Financial difficulty looms for 265 top IFA firms

A huge 265 of the UK's top IFA firms will end the year in financial difficulty with a further “spike of failures” in the new year, says a report by Plimsoll.

The grim forecast comes as part of its assessment of the top 1000 IFA companies and how they are positioned going into 2010, with many doomed to fail, according to Plimsoll.

"Having clung on through the bad times many of these struggling companies are going to run out of time and fail just before the recovery really takes hold," says author of the analysis David Pattison.

"Sadly, some of them are just too weak to carry on and there will be a spike of failures in the new year."

But he goes on to say the remaining companies will benefit from the reduced competition.

Amongst the losers, Pattison also points to a swathe of winners who are performing robustly.

"A number of companies have managed to improve their performance in the latest year," he says. "They are part of a band of 524 companies that prove success can still be achieved in the industry despite difficult trading conditions."

Pattison says the industry is about to enter a prolonged period of consolidation as those healthy companies that have weathered the financial storm takeover their weaker counterparts.

"With too many companies chasing weakened demand it is inevitable that there is likely to be a number of high profile mergers and takeovers.

The industry will act out its own survival of the fittest contest which, says Pattison, is well overdue.

"This period of consolidation is needed to sort out the dead wood. We have named 125 companies as the best acquisition prospects in the market."

And he also issues an ominous warning to those "reckless" companies that persist in chasing sales despite mounting losses.

"The recession has put prudence back at the forefront of boardroom strategy and these companies have to cut their teeth accordingly or face the consequences."

The newly published Plimsoll Industry Analysis 2010 paints a grim picture for the industry next year, with two-thirds of firms struggling. One in three companies will make a loss and a further third will suffer financial difficulty.

"There are going to be big changes in the UK IFA industry with lots of takeovers, a number of high profile failures and even the odd surprise or two along the way," concludes Pattison.

The report assessing every IFA firm is available now. Readers of IFAonline will get a £50 discount if they call 01642 626400 and quote reference PR/AA10.