For a long time, we could live with the suspect that financial products broadcast on structured distribution networks (many say MLM) are much more expensive than being directly tied to it. The reason for this was the need for commissions on commissions and the refinancing of motivational competitions. However, in 2018, this is a misconception, or is the overpriced intermediary still characterized by the financial market today?
A flat deposit as an overpriced product?
At present, there are 4 flats in the Hungarian money market parallel to each other (Fundamenta, Erste, OTP, Aegon). The product is infinitely simple, because on the one hand, 30% state subsidy is paid for the payments, and on the other hand, the cost deduction takes place under the conditions regulated by law (150 HUF / month every year in case of administrative fee transfer, the account opening fee is max. .
Housing savings are sold through different channels, such as
- in your own sales network
- external sales network
The operation of housing collections is regulated by the effective Housing Savings Fund Act, which makes it possible to deviate from it only in the interests of clients in a positive direction. Since the savings part of the home savings contract is mostly charged by the account opening fee as a significant cost element, it can be difficult to draw on any sales network that sells home savings much more expensive than the market.
Discounts are important for sales networks
Because competition in this market is very tight due to legal constraints, companies are struggling with action for the benefits and affairs of their customers. Such a discount is the promotion of account opening fees so that the customer can conclude the contract at a lower cost and simpler.
And this can be a competitive advantage everyone wants to live with. For example, by the end of February last year, we were able to conclude with you free of charge Erste home savings fund contracts. In addition, we had a special deal with the cashier, which enabled us to provide better conditions than if you had entered the contract with ERSTE.
This condition is the account opening constraint. Because they were able to open the house deposit for free at the bank if you had a current account with them. You were able to do this without any kind of boundness. So we can say that we have secured a better condition as an intermediary.
Savings life insurance as an overpriced product?
In Hungary over the past 15 years, savings-saving life insurance contracts have been extremely widespread and, in parallel, products sold in agency networks have been poorly, violently and expensively sold. For a long time, the market really looked like Brokers’ own products were far more expensive than we would have been to contract with the insurance company.
In recent years, however, there has been an extraordinary paradigm shift. On the one hand, the sharp competition, on the other hand, the MNB’s aspirations (code of ethics, maximization of TKM, commission stop, etc.), and thirdly, because of the disappointed old customers, the competition has never seen a reversal. They want to get better conditions in products, and at lower cost levels.
The purpose of creating a TKM (Total Cost Indicator) was to make all products comparable through these pre-defined static examples. However, the initial calculation methodology was fine-tuned on the fly to get a more realistic picture of the real cost of a product.
Are the mediated products really more expensive?
It is difficult to give a clear answer, as there are more expensive and cheaper products on the market today. In addition, the TKM indicator gives a too static value, which is not entirely in line with the various premium rates of insurers. However, guidance is quite good.
A loan as an overpriced financial product?
The third big group that we need to look at – when we look at the cost of intermediated products by financial intermediaries – is loans. For a long time, it was common knowledge that the credit intermediary would “make us more expensive” because it is in his interest. It should be mentioned as an important fact that banks have never created exclusive mortgage loan schemes that would not have been reached by the “street man” from the bank branch.
The starting point was always the market credit, market interest. The worse the offer would simply have been to physically incapable of presenting it to customers (we are not talking about a credit strategy now). However, the major intermediary companies were able to make the difference in the direction of the customers with 1-1 good agreements with the bank.
In the past year, for example, we had such an agreement with the “30,000 forint customer coupon”, free appraisal, free prepayment (this would have been 1% of the bank loan). So in the huge competition, the market was forced to get the best deals and create a win-win situation.