Four out of 10 of advisory firms believe small IFA businesses will go out of business over the next five to 10 years, according to research by JP Morgan Asset Management.
The survey, which polled 200 IFA companies, also reveals that 70 per cent of firms that are grossing less than £1m a year are looking either to attract investment, sell the business or join a bigger company.
Two-thirds of IFAs believe the move from commission to fees is likely to be the biggest threat facing their business in the next few years while 62 per cent believe that treating customers fairly will also play a major role.
The impact of regulatory pressures on the UK market also sees the retail distribution review and Mifid feature highly on the drivers for change while the further integration of wrap was considered to be the fifth most pressing challenge facing advisers.
JPMAM head of UK retail sales Jasper Berens says that although consolidation is likely to take place in the UK market, he believes there is plenty of dormant demand that can be harnessed by smaller adviser companies.
He says: “We feel that the IFA market has been shrouded by pessimism in the past few months despite the number of opportunities there still are for firms who lift their levels of professionalism. It may be that latent demand for independent advice is outstripping supply. This could present a powerful opportunity for IFAs.”