Banks could dominate advice market
New rules governing the sale of financial products could put the livelihoods of Independent Financial Advisers (IFAs) at risk, according to a new report.
Financial advisers based at High Street banks will hold a competitive advantage over their independent counterparts when limitations are removed on the range of financial products they can recommend to clients, according to market analyst Datamonitor.
The report argues that, as a result of the reforms, the public will find it difficult to distinguish between financial advisers being paid by a bank or building society and truly independent advisers.
The new rules will end the restriction, known as polarisation, under which firms which are not independent financial advisers are allowed to sell products on behalf of only one provider.
Instead, they will be able to offer products from a range of companies, while IFAs will give consumers the option to pay for advice through a fee rather than only by commission.
The report's author, Alan Shield, said the new rules will confuse the public and could lead to the banks grabbing a greater market share.
"In the new depolarised market, banks will have the competitive advantage, able to leverage their considerable
distribution networks and make it harder for IFAs to distinguish themselves as expert advisers," Mr Shield said.
During the next five years he expects IFAs' share of life and pensions sales to fall by more than 9% to around 57% of new business.
To survive, Mr Shields proposes that IFAs form alliances with product providers or focus on high net worth clients.
But some IFAs disagree with the reports assessment and point to an expanding market share during recent years after some bank-based advisers have been hit by successive mis-selling claims.
"Undoubtedly, the banks are going to use all their marketing muscle and the public will be confused.
"However, over the long term the personal service offered by a good IFA - where they advise rather than just simply sell - will win through," Rebekah Kearey director of IFA firm Roundhill Financial Management told BBC News Online.