Advertisers use a big fat bag of persuasive techniques and messages to make a financial product or service look as attractive as possible. Can you see past their headline message?
Let’s be honest. Financial products are not known for being overly interesting. It's not a subject we give much thought to. The reality is, when we compare financial products online the lion’s share of the market goes to those companies offering the best headline rates or the cheapest insurance policies.
That may seem perfectly reasonable. We all want the best deal after all. But therein lies the crunch. The best headline rate or cheapest policy does not always equate to the best product, especially when we take our personal requirements into consideration. We are all attracted by eye-popping headline rates and messages, but all too often if we delve deeper into the belly of the offering, things are not always as rosy as they first appeared.
Advertisers are very clever at presenting information to us so we see what they want us to see. If we’re not careful we can miss the full picture as to what is being offered.
Here’s a great illustration of how we can miss information that’s sitting right in front of us.
Read the following text and count the number of F’s.
FINISHED FILES ARE THE RE-
SULT OF YEARS OF SCIENTIF-
IC STUDY COMBINED WITH THE
EXPERIENCE OF YEARS
How many did you count? Three? That’s the answer the majority of people give. There are in fact six F’s in the text above! So, why do most of us only count three? Apparently it's because the brain doesn’t process "OF" when looking for F's, most likely due to the fact that "OF" phonetically gives an "OV" sound.
I’m not suggesting that advertisers use “mind tricks”. This is just a simple illustration of how we can miss information that’s being placed right under our nose.
The fact is that advertisers are going to present information to you in a manner that makes a product appear more attractive, so you are more likely to buy it or apply for it. After all, that’s what advertising is all about. The thing is, when a financial product is being sold to you, especially online, all the information relating to that product is readily available. But how many of us read the small print, or even the most basic of additional details?
There is rarely a single ‘best product’ in any financial sector because factors beyond the headline rate or price come in to play, and you should always relate those factors to your own needs and situation.
Let’s take savings as an example. At the time of writing this article, the highest interest rate available is 8.25% from Chorley & District Building Society. Sounds great. However, customers must have a second Society account and that account must remain open until this account is closed.
Furthermore, there is a maximum investment per investor of £1800 and the account can’t be managed online or over the phone. So, great headline rate, but when you look at the details of the product, it’s perhaps not so good for the majority of savers.
If you have applied for a credit card in the past, chances are that you were persuaded by a 0% introductory rate, cashback rate or low standard APR. Reasonable enough, but what about the other factors? What fee are you being charged to use your card abroad? What fee are you charged for transferring balances to your card? What fee are you charged for using an ATM?
Let’s look at one final product; car insurance. I would guess that the most important factor for you is price. Again, whilst this is a sensible starting point, what about other factors? Do you get a hire car if your car is being repaired after an accident? Are you covered for valuables stolen from your car? What’s the excess on the policy?
Financial products are complex beasts. Don’t just ‘look at the surface’ of a product. Dive in and see what it’s really made of.
I like to think of choosing a financial product like eating a bag of revels. All the revels look attractive at first glance. However, you take one and place it in your mouth. Arghh – it’s an orange or coffee one. Disaster.
You’re far better off cutting through the revel first to find out what it’s made of. That way you can discard the ones that don’t suit your pallet and ensure you get your hands on the toffee one, which is undeniably the king of all Revels.
In other words, we shouldn’t rely solely on headline rates or prices. Look at the detail. Don’t let clever advertising hide you from the true ‘pros and cons’ of a financial product.
