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&#39Handful of firms left in the savings market in five years&#39

Scottish Widows predicts that Sandler&#39s recommendations will trigger a further wave of consolidation in the savings industry, leaving only a handful of companies in the market in five years.

Brand and network director David Graham says Sandler&#39s report calls for increased competition in the savings industry while imposing price caps which require providers to be large-scale to be profitable.

He predicts that companies will need a market share of 8-15 per cent to make a profit, which does not allow for many players. Small companies will be snapped up, particularly fund management companies which he believes will be forced to merge with bigger life companies.

Graham says fund management companies have success when they are small but are not so successful when they reach a certain size. However, he believes there is nothing stopping big companies offering boutique-style products.

He says: “The 1 per cent infection will spread upwards to more expensive products. I think there will only be between five and eight companies left. Fund management companies like Fidelity and Newton will continue to be successful but others will have to be adsorbed. But there will always be room for specialist boutiques.”

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