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Lessons from US experience

Advisers in the UK should look to the US for lessons about how a shakeout of the market is likely to affect their businesses, according to JP Morgan Asset Management.

The fund firm carried out a survey of the US advice market in 2005 and found that following a period of relative strength for the sector in the 1980s and 1990s, a number of changes led to consolidation in the market, as is happening in the UK today.

The US market has had to adapt to the introduction of new entrants, such as banks offering wealth management services, the development of wrap and rising operational costs in bear markets.

JPMAM found that these factors led to a new structure for the US market that saw it dominated by a small core of 25 to 50 firms, with another 500 to 600 firms considered to be “mid-sized specialist businesses.”

The main difference between the markets is that the bulk of the changes in the US were commercial rather regulation-led as in the UK.

But JPMAM still expects further consolidation in the UK as in the US but believes there may be greater scope for smaller advice firms in the UK to survive if they are able to differentiate their propositions.

The report says: “We believe that the UK market will still be able to support small, local advisory firms, provided their client proposition is clear and operationally efficient.”

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