IFAs in the UK might not face as rough a ride when the advice market is depolarised next year, says ...
IFAs in the UK might not face as rough a ride when the advice market is depolarised next year, says Datamonitor, and banks are able to distribute several different life products instead of just their own.
Datamonitor's latest report "Opportunities in European Life Bancassurance" predicts a rise in UK market share for bancassurers selling financial products through the bank's advisers - from 18% in 2002 to 28% in 2007.
At the same time, IFAs will see a drop from their current 56% market share to just under 52%.
Datamonitor believes bancassurers will try to benefit from depolarisation as they have
a strong relationships with the mass market and will be able to make more use of their large distribution networks, Datamonitor says.
Using Spain as an example, where bancassurers managed to grow their market share from nil to 77% in a decade - after the liberalisation of distribution channels - Datamonitor warns that IFAs in the UK could face the same siuation.
Worryingly, this increase in Spain was all at the expense of other distribution channels, Datamonitor says, however, the low rise in predcted bancassurance take-up suggests the affect on IFAs will not be significant.
Once depolarisation of the advice market comes into force mid-2004, the UK market has the potential to follow the European advice route as banks will be able to compete on a more even level with IFAs that currently dominate the UK market.
Alan Shields, financial services analyst at Datamonitor and author of the report, says: "As the line begins to blur between multiple product advice and independent advice, IFAs in the UK will suffer at the hands of the banks and find it increasingly difficult to distinguish themselves in the eyes of retail clients."
That said, Shields does not believe the UK will see such a "meteoric rise" of bancassurance as in Spain as British investors seem to prefer to receive their face-to-face advice from IFAs.
The report also reveals that the penetration of bancassurance in the distribution of life assurance varies dramatically across Europe, ranging from less than 20% to over 70%.
Bancassurance has been particularly successful in Spain, France and Italy where banks enjoy more than 50% of the distribution of life assurance products, compared to the UK or Germany, where market share of bancassurers is only at around 20%.
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