As many as 40 per cent of small adviser firms will go out of business over the next five to 10 years, says research by JP Morgan Asset Management.
In a poll of 200 IFAs, JPMAM found that 70 per cent of advisers believe that firms with revenues of less than £1m a year, representing 95 per cent of the market, are looking to either attract investment, sell the businesses or join a bigger company.
The survey was carried out to gauge adviser opinion ahead of the implementation of the RDR.
JPMAM head of UK retail sales Jasper Berens says: “While factors will certainly favour bigger players, we steadfastly believe small firms can cont-inue to survive and prosper. However, they must be clev-erly marketed, operationally efficient and focused on a clear client proposition.”
Two-thirds of advisory firms believe the move from commission to fees will mark the biggest change facing the industry over the next three years. Sixty 60 per cent say a move to a recurring revenue stream will be critical while 42 per cent say firms that can generate sustainable revenue from trail commission or fees will be the winners in the future.
Berens says that with overall savings levels approaching a 50-year low, the income potentially available for savings among high earners is at record levels. He says: “It may be that latent demand for independent advice is outstripping supply. This could present a powerful opportunity for IFAs.”