Yet another business survey focuses on the perennial prop-hecy of IFA
This time, the research was carried out with 435 consumers by Mori for
computing giant IBM. IBM global services insurance principal David Taylor
believes the challenges of commission caps, depolarisation and new
technology will hit the IFA sector in the longer term, possibly to the tune
of a 30 per cent reduction of business.
However, the poll still shows IFAs as the favourite financial services
channel, with 41 per cent of UK adults over 30 and earning £25,000
upwards saying they would want to get advice from an IFA.
In contrast, only 13 per cent would consult a specialist adviser advising
on a range of products they had selected and 22 per cent opt for their own
banks advising on a range of products they have pre-selected.
The main beneficiary of the survey's forecast fallout in IFA business is
expected to be bancassurers.
Taylor says: “A multi-tied, depolarised marketplace plays into the hands
of the bancassurers. The growth in the IFA sector from direct salesforces
cannot be sustained in a low-commission environment.
“We see a structural shift, with IFA work potentially falling away. Thirty
per cent seems a realistic figure in the context of the ongoing changes.”
ABI statistics for 2000 show IFAs have 57 per cent of total financial
services distribution, compared with 24 per cent for direct salesforces –
predicted to fall even further this year given widespread redundancies –
and bancassurers holding 11 per cent.
Some IFAs feel they are punching below their weight when it comes to
getting their voice heard in a polarisation debate which they feel is being
led by the banks.
Falcon Group chief executive Allan Rosengren says: “The banks are well
organised in presenting their views. You have an IFA market of around
10,000 firms but with very few leaders of opinion. The end result is that
we do not talk up our position strongly enough.”
Although IFAs still dominate financial services distribution, banks
clearly have huge customer bases.
Scottish Widows brand and network development director David Graham says:
“People will come to brands they can trust to get financial advice. The
problem for IFAs is that not many of them have huge brands so they will
concentrate on the up-market customer.
“Banks will succeed if they offer more than one product line. If you have
the client's current account and then a mortgage with Cheltenham &
Gloucester and a pension with Scottish Widows, then you have one customer
over three product areas who you can look after better and more
Some argue that full multi-ties will give consumers less choice and hold
The bancassurer model assumes there is not a significant difference in
the performance of most products and that the key is to ensure that
customers have the right type of product, with less emphasis on finding the
best in the market.
The argument runs that the quality of products is assessed at the stage
when the bancassurer considers products for inclusion on its panel. The
bancassurer adviser is therefore not troubled with considering all products.
Graham says: “In the end it will come down to giving advice. It does not
matter whether the pension is with Norwich Union, Standard Life or whoever
– it is the advice about which products are needed that is important.”
But some people see the bancassurers continuing their indifferent record
and are bullish about the future for IFAs.
Norwich Union director of IFA development David Barral points out that not
all providers are rejecting the IFA route. He believes the Woolwich IFA
Services model could succeed.
He says: “Bancassurers have never really lived up to the predictions and
expectations. The one channel that has thrived throughout has been IFAs.
“Why would Bank of Ireland buy Chase de Vere? People are buying IFAs for
their higher persistency rates and better quality business. providers have
decided that the IFA model is more productive and I think the Wifas model
will be repeated.”