Are Brokers Prepared To Be Compared? - Black Swan

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Are Brokers Prepared To Be Compared?

April 18, 2016

By Consulting Group

The price comparison industry has changed the way that people choose utilities and insurance, with 30 million Britons using price comparison sites each year.

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Although the broker market has historically been neglected by major comparison sites, niche providers such as brokercompare.info show that broker comparison is possible, and the major sites will enter the market in the near future as they look to investment / fintech products as their next source of growth.

Customers appreciate the simple and accessible way in which price comparison sites present complex information, which is ideal for the complex pricing of the broker market. According to an FCA study of comparison sites, consumers believe that,

“they make a potentially boring and difficult job relatively painless”

In the 2014/15 tax year 10.2 million people invested in a cash ISA, compared with 2.8 million investing in a stocks and shares ISA. According to the Platforum, just 15% of UK adults hold risk-based investments, compared with 48% of US adults.1

There is an enormous untapped market for share and fund dealing services, and price comparison websites can help brokers address it. A good price comparison site can give an investor a very good idea of how much they will pay to use different brokers, based on their individual investing behaviour. On top of this, they have an existing market of 30 million users.2

Most brokers are not ready for their customers’ choices to be determined by price comparison sites, but the changes which will be necessary will not automatically lead to a race to the bottom for pricing.

There are three basic pricing structures brokers can follow:

percentage Percentage Fees
hammer Fixed fee for all trades
menu Charge for each service

Each of them can come out at the top of a comparison table for different types of customer.

The challenge for brokers is to offer a pricing structure which performs well for its target customer across multiple channels including price comparison sites.

A broker should be able to analyse how its prices perform for new customers on a price comparison tool, understand the impact of possible new structures for both current and future customers and then ensure its product meets the needs of its future customer base.

Black Swan Partners

Black Swan Partners is a specialist retail finance consultancy with a deep understanding of pricing and price structures within the broker market. We perform strategic analysis of existing customer bases for leading brokers, help to deliver significant cost savings and develop market leading products such as our customer facing comparison tool Broker Compare. Should you wish to discuss any of the topics raised in this paper, please contact us

1http://money.cnn.com/2015/04/10/investing/investing-52-percent-americans-have-no-money-in-stocks/
2Mintel, Web Aggregators in Financial Services, June 2013

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