In The Wealth of Nations back in 1776, Adam Smith wrote of an invisible hand at work in society.
With this metaphor he described the almost mystical ability of the market to meet people’s needs, to match what is possible with what is required, supply with demand.
Sitting at his desk in Kirkcaldy over 200 years ago, the intellectual godfather of capitalism could not have imagined the complexity of today’s marketplace.
He could not have anticipated the astonishing advances in technology, the ferocious global competition, or the flows of people across continents.
In The Origin of Wealth: Evolution, Complexity & the Radical Remaking of Economics, published in 2006, McKinsey Global Institute Senior Fellow Eric D Beinhocker showed just how difficult doing business in the 21st century has become.
In the face of this complexity, markets have developed their own responses. New organisations have emerged to help connect supply with demand. Where expertise is required, distances are too great, or information incomplete, intermediaries such as mortgage brokers play a role in solving those problems.
This shift to multi-layered markets has two important implications: first, intermediaries have become hugely important to consumers. They mediate professional relationships, providing consumers with new opportunities, guiding and shaping their choices.
Advisers, experts and brokers tell where to shop, who to do business with, and who to hire. The happiness and wealth of consumers can depend on them.
Second, like all markets, those in which intermediaries operate can be either efficient or inefficient, fair or unfair, able or unable to operate in the public interest.
But while Adam Smith had faith that markets would inevitably serve in the public interest, today we are not so sure. We recognise that their success or failure can be affected by values, incentives, accountability, and information.
And it is at this point that price comparison websites fail. They do not stack up against mortgage brokers because they are not as good a solution to the failing mortgage market as brokers.
This, I believe, is the reason they are so unpopular.
As reported by Mortgage Strategy, fewer than half of those who use price comparison websites are satisfied with the service provided, according to research by Which?, Europe’s largest consumer rights organisation.
The websites are used by consumers to compare a range of financial products, from insurance and energy to mortgages.
Three-quarters of the 1,703 people Which? polled used such websites, with half taking out a product through them.
Others went to the provider to buy the product direct rather than clicking through the comparison website.
But of those hundreds of people, only 46 per cent said they were satisfied by the service they received and only 21% trust the sites to find the best price available.
Comparison websites are part and parcel of finding new financial products, so if they want to compete with the broker market, they really need to be better at keeping their customers happy.