A report leaked last week indicates these reforms will cause a massive shake-out, with 9,000 IFAs losing their jobs within three years. The KPMG/ Origo report was prepared for 19 of the country's biggest life insurers, and it suggests that they can now use the internet to sell these new low-cost policies direct to the public.
Sandy Neilson, the managing director of Origo, said 40 per cent of advisers' jobs could disappear "if they don't recognise there are products they cannot sell profitably".
The biggest drop in advisers' income will come when the new low-cost "stakeholder" pensions are introduced in 2001. Currently, many small IFAs rely on income from selling high-charging personal pension to stay in business. IFAs earn pounds 1,800 in commission immediately when they sell a pounds 200-a-month pension plan. Stakeholder pensions will not generate commission.
Representatives from some of the top IFAs met life insurers last week to draw up a plan of action to tackle the crisis.
The Society of Financial Advisers (Sofa), which organised the meeting, wants the Government to compel employers to use IFAs to educate workforces about financial planning. But even if adopted, these plans will only generate business for highly qualified IFAs from top firms that already attract corporate clients. Many small firms will be cut out of the loop.
Responses to the Green Paper on stakeholder pensions have to be with the Department of Social Security (DSS) by the end of this month.