The IFA market has been compared with the airline industry in a report examining the dangers facing advisers in 2009.
According to industry analysts Plimsoll, the airline sector is "to some extent" 12 to 18 months ahead of UK financial advice in what it calls the "evolutionary cycle".
It says the failure of XL Leisure in September was "the best thing that could have happened" to the industry as it freed up space for other airlines and says the struggles facing more than 100 adviser firms could have a similar impact.
"The [IFA] sector has overcapacity," it says. "More than 30% of businesses suffered a fall in sales last year, with competitive pressure forcing many to see sales fall by 14%.
"[But] the market will see winners emerging out of the crisis," it says. "There are 684 terrific companies who can compete fiercely on price and are largely debt free, while holding their margins.
"Most are operating at the height of productivity and these will be the ones to watch in the next period."
The report says 118 of what it calls the leading 1,000 IFAs in the UK are in financial danger, adding "not all of these will survive".
Of the 118 companies, more than 50 managed to increase sales in 2008 but Plimsoll says this only proves that, despite rising debts and mounting losses, they were "desperate to maintain sales at any cost". Almost 40 firms increased their debts.
"There is no doubt in my mind that recessions catch bad businesses out," says Plimsoll senior analyst David Pattison. "Those companies that have entered this period ill-prepared have placed themselves at a distinct disadvantage.
"Many have grown used to running their businesses on high risk business models, propped up largely on finance."
The Plimsoll analysis is available for £350. Contact Clair Sherwood on 01642 626400.IFAonline
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