Key Figures Within The Financial Services Industry Argue That IFAs Face A Bleak Future

With increased competition within the market, the heightened costs of regulation compliance and the emergence of new Web-based technologies, key figures within the financial services industry have argued that IFAs face a bleak future.

It is certainly the case that the industry is currently undergoing transformation and that IFAs face insecurity in the short term. Research and Markets have announced the addition of the "Independent Financial Advisers Market Assessment 2003" report to their offering.

Since January 2002, the market for Independent Financial Advisers (IFAs) has been the focus of considerable debate.

With increased competition within the market, the heightened costs of regulation compliance and the emergence of new Web-based technologies, key figures within the financial services industry have argued that IFAs face a bleak future. It is certainly the case that the industry is currently undergoing transformation and that IFAs face insecurity in the short term.

However, we expect that while there will be considerable changes in the shape of the market in the next few years, if IFAs focus on keeping ahead of these new developments and take steps to consolidate and nurture their client base, the IFA market will stabilise well before the end of the decade and IFAs will enjoy a promising future across the range of financial services products.

The Financial Services Authority (FSA), the government watchdog, has increasingly regulated the market. IFAs have strict qualifications to obtain and update, and stringent compliance codes to which they must adhere. However, the FSA has recently been criticised for damaging the market through over-regulation. This appears to have been acknowledged by the FSA, which is taking steps to address the burden of regulation.

Recent regulatory developments strive to make the market more transparent by introducing the 'menu' payment system, whereby all IFAs offer a choice of commission or fees. Many IFAs already work in this way and will not be dramatically affected by the changes. For others, transparency is likely to increase trust and good customer relations.

Small IFAs lacking the capital to invest in areas such as compliance and IT may need to form networks if they are to compete with the technology and economies of scale enjoyed by large companies.

The IFA networks will increase in size and coverage, allowing member firms to share regulatory and technological costs with the support of large customer databases, covering all types of product and most retailers.

In 2002, there were many mergers and acquisitions as more firms have sought to take advantage of large economies of scale in a market in which profits are declining due to increased costs and a reduction in commission.

IFAs have achieved a major share in the distribution of many financial products. There is a large savings gap in the UK, and the Government is taking steps to promote individual pension saving. IFAs already enjoy a major presence in this sector, which is likely to grow in the future. IFAs also enjoy a large proportion of mortgage business, and 2001/2002 saw a dramatic increase in remortgaging, as a result of rising house prices and falling interest rates.

IFAs dominate unit trust advice on behalf of individuals. IFAs' share of this market may be threatened by investors with the confidence and time to shop around the new Web-based fund supermarkets.

We commissioned an exclusive survey of 906 consumers and discovered that most respondents would seek advice from a bank or building society that offered a wide range of products other than its own. The survey also found that a sizeable minority rely on their family for advice and that the largest proportion of individuals would consult an IFA about a mortgage.

For a complete index of this report click on http://www.researchandmarkets.com/reports/35157

REPORT DATA SUMMARY:
Independent Financial Advisers Market Assessment 2003
Category: Banking & Financial Services
URL: www.researchandmarkets.com/reports/35157

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