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Will the big bank sound top the sales charts?

Yet another business survey focuses on the perennial prop-hecy of IFA

sales plummeting

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&#39s 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&#39s 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

cost-effectively.”

Some argue that full multi-ties will give consumers less choice and hold

back competition.

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.”

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