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&#39IFA market share under pressure in depolarisation&#39

Big financial institutions could take away up to 18 per cent of IFAs&#39 overall market share in the next five years, according to Datamonitor research.

It questioned a panel of 100 IFAs in February and March to produce the UK Independent Financial Advisers 2003 report about the future for IFAs in a depolarised world.

Datamonitor wanted to examine advisers&#39 reaction to regulatory change and their relationship with product providers.

Its findings have led report author and analyst Alan Shields to predict that IFAs will lose out to banks and big financial institutions on annual-premium life and pension sales following depolarisation.

IFAs have dominated life and pension business over the past five years, with their sales rising by an average of 12.2 per cent a year, according to ABI figures.

But Shields says IFAs will be unable to maintain their grip on the market in the future. He forecasts their share of total life and pension distribution will fall by 9 per cent from 66.2 per cent to 56.9 per cent over the next five years.

Shields says banks and building societies will ultimately benefit most from depolarisation as they exploit their considerable distribution networks and existing relationships with retail customers. He also predicts that IFAs will come under increasing pressure to distinguish themselves from advisers in high-street branches.

Shields says: “The new regulations that are about to be introduced by the FSA will see the competitive landscape of distribution in retail life, pension and investment products change markedly, with banks set to enter the fray as competitors.

“Unlike previous proposals however, the new regulations have been hailed by the industry as a smart move. They allow IFAs to assess and define their own business models rather than dictating rules to them.”

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