Defaqto announces new star rating procedure

February 1, 2008 | posted by Luci Mylward in Banking, Insight, Insurance, Investment, Pensions, Press Release, Protection | comments (0) |

Defaqto today announced the introduction of a new procedure for star rating personal financial products. Over the past seven years Defaqto has been producing star ratings for a wide range of financial products.  During this time, the process was based on products being scored for their quality against a set of product criteria using Defaqto’s unique Product DNA1 process which is built into the Aequos database. Depending on the scores achieved, products were located in one of five star categories, with Five Stars being the top rating and One Star the lowest rating.To get into the Five Star category, a product had to be scored within the top 10 per cent of all products. For Four Stars, products had to be the next 15 percent of products, for Three Stars in the next 25 percent and so on.

Star ratings for different product groups were produced over the course of a year for inclusion in the publication of the relevant Defaqto Insight market report.

During 2007 Defaqto underwent a review of its rating procedures and decided that in future it will produce all star ratings on the same day - 1st February - and that these ratings will apply for the 12 months to the end of the following January. As well as the revised schedule, the methodology for deciding on product ratings has been improved by Defaqto’s product experts, from being a relative comparison to becoming a set of absolute ‘bars’. As part of the new rating, Defaqto has stipulated that before a product can be rated as Five Stars it must provide some level of cover or benefit in a number of key areas.

These changes will give product providers distinct advantages over the current system:

  • Getting a Five Star product rating will no longer depend on how many other Five Star rated products exist.
  • Providers will know that if their products meet or exceed the top bar for quality, they will be rated Five Stars.
  •  Providers licensed to use Defaqto’s star rating logo will be able to use the logo more effectively, knowing it relates to the current year and the first month of the next year.
  • Providers can develop products over the course of a year knowing in advance the criteria used to score product quality and what the star rating boundaries are.

The research methodology together with the features and benefits used by Defaqto in calculating each product’s scores, as well as the boundaries for each star rating, are produced within the relevant Star Rating Report 20082 publication.

Commenting on the change, Brian Brown, Head of Insight at Defaqto said: “We  believe that these changes will bring greater certainty to providers both in terms of the development and marketing of their products as well as enhanced confidence in the star ratings themselves among consumers.”

                          

-Ends-

Notes to Editors

1 Product DNA - Product Data Numerical Analysis

2 Reports for the different product areas entitled ‘Star Rating Reports 2008′ are on sale priced £850 plus VAT each for a PDF version with discounts available for subsequent purchases . For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

For further information contact:

Defaqto Limited 

Brian Brown, Chris Johnston or Luci Mylward

01844 295 454

Star Rating Reports 2008

Number of Features or Benefit Criteria Scored

Features or Benefit  Criteria Essential for Five Star Rating
Home Insurance

 

 
Buildings

23

9
Contents

40

12
Motor

 

 
Comprehensive

44

8
Motorcycle

29

5
Travel

 

 
Annual Travel

29

12
Single Trip

27

12
Gap Year

29

8
Long Stay Travel

29

8
Payment Protection

 

 
Personal Loan PPI

24

7
Credit Card PPI

24

9
Mortgage PPI

24

7
Pet

 

 
Cat

24

5
Dog

26

6
Critical Illness

 

 
Stand Alone CIC

23

0
Level Term CIC

24

0
Decreasing Term CIC

24

0
Income Protection

 

 
Income Protection

16

0
Offshore Bonds

 

 
Guided Architecture

21

0
Portfolio Bonds

21

0
Onshore Bonds

 

 
UK Unit Linked Bonds

18

0
Sipps

Features, Benefits / Costs

Features, Benefits / Costs
SIPPs

19 / 8

0
  

 

 
Current Accounts

34 / 43

3 / 0

 

 
   Credit Cards

 

 
Credit Cards

19 / 27

0 / 1
Offset & Current Account  Mortgages

 

 
Offset & Current Account Mortgages

45  / 24

3 / 1
Equity Release

 

 
Lifetime Mortgages

53 / 27

1 / 1*

 1* - One cost feature the product must not have to achieve Five Star N.B. Where no essential criteria is listed this is because it is included in the standard criteria

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Don’t say you weren’t warned! The FSA lays it on the line

January 30, 2008 | posted by Brian Brown in Banking, Insight, Insurance, Investment, Pensions, Protection | comments (0) |

The FSA has today published its Financial Risks Outlook 2008 report (PDF Download), which sets out the FSA view on the UK financial markets, and where it sees potential risks.

Not only does this report provide an excellent summary of where the world economy and the UK within it appears to be at present, it also discusses the FSA’s priority risks for this year.

It’s not a light read - 70 pages of quite detailed content - but there is an extensive section titled “Industry Focus” which sets out the FSA’s thoughts on what it sees as risks in each financial area.  And some of it makes for quite worrying reading for those involved in financial services.

Leaving aside the massive problems with consumer lending the report also includes some pearls which should guide industry leaders in their future dealings with the FSA, and clearly states where the potholes are.  Non-subtle pointers include: (more…)

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Accessing personal internet accounts - where do we go from here?

January 22, 2008 | posted by Chris Johnston in Banking, Insight, Investment, Savings | comments (1) |

There is an inexorable trend towards holding data about people’s savings and investments online. Indeed, many of the best buy savings accounts are internet based. While providing undoubted benefits to consumers in terms of managing their accounts, holding this type of information on the web does come at a price. This is because we have to record and recall an ever-growing number of user names, dealing names, passwords, pin numbers, personal codes and memorable words. A typical investment account may require up to five of the above. And this is just one account. When internet banking and other savings or investment accounts are added, the names and number that need to be held begin to resemble a spy’s cipher book.

And we can’t always opt out of this brave new world and contact the provider in the good old way - over the telephone. Not only will this bring its own password scrutiny, but telephone enquiries may no longer be accepted. The poor punter is then reduced to writing in (with appropriate client details) to give his or her instructions.

Just like a spy’s notebook, all this account information is very valuable and could be very damaging if it fell into the wrong hands. So, the poor investor not only has the problem of inputting an ever-growing amount of his or her own client information, they also have the worry of keeping this information accessible but safe.

This situation has arisen because each provider has gone through the same process of screening client access. While it makes sense to do this on an individual account basis, collectively it is just storing up problems later on.

Surely, there must be a better way of handling this situation, but until one is found, it’s either the memory training course or the larger notebook.  

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Borrowing more could cost you less, says Defaqto

January 9, 2008 | posted by Chris Johnston in Banking, Insight, Personal Loans, Press Release | comments (0) |

A review of the personal loans market by Defaqto reveals that borrowers could end up paying less in repayments by taking out slightly larger loans with the same lender.

This anomaly arises due to the way most lenders structure their rates, which differ according to the ‘tier’ size the loan falls into. Generally, a higher interest rate is charged on the lowest tiers and rates then decrease as the amount borrowed increases, often then plateauing and remaining unchanged for the larger amounts.

The top end of the first tier for most lenders falls between £1,000 and £5,000, while others have two tiers in this range, and differences between the rates charged in one tier and those in the next tier up can be quite significant.

(more…)

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Do we really need the Chancellor’s stick or should be we really be finding ways to ensure it is never needed?

January 4, 2008 | posted by David Abbis in Banking, Credit Cards, Insight, Mortgages | comments (2) |

It is interesting to learn that Alistair Darling is establishing a procedure should another Northern Rock style crisis occur, but is this really the answer? Surely the most important measure is to ensure that no bank gets into the same situation. The problem arose because Northern Rock decided they could make money by lending to people that could not afford such a high level of debt and without a sufficient margin in the security offered.

Naturally we do not want to return to the boom and bust style of life but there are lessons to be learned or remembered from those times. I admit that I now qualify for a bus pass and life has moved on in the past thirty years but none of us can just march on without balancing the books. (more…)

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Credit cards – breaking the mould

January 3, 2008 | posted by Chris Johnston in Banking, Credit Cards, Insight, Press Release | comments (0) |

In recent times the credit card industry has done little to encourage customer loyalty, preferring instead to pursue new customers with a wide range of enticing introductory deals, such as 0% balance transfers, 0% purchase or enhanced introductory cash backs.Meanwhile, existing customers were largely ignored and, unsurprisingly, the credit worthy ones decided to take advantage of these deals and switched cards on a fairly regular basis.

Against this backdrop Capital One has announced an initiative which is a genuine attempt to engender loyalty within its current customer base, as well as an initiative designed to win new customers.

(more…)

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Banks and building societies battle for cheapest mortgages

January 2, 2008 | posted by Chris Johnston in Banking, Insight, Mortgages | comments (0) |

While a bank was the cheapest mortgage lender in 2007 for existing borrowers in Defaqto’s annual survey, building societies took two of the top five places and five of the top ten.In its survey, Defaqto found that for standard variable rate mortgages or their equivalent for existing borrowers, HSBC retained its top spot as the cheapest mortgage, closely followed by two building societies, Skipton Building Society and then Nationwide.The research was based on the amount of gross interest payable on a £50,000 interest-only mortgage provided by top lenders in 2006, as defined by the Council of Mortgage Lenders. In order to provide a level playing field for comparisons, specialist providers were not included, neither are any privilege or loyalty rates.

(more…)

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Defaqto calls for a further extension to The Banking Code

November 23, 2007 | posted by Chris Johnston in Banking, Insight, Press Release | comments (0) |

The impending changes to the Banking Code address many of the concerns that have been raised in recent times and Defaqto applauds these initiatives.

However, in one particular respect, Defaqto would like to see a further extension of the Banking Code. This relates to ensuring that easy access savings accounts that levy interest penalties on withdrawals are advertised in such a way that the consumer can instantly understand what type of account it is.

While the revised Banking Code (‘Code of conduct for the advertising of interest bearing accounts’) with ensure that the conditions on withdrawal are stated in each account’s terms and conditions as well as in the proposed savings summary box, consumers may still not grasp the full extent of the penalties built into these accounts.

For this reason, Defaqto suggests that these accounts, which have proliferated in recent times, be labelled as ‘instant access penalty accounts’ or ‘easy access penalty accounts’.

This would be a step beyond the insertion of withdrawal penalty conditions in the proposed savings summary box and would enable consumers to register ‘at a glance’ the type of account being proffered.

David Black, Principal Consultant for Banking at Defaqto said: “Some providers of these accounts have started referring to them as “discipline” accounts on the basis that they’re designed to deter withdrawals in all but emergencies. On the positive side they do offer good value for depositors who know they will not need to access their money.

(more…)

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High interest regular savings accounts more style than substance, says Defaqto

November 21, 2007 | posted by Chris Johnston in Banking, Insight, Press Release, Savings | comments (0) |

Savers thinking of investing in regular savings accounts offering high rates of interest should carefully evaluate what they will actually earn and the conditions of the offer, says Defaqto. The majority of the highest paying regular savings accounts have conditions attached to their availability. Typically they are restricted to customers who either have a specific current account with the bank or to new customers prepared to open such an account. Depositing a certain amount of money into the current account each month may also be one of the conditions that applies before the high paying regular savings account can be opened.

David Black, Principal Consultant - Banking at Defaqto said: “Some of these offers have cracking headline rates but all of them are limited to a one year period so the actual amount of interest that can be earned looks surprisingly low when compared to the headline rate”

“Many people wrongly assume that if they invest £100 a month for a year at 10% that they’ll get gross interest of £120 (i.e. 10% on the entire £1,200). In reality only the initial monthly investment that will earn interest for a full year. The actual interest earned would only be £65 for a non-taxpayer, £52 for a basic rate taxpayer or £39 for a higher rate taxpayer”

(more…)

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Credit Cards Reward Disloyalty, Says Defaqto

November 12, 2007 | posted by Chris Johnston in Banking, Credit Cards, Insight, Press Release | comments (0) |

Consumers are being rewarded for disloyalty by credit card companies restricting best offers to new customers, says Defaqto’s in its latest report “Credit Cards in the UK”.

Despite the introduction of some ‘anniversary’ offers for existing customers, such as those offered by the Egg Card and the Post Office’s Two in One Credit Card, consumers are still able to get better deals by switching to a new card.

The average duration for an introductory 0% offer lasts 9.5 months for balance transfers and 5.6 months for purchases, whereas existing customer 0% anniversary offers are typically 5 or 6 months for balance transfers, so it is not difficult to see that consumers can be better off by applying for a new card.

David Black , Principal Consultant Banking, and author of the report, says: “There is a clear incentive for the creditworthy to review and change their credit card on a regular basis. The credit card industry is geared to routinely rewarding customer disloyalty for the creditworthy and there seems to be little evidence of this changing.”

Some market leading credit cards are offering 15 months 0% interest free credit: Virgin’s Credit Card for balance transfers and Halifax’s Purchase Card for purchases.

Cash back credit cards tell pretty much the same story, with the best ones invariably limited to an introductory period. Cash back rates of 6% (Shell MasterCard from Citi: on Shell fuel purchases for 3 months but paid as a discount on future fuel purchases), 5% (Amex Platinum: on spend up to £4,000 in the first three months; and Abbey Credit Card: on £1,000 of supermarket spend before 31 st January 2008), and 4% (Capital One Cash Back with World: for first three months) are some of the best available.

Black adds: “One area where credit card loyalty can be engendered is a rich reward scheme partnership with a national retailer or service provider whereby discounts are earned towards future high value purchases.”

-Ends-

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