IFA business will be eroded by the internet. The prediction comes from European fund supermarket s...
IFA business will be eroded by the internet. The prediction comes from European fund supermarket systems provider, FundsHub.
But before IFA's look anxiously over their shoulder at thier cyber competitor, FundsHub insists the distribution of retail mutual funds over the next few years will, nevertheless, continue to be dominated by the intermediary.
The new research, by Datamonitor, suggests IFAs' share of distribution will remain relatively constant over the next few years, although slipping slightly from 61% in 2000 to 60.2% in 2005.
Direct channels, (constituting of telephone, mail, internet, tied agents, sales forces and private clients) are forecast to increase their market share strongly from 14.3% in 2000 to 22.3% in 2005. This, however, is a little misleading without a breakdown.
The internet accounts for the lion's share of the direct channel increase with its share of the market forecast to grow form 5% in 2000 to 11.5% in 2005.
The real losers in the equation are direct sales forces and tied agents with their share coming down form 19.8% in 20000 to 13.5% in 2005. The research said this reflected a general trend by product providers to dispense with their own sales forces because of high operating costs and declining sales figures. It concluded that more pressure is being put on traditional sales methods by fund supermarkets actively targeting "mass affluent" clients.
Mark Lund, Chief Executive of FundsHub commented: "This research confirms how powerful IFAs are in the distribution of mutual funds in the UK. But what we found most exciting was that Internet sales are expected to double over the next four years. This means almost £40bn of funds will be bought online. The main sufferers will be the direct sales forces with their high operating costs. The funds supermarkets will be eating away at their business."
The research for FundsHub ties in with the launch of fund multi-manager Selestia on November 19, to which the group provides technology and operations solutions. Selestia is designed to meet a demand from IFAs for a new entirely investment focused service.
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Launching later in 2019
£80bn funds under calculation