The number of IFAs is set to be slashed by the impact of technology and a surge in low-cost financial products, according to shock new research.
Research by “big five” financial consultancy KPMG and standard-setting body Origo reveals there could be 40 per cent fewer IFAs by 2002, with 9,000 advisers leaving the industry.
The conclusions are backed by separate research from Ernst & Young and life industry analyst Ned Cazalet.
The KPMG/Origo report says low-cost products such as stakeholder pensions and Isas will freeze IFAs out of the market.
Their problems will be compounded by a failure to invest in new technology.
Calculations by KPMG suggest Government Cat standards will reduce life and pension companies' income to 1 per cent of the £400bn funds they manage – a maximum of £4bn. But it estimates industry costs run at more than £7bn per year including commission.
The report warns providers could freeze out IFA relationships which are not profitable.
Ernst & Young management consultant Shaun Crawford predicts the small IFAs who do personal business will be the scapegoats.
Cazalet's latest study of the life industry predicts 25 per cent of IFAs will be lost to the pension misselling scandal alone.
IFA Association head of technical services Fay Goddard says: “Some IFAs will fall by the wayside. There will be a move for specialist advice and those who advise on a family level could suffer.”
IFA Promotion chief executive Ann-Marie Martyn says: “We will see a reduction in the number of IFAs. They must drop the quill and pick up the keyboard.”
But Scottish Amicable sales & marketing director John Cowan says: “IFAs will adapt and many are already reinventing themselves.”
Origo chairman Sandy Neilson says: “Provider cost bases are being driven down. We will be consulting with them and IFAs to discuss the way forward.”