High-street banks will control the distribution of life insurance products if polarisation is scrapped, leaving IFAs out in the cold, says a survey from consultancy Cap Gemini Ernst & Young.
The company says the banks will dominate because of their large customer bases and their branch networks in a multi-tied regulatory regime.
Smaller IFAs will face an especially difficult challenge in retaining business while bigger firms will deal mainly with high-net-worth clients who appreciate the value of independent advice.
The survey concludes that banks will hold a strong bargaining position when it comes to signing deals with life offices and will influence the shape of the relationships. They will also be able to demand the multi-tie support arrangements which best suit them.
CGEY believes polarisation will be abolished by the Treasury in the long term despite the FSA's claim that the second phase of consultation is still up for grabs before any further changes are introduced.
Cap Gemini Ernst & Young vice-president Shaun Crawford says: “If the proposed changes to the polarisation rules are extended into phase two, the bulk of the future life insurance distribution will be handed over to the banks.”
An FSA spokeswoman says: “The report is speculative. As long as there is a need for independent advice there will always be independent advice.”