IFAs to dominate UK retail market

By Barbara Messer

Independentfinancial advisers (IFAs) in Britain are set to snatch more than 50 per cent of the local retail funds management market by 2006, in spite of legislation to depolarise the industry which comes into place next year, according to research consultancy Cerulli Associates.

IFAs already oversee around 44 per cent, or £230 billion worth, of retail-sourced assets in Britain’s funds management industry. But this percentage is poised to rise, with IFAs being better positioned to cater for the complex advisory needs of wealthier clients than banks and tied agents, which are likely to focus on the mass-retail investor market instead, Cerulli says.

“Independent advisers will continue to gather larger net inflows from more affluent clients, and will see their market share of retail fund assets rise accordingly, and primarily at the expense of tied agents and multi-tied distributors, who will fail to grow as quickly,” Cerulli says.

The predicted failure by agents and banks to increase their share of the retail market comes in spite of the British government’s initiatives to depolarise the industry. At the moment, distributors of proprietary funds are not allowed to simultaneously distribute third-party products. But this is likely to change in late 2003, when new legislation will enable advisers tied to single-product vendors to become ‘multi-tied’ distributors of third-party products.

The Cerulli report says although many IFAs will choose to become multi-tied distributors, those that remain independent are likely to further expand their market share.