The stranglehold that independent financial advisors (IFAs) have over the life and pensions product market will continue into the next decade, a report says, but the sector is under increased threat from new providers.
Today's study from research firm Datamonitor says that IFAs accounted for two-thirds of associated product sales in 2006, predicting that this share will increase to four-fifths by 2010.
But despite revealing that the number of IFAs and their subsequent turnover in the UK has increased by 17 per cent and ten per cent respectively during the last 12 months, Datamonitor warns that there are storm clouds on the horizon.
The financial analyst claims that bancassurances, usually banks with insurance subsidiaries, and multi-tie advisors are braced to increase their market share through embracing new technology and throwing out outdated business models.
Lauren McAughtry, financial services analyst at the firm and author of today's report, said: "Technology is unlikely to replace or reduce the advisory business by any significant margin. The industry must therefore learn to view technology not as a threat but as an opportunity."
Although IFAs still dominate the pensions market, Datamonitor says that the 15 per cent share obtained by the two new rivals represents significant competition in a previously uncontested sector.
Ms McAughtry added that additional problems facing IFAs revolve around increasingly savvy consumers who demand more transparent advice and the fact that an ageing profession was being highlighted by a lack of new advisors coming through the ranks.
The most pressing challenge facing IFAs, according to the analyst, is therefore to "introduce new blood to the business, through a combination of recruitment and publicity, or risk the stagnation and eventual failure of the industry".