IFAs will have to increase the amount of business they write by 400 per cent by 2003 to maintain current income levels, according to research by KPMG.
The report, based on extensive interviews with senior life office personnel, predicts that all financial products will be brought under the 1 per cent charging cap for stakeholder pensions.
This means that IFAs will have to work four times as hard just to maintain their existing income levels.
The research also concludes that downward pressure on margins will force life offices to slash marketing budgets by around 80 per cent.
It is also anticipated that up to 50 per cent of broker consultants will be axed by life offices by 2003.
Author of the research KPMG principal consultant Robert Wood says the Government is pushing for a level playing field for financial product charges, meaning life offices and IFAs need to change their businesses as a matter of urgency.
Wood says: “The 1 per cent world is not here yet but it is coming. There needs to be a 50 per cent reduction in broker consultants and a 400 per cent increase in productivity for IFAs.”
Towry Law chief executive Douglas Black says: “If you were just selling commodity products like Isas and stakeholder pensions, then you will need to increase your turn over significantly.
“For us, it is only a relatively small percentage of turnover but there are a number of people who will find the pressure too much to bear and will leave the industry.”