IFAs using fund supermarkets could cut their costs by up to 20 per cent, according to a report from Cerulli Associates.
It predicts IFAs are set to account for more than a tenth of all assets in continental European fund management by 2005 as the power of the banks is eroded.
The report, which will be published later this month, says fund supermarkets have the power to help IFAs with increasing pressures on their margins. By taking care of time-consuming and sometimes costly functions, such as reporting, administration, execution and custody, Cerulli says supermarkets can significantly boost IFAs' profitability.
Cerulli says IFAs are already adopting new practices by no longer relying on transactions for revenue. Instead, as the internet has commoditised transactions and information, IFAs are trying to differentiate themselves on the basis of the advice that they provide.
The report says supermarkets are poised to make significant inroads into fund distribution in Europe, with Cerulli predicting they will account for up to 25 per cent of net new inflows by 2005.
The report points out that across continental Europe, the proportion of funds under management attributed to banks has fallen from 78 to 74 per cent since 1997 while IFA sales have increased from 6 to 8 per cent. In the UK, IFAs are already established as the dominant fund distribution channel, accounting for more than 40 per cent of fund sales.
Cofunds head of sales Rodney Aldridge says: “In the short period of time since we have launched, we have seen a very strong take-up of the supermarket concept. We believe it is already becoming a significant distribution channel for fund managers in the IFA market.”