Nila Sweeney

Remember the tale of Little Red Riding Hood? Well, when it comes to buying financial products make sure you’re not dealing with a wolf in granny's clothing.The trick is in the use of brands.


Many big multi-national corporations do it. Take the food giant Nestle for example. It owns 21 different brands of instant coffee, 34 different brands of bottled water and 18 other drinks, using brand differentiation to make the customer believe he/she has real choices.

The same thing happens in financial services. Australia’s biggest financial institutions buy up smaller operations but keep their brands so they can cover lots of different customer types and price points.
The challenge for customers is to figure out whether they’re paying too much for a financial product from the parent company when they could get much the same product for a much lower price in the form another brand owned by the parent company.
Home loans are the best example in Australia at the moment.
A few years ago Australia had a number of genuine non-bank lenders who got their funding from independently owned wholesale lenders. Challenger Mortgage Management was one of those wholesale lenders. It was then purchased by the NAB and re-named Advantedge, and started receiving their funding from the NAB. UBank is another NAB-owned brand.
A quick web comparison reveals that the UBank UHomeloan (refinance only) is a full 0.94% cheaper than the NAB standard variable. So in effect, if you’ve got a NAB standard variable you’re paying 0.94% more than UBank customers for a similarly featured loan from the same lender.
What can you do?
When comparing non-bank lenders the best way to find out whether you’re doing business with the real deal is to ask them where they get their funding from. At the moment in Australia there are only two wholesale lenders that are 100% securitised and they are Firstmac and Resimac.
If you currently have a home loan with one of the big four banks and you've chosen that loan because of the bank's security or a long-term relationship, maybe it's time to do some serious comparison shopping. Check out what its other brands have on offer. After all, it's the same lender.
What about other products?
Your small, neighbourhood financial planner is also likely to be owned by a big institution such as AMP or one of the banks. Insurance companies are also differentiating their brands to appeal to different market segments. It’s a woods full of wolves out there so be careful. A google search asking the question “who owns …” can be very revealing.
TIP: It’s the same story with bank accounts. The USaver account pays 0.51% more interest than the NAB iSaver and the UBank six-month term deposit pays 0.45% more interest than the NAB equivalent, but your money is sitting in the same institution with the same risk or lack of it that that involves. 
Lender NAB UBank emoney


Tailored Home Loan UHome Loan (refinance) Standard Variable
Comparison rate 7.17% 6.23% 6.51%
Source: Lenders' websites (29 February 2011) 
-- By Jackie Pearson

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan