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Broker business booming as IFAs head for 50%

As life and pension sales return to the boom days of 1993, IFAs&#39 share of the market continues to rise amid signs that more and more people are turning to independent advice.

According to the latest ABI market share figures, IFAs&#39 share of new individual life and pension annual premiums jumped to 42.6 per cent last year from 37 per cent in 1996.

In the single-premium life and pension market, the increase in IFA share was less pronounced but brokers still continue to dominate. IFAs&#39 share of the £18.9bn market in 1997 rose to 61 per cent from 60 per cent, recovering to levels last seen in 1993.

National Mutual marketing manager Stephen Phillips says the increase in IFA market share is down to more people beginning to appreciate the merits of independent advice.

He says: "This is in line with what we would have expected. Increasing numbers of people are beginning to move to using IFAs as they are recognising that it is the only way that you can get a square deal."

Phillips predicts that, if the rate of growth in IFA sales continues, brokers could have a 50-50 split in annual premiums by around 2001.

The increased IFA market share comes at a time when life and pension business is finally recovering after three years in the doldrums. ABI figures show that total new business, based on annual premiums plus 10 per cent of singles, rose by 10.6 per cent in 1997 to £4.68bn from £4.23bn.

In 1993, sales peaked at £4.52bn but fell to £3.97bn in 1994 and £3.36bn in 1995 following the introduction of commission disclosure on life and pension products.

Last year, total single-premium business rose by 11.3 per cent to £19.6bn from £17.6bn in 1996. Total annual-premium sales increased by 10.1 per cent to £2.72bn from £2.47bn. The ABI puts the increase mainly down to a turn-round in the economy from the recession-hit years following 1993.

The increase in brokers&#39 market share is coming at the expense of company salesforces and direct providers, both of which have seen their slice of life and pension sales slump.

Company salesforces still have the biggest chunk of the new annual-premium market but saw their share continue to slip back, falling to 54.6 per cent from 60.1 per cent in 1996. Company reps have seen their share of total new annual premiums fall every year since 1993, when they had 69 per cent of a £2.5bn market.

Salesforces have also fallen back in capturing single-premium life and pension business but less dramatically than in annual business. Their total share fell to 37.9 per cent from 38.7 per cent in 1996, continuing a trend from 1993 when their share was 48.3 per cent.

The direct life and pension market remains small in terms of share and fell back slightly in 1997. Direct sales, including business from direct mail and newspapers, took in 2.8 per cent of total new annual premiums compared with 2.9 per cent in 1996.

The likes of Virgin Direct and Direct Line have an even smaller slice of single-premium business which has dipped to 1.2 per cent from 1.3 per cent.

Phillips says: "I don&#39t really see the direct-sellers as being a short-term threat. In the long term that may be different."

In which product markets are brokers doing best?

IFAs are certainly winning the battle against the salesforces in individual pensions, which include personal pensions and FSAVCs.

In annual-premium business, total IFA share increased to 55.3 per cent of a £1.3bn market from 48.2 per cent in 1996. Their share of the market has mushroomed over the last five years, growing every year since 1993 when the IFA share was 32 per cent.

When bank and building society IFAs are excluded, the growth in brokers&#39 share of the annual-premium individual pension market is even more impressive, rising by over nine percentage points to 51.3 per cent from 42.2 per cent in 1996.

Brokers are doing even better in the single-premium individual pension market, which they have dominated since 1993 when they saw their share leap to 59.1 per cent from 43.6 per cent. IFAs &#39 total share in 1997 rose to 67.8 per cent from 63.6 per cent.

The ABI says IFAs&#39 slice of single-premium individual pension sales has risen for the fifth successive year, accounting for almost 80 per cent of linked business.

It adds that most of this growth has come at the expense of the company salesforces, which have seen their share of annual and individual pension sales dwindle since 1993. Their share of the market has dived from 67.6 per cent of new annual premiums in 1993 to 53.2 per cent in 1996 and just 44.3 per cent in 1997.

Company salesforces are also seeing a significant dip in their share of single-premium individual pension sales, down from 55.5 per cent in 1993 to 35.3 per cent in 1996 and just 31.6 per cent last year.

But it is not all good news for IFAs in the pension market, with salesforces coming back at them in annual-premium executive pension plans and occupational schemes.

IFAs continue to dominate the EPP market but their share of annual premiums has slipped back to 80.2 per cent from 81.9 per cent. Company salesforces picked up extra market share, seeing their proportion of annual sales increase to 19.7 per cent from 18 per cent.

IFAs also lost some of their slice of single- and annual-premium occupational group pension scheme business to company salesforces.

Brokers&#39 share of single-premium sales fell to 71.8 per cent from 79.5 per cent while salesforces saw their share increase to 27.4 per cent from 19.9 per cent. IFAs&#39 annual-premium market share fell to to 69.1 per cent from 72.1 per cent, with salesforces going up to a 30.5 per cent share from 27.5 per cent.

However, a recent Money Marketing survey of life offices found that many are predicting a slowdown in new business growth.

According to the survey, growth in life, pension and investment sales is set to slow to 8 per cent in 1998 after two years of 25 per cent-plus growth. But even if this turns out to be the case, IFAs seem to be well placed to hold on to or even increase their share of the market.


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