Money: The end of the financial services industry as we know it

The Prudential's decision last week to axe 4,000 staff, a third of its UK workforce, signals the beginning of the end of our financial services industry as we have grown to know and distrust it.

Government reforms and savvier customers have delivered a double blow to the insurance industry. More jobs will follow: devastating for those affected, but a direct result of lowered profit margins.

The Government will only allow insurers to make charges of 1 per cent a year on stakeholder pensions, designed to get much of the working population saving for retirement. (Insurance companies remove as much as 10 per cent of contributions in charges and commission from existing personal pensions.)

So stakeholder schemes will only make money for insurers if they are sold in high volumes (through deals with large companies, trade unions and so on).

The high-street banks and building societies are likely to be winners. Abbey National has just announced a 20 per cent cut in the number of till positions in its branches. Many will be replaced by financial advice desks: it wants to sell lots of savings, insurance and investments.

Many "independent" financial advisers - those who depend on commission - (rightly) suspect their days are numbered. An Office of Fair Trading report likely to be published later this month is widely believed to recommend that advisers can only call themselves "independent" if they make a shift to fee-paying advice.

The top IFAs will survive, as there will always be a market for good advice. The rest may well be forced under by the reforms and the internet, which makes financial information widely available without our having to go through an expensive "gatekeeper" to get at it.

In just two years, the Government has effectively undermined the commission- driven sales system that allowed the pensions mis-selling scandal to happen, not to mention the mis-selling of endowments, free-standing AVC policies and other less than brilliant investments such as maximum investment plans (MIPs).

A less obvious but equally desirable result of the upcoming shake-out would be an end to the white, male, conservative (small and large C) stranglehold on financial services. It's not exactly an attractive and welcoming environment for anyone who doesn't fit their mould, either as a worker or customer.

A female marketing executive told me about a recent roadshow her firm held for IFAs. Thirty men fell silent when she walked in. "Oh, don't mind her, she's just here to make the tea!" said one wag.

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