Throw off the 'rip-off' yoke: go online for value

Eddie Lennon and Bill Tyson
Irish Independent, Business Section
Thursday February 5th

The internet can prove a vital weapon in the war for better value, providing easily processed information and many cheaper deals at the touch of a button. Here's a quick guide to the most useful sites.

THE main reason that Irish consumers are being ripped off is not just corporate greed.

It is because we are complicit in our own abuse. And so, in financial terms, we get what we deserve.

We are losing the war for better value, and will continue to lose if our new-found consumer awareness does not mature into action.

A classic example, borne out in repeated surveys in the Irish Independent, is buying CDs. In the shops, you can expect to pay up to €20, and sometimes even more, for a CD.

But at cdwow.ie, you can choose from a huge selection of CDs for just €16.95, including delivery.

Similarly, the plummeting dollar makes buying online from American-based websites such as amazon.com all the more attractive. You can also use the internet to get cheaper flights, not just with Ryanair but now with Aer Lingus too.

The latter came out cheaper than Ryanair recently when I sought quotes for a flight to London.

In the end, I chose Cityjet, again through the internet, because, while not the cheapest, it was close enough at €80 return and its host airport in London's docklands is in the heart of the city.

Another useful online moneysaver is www.LAbrokers.ie (discounted life and mortgage protection cover).

And there are a host of websites where you can get cheap travel insurance instead of using your travel agent, whose prices are almost universally dearer (see Good Buys, left).

Their dominant position has not surprisingly led to higher pricing - and all too often the financially naive do not query it. The internet also offers some insightful overviews of how to get the bargains, and avoid the rip-offs, information that we really should ignore at our financial peril.

Askaboutmoney.com offers a truly impressive insight into dozens of areas where you can avoid being fleeced; and Ireland's new consumer activity website www.valueireland.com similarly invites people to tell of their experiences about rip-offs and bargains in Ireland and submit review and value-conscious tips online.

New financial watchdog IFSRA provides surveys of car insurance and bank charges (with more surveys to come) as well as guides to your rights and many other products.

For investments, myadviser.ie has some good offers on occasion, but its main selling point is that it also offers personal advice, which is unusual in the often-impersonal world of dealing online.

The biggest bugbear with investments - and many other areas - is commission. Commission can pull the wool over your eyes because it is designed to just that.

You are quoted a low percentage that does not set off any alarm bells. Yet when a high capital sum is involved, it should.

For example, 3pc may not sound very much - but it amounts to €3,000 out of €100,000.

The commission-based system also compromises the quality of advice you are getting as many advisers are hardly going to recommend providers who pay little or no commission, such as the EBS range of Summit funds.

If you know what you want, the internet again offers the best way around this insidious system.

If web-based intermediaries can do enough business, they can afford to forego hefty commission in favour of reasonable fees in order to attract more business.

Take LAbrokers.ie, for example, using the example of a 35-year-old non-smoking female seeking mortgage protection insurance over 20 years.

LABrokers would charge just €11 in the first year because it refunds the commission it gets from the company it finds to be cheapest (Hibernian in this case). From then on, the premium would be €111 a year, which would still be the best around, so you win both ways.

Some of the best deals for investments can be also sourced through the internet. Many of the aforementioned websites often offer good "discount" deals - and even when they don't flat fees beat commission almost all of the time.

Michael Kiernan of Myadviser.ie explains how commission works:

"Say you were investing €10,000 into your pension as a once-off lump sum payment. The sales person could tell you that you were getting 103pc allocation on your investment."

"This would give you the impression that not only were you getting all of your money invested but your were also getting a bonus of 3pc on top - unfortunately that is not the case.

"What happens is your 103pc allocation is reduced to 98pc allocation to take account of the commission, in this case 5pc.

"Your allocation is then hit again by a charge called the 'Bid Offer Spread', usually 5pc, leaving only 93.1pc (98pc x 95pc) actually being invested, i.e. €9,310. The sales person gets €500 upfront for their efforts.

"Obviously the higher the lump sum, the higher the amount of commission, despite the fact that it usually takes the same effort to advise and execute a €10k pension as it does for a €100k, but in the latter case the commission is €5,000.

"That's how you move from 103pc of 'Sales Talk' to the 'Real World' of 93.1pc."

Myadviser offers an alternative to losing thousands in this way - a fee-based system calculated on how much advice you want that replaces the 5pc commission deal.

The fees range from €100 for customers who know what they want up to €700 for those in need of the full financial advice service - which is pretty cheap compared to the thousands you would have to pay on commission.

Deals from stockbrokers can also be compared online (for the cheapest offers on Irish share dealing check out www.sharewatch.com, which has a minimum fee of €30 and a very low commission rate of 0.3pc.)

Doing your actual dealing online can also save you money with the likes of www.scottrade.com, which charges as little as $7 a deal, or even www.davy.ie, whose online service is cheaper than its 'real world' offering.

Contrast this with the 1.5pc commission charged by most Irish stockbrokers.

You can also keep track of your shares and get a host of useful information through sites such as www.nasdaq.com and www.ise.ie (for Irish shares).

Consumers have more information at their fingertips than ever before - all they have to do is 'let their fingers do the walking' across their keyboard.

Consumerism is about choice, and informed choice through the internet holds the greatest new weapon against the culture of the rip-off.