Conal Gregory: Tread carefully through the jargon of comparison websites

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The internet can be a great source of financial information with websites, when carefully read, providing key data and ideas for decision making. Yet such sites are rarely independent and should be viewed with caution.

Meerkats like Aleksandr have actually made comparison sites sound fun. Yet internet sites need money to survive. They are generally offered either by product providers or by comparison organisations which are paid on a commission or reference basis.

The former allows the latest money data and performance to be immediately available. It is revised regularly whilst a printed and posted fact sheet is usually somewhat dated.

Comparison sites are usually selective in their range. In the field of insurance, several notable providers like Aviva refuse to participate. Use sites to start a comparison exercise but remember that in areas like protection (critical illness, income and term), often only broad brushed questions are asked with few exclusions pointed out.

Protective insurance is a good example where comparison sites could be dangerous. Only a qualified independent broker is trained to ask the right questions and recommend an appropriate policy. If someone relies on an online questionnaire, their premiums may turn out to be of little or no use whatsoever.

Taking income protection, sites often do not distinguish between being able to take ‘any’ job or ‘own’ occupation if illness or other difficulty prevents you continuing to do your current work. Such critical wording is bread and butter to a professional broker but would be lost on most who could fall for the lowest premium offered on a website.

Investopedia is a good place to get an explanation of the jargon used in financial services but Adrian Lowcock, head of Investing at AXA Wealth, warns that “inexperienced investors tread carefully as not all the explanations are clear and easy to understand. They tend to require some investment knowledge”.

For stock market information, the Financial Times has two good sources, even on its free registration service. “FT Alphaville and Fast FT provide excellent market updates and commentary, with the latter updated 24 hours a day by specialist teams in London, New York and Hong Kong,” says Martin Payne, Leeds-based director of wealth manager Brewin Dolphin.

FT Trustnet is an excellent source for finding equity and fund prices and product information. Hargreaves Lansdown provides a host of information to anyone. Existing and potential investors can learn from the research they undertake and helpful filtering of the best collectives in each sector.

Consider also the websites offered by financial platforms or supermarkets. However, they are not comprehensive with most not covering the key area of investment trusts.

FundCalibre is open and free to all. It is designed to help any saver without experience. You can look at a narrow list of funds from which to choose or use it to validate decisions.

It is the brainchild of the team behind Chelsea Financial Services, a noted discount broker. They have tried to remove as much industry jargon as possible from the site.

To avoid over-dependence on any one sector or geographical zone, try the tools available for asset allocation to build a portfolio: www.fundcalibre.com/elite_portfolios. You will also find a ‘knowledge centre’ where items are explained for novice investors.

Joel Dungate, investment analyst at Redmayne-Bentley stockbrokers, likes Yahoo Finance to research historical share prices. He also approves of the ‘thisismoney’ site for providing useful advice. Gain good commentary from The Motley Fool.

For background comment on the economy as well as wider bond markets, a blog (Bond Vigilantes) is written by M&G’s fixed interest team.

Individual stockbrokers and the larger private client managers invest in online help. The better ones carry updates from fund managers and usually a blog from their research team.

Brewin Dolphin’s Insight page contains regular articles on wealth management and economics. The page also provides links to its regular podcast where their strategists and analysts discuss markets and quiz leading figures within the industry.

To compare cash accounts and find some of the most competitive deals on a range of financial services including mortgages and insurance, Money Saving Expert is a site that has built up a strong following.

It has many forums which discuss a wide range of financial issues.

Use websites primarily for facts. Be wary of forums discussing investments as the viewer does not know how qualified, if at all, are those answering questions and if there is a secret agenda, possibly paid-for by an external interested source.

Research by Populus revealed that almost half of consumers were unaware that switching sites charge commission.

Someone considering a monthly saving on a long-term basis, such as for a child, might well look at a website. For tax efficiency, an ISA or Junior ISA is a must but many miss a tax-exempt savings plan which is available through friendly societies which shows the limits self-imposed by websites.

Energy websites are some of the most popular. It is lucrative business for them but the transparency of commission earned has never been evident.

Earlier this year, Moneysupermarket revealed it received around £40 each time a fuel switch (electricity or gas) was made using its site. With Energyhelpline, the commission of £40-£50 per switch is shared with Comparethemarket or Gocompare, depending on the site used.

Often, whether the subject is energy, insurance or investment, a true comparison is not immediately revealed and the viewer needs to select the “show all deals” offer to gain a full picture. One trick is to ask the viewer if they wish to see deals they are able to switch to ‘now’ or ‘today’. If they affirm, the site then presents a select commission-earning group and often omits the best deals.

Therefore be vigilant in the right option to take and compare sites. The ‘unbiased’ site is often used to find a financial adviser but only those who pay monthly for their listing appear unless you request for all in the district to be shown.

“Comparison sites have generally been a force for good for consumers but for investing and pensions, such sites are not a good option,” cautions Gareth Shaw, head of consumer affairs at Saga. “Very few offer the ability to compare stocks and shares ISAs.”

Shaw says that when it comes to long-term investing, “the cheapest doesn’t necessarily mean the best. Many people value a service that offers telephone support and access to financial advice which you simply would not get from the cheaper no-frills companies.”

Saga Investment Services hosts a pricing calculator on its website.

This allows users to see how much its service will cost.

The Competition and Markets Authority is so concerned about “potentially misleading practices” on websites that it launched a review in July.

The checklist

-Cross check with more than one site

-Watch for terms which hide a comprehensive list

-Use an experienced professional, such as an independent insurance broker, where sites are inadequate

-Keep up to date with fund data and manager information

-Construct personal portfolios