Will increased competition threaten advisers' market share?
The industry has dismissed claims from Datamonitor that the depolarisation of the advice market in 2004 will bring increased competition from banks and threaten the livelihood of advisers.
The research paper, Opp-ortunities in European Life Bancassurance, suggests that depolarisation will allow banks to distribute multiple life products instead of just one product and compete on a more even level with advisers currently dominating the market.
It estimates that the banc-assurance channel will see a rise in market share from 18% in 2002 to 28% in 2007. During that same period, it forecasts advisers will see a decline in their market penetration from the current level of 56% to less than 52%.
Despite Datamonitor's fore-cast, providers in the UK are not convinced advisers will be slowly forced out of the market. While depolarisation will enable banks to broaden their offering by distributing multiple life products to consumers and impact the market in some way, the industry is confident that advisers will prevail.
"I do not believe the pred-ictions at all," said Nick Kirwan, head of protection, product development at Scottish Provident. "I think the one great strength advisers have is their ability to change and adapt to market conditions.
"I do not believe that what differentiates banks from IFAs is the products they offer. It is more about advice and service. Banks and advisers are not operating in the same market space or targeting the same consumers," he said.
Datamonitor's estimates are based on the bancassurance model currently deployed in other European countries such as Italy, France and Spain. It states that Spain, in parti- cular, has seen a surge in the bancassurance distribution channel over the last decade, which has seen banks grow their market share from nil to 77% at the expense of other distribution channels.
Alan Shields, financial services analyst at Datamonitor and author of the report, said that while the UK may not experience such a significant rise, depolarisation is a threat to advisers working in the market.
"As the lines begin to blur between multiple product advice and independent advice, IFAs in the UK will suffer at the hands of the banks," he said.
