A third of adviser firms will be forced to close in January next year because of professional indemnity requirements imposed by the European Union.
IFA Thomson's Group chief executive Douglas Gardner, a member of the FSA's practitioner panel, speaking at the London Professionals dinner last week, said he believes that the combined imp-act of impending EU directives will wipe out a third of the estimated 26,000 advisers trading today.
Gardner predicts that the financial services landscape after depolarisation will see fewer than 30 big independent advice firms controlling 85 per cent of distribution. He believes these will be firms which have a strong grip on distribution in the UK and throughout Europe.
Gardner believes the combination of the insurance mediation directive, which requires firms doing insurance business to have £1m cover by January 2005, followed a year later by the market in financial instruments directive by April 2006, which will require firms doing investment business to have another £500,000 in cover plus £30,000 capital or a mix of the two, will see thousands of firms close.
He is calling for more evaluation of the financial benefits brought by the new rules combined with further analysis of their impact on the UK market. Gardner said: “From January 15 next year, advisory firms are going to have to have a level of PI dictated by Mifid or ISD2. There will be no get out of jail free card. I predict that at least one-third of the businesses trading today will be unable to trade after depolarisation.”