The odd time I get a call from someone enquiring about a pension, investment or risk benefits. They are a bit standoffish and by experience you know they are looking for free advice before they go off to do their own thing. They think if they go directly to the insurance company, they will get it cheaper. But it doesn’t work that way. Insurance companies get most of their business from the advisor market so they are not going to undercut them.
The easiest way to understand it is say you want to buy a pair of Nike runners. Nike aren’t going to sell you a pair at wholesale prices. What they will do though is open a Nike store that only sells their product. They will show you all the different Nike runners available and sell them to you at the retail price with the retail store keeping the profit. Or you can go to an independent store who will show you Nike, Adidas, Puma, New Balance etc so you can choose from a selection of runners. Even if you go for the Nike, the price is the same as if you went to the Nike store.
It’s the same dealing with an insurance company. If you go directly to any of the providers, you will deal with their direct sales team. They are also called tied agents as they can only advise on the products of the company they represent. A tied agents is in fact self employed and are paid solely by commission, so if they don’t sell you something, they don’t get paid.
Whereas an independent advisor can advise on the most suitable product from all the providers in the market. By carrying out constant analysis of the market, we will know what company has competitively priced contracts and suitable funds/ features to suit you. You also have the option of paying an independent advisor a fee instead of commission or you can just pay them for financial advice without the need for a product at all. Afterall, wouldn’t it be great to use a financial advisor who told you “Just keep doing what you are doing and you’ll be fine” instead of trying to sell you something?
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