16 Jan, 2008
Published: 07:00 Wednesday 16 January 2008
By: Michelle McGagh, News Reporter
Research by Plimsoll suggests that 85% of independent financial
advisers are well placed to weather the economic storm that 2008
threatens to bring.
A survey of 1,379 advisers showed that despite the gloom and doom
predictions for the economy the adviser sector will not suffer
'terminal fallout' in 2008. On the contrary, the next 12 months
could be exciting times for advisers.
Plimsoll has identified four groups of behaviour including market
chasers, predators, prey and fence-sitters. Of those surveyed, 149
firms will be chasing extra market share at any cost, 418 firms are
set to go on the offensive, 209 advisers think they will be
squeezed out but 603 will be sitting the whole thing out.
According to David Pattison, Plimsoll senior analyst, there are
pros and cons for each of the categories.
The market chasers have spent 2007 gearing up for growth, to 'such
an extent that some of them are completely reliant on outside
finance,' said Pattison.
'Despite the prospect of even tighter credit, they look
surprisingly confident to continue with their aggressive expansion
plans. With their expected growth rates likely to be in the 40% to
48% range, they could cause chaos in the market as their
undercutting price policies cripple the competition.'
Market chasers could be curtailed if the financiers become
increasingly worried about loans to these companies.
The predators have the most to gain in 2008 as they are capable of
funding their investments with their own cash. On average the firms
enjoyed profit margins of 17.9% in the past two years. As an
increased number of cheap acquisitions appear the only problem
predators may face is 'missing opportunities because of a lack of
clear strategy,' said Pattison.
Any companies that feel they will be pushed out by the market
downturn should cut costs to relieve any debt they are in and they
'may still turn things around,' recommends Pattison.
Companies that are hoping to weather the storm have on the majority
been slowing down their capital expenditure, controlling costs and
sticking to profitable areas of their business concludes the
survey. They have been staggering profitability and making margins
of more than 17% year on year, often in niche markets.
Although they appear to be the firms least at risk Pattison warned,
'Doing nothing is perhaps more dangerous than you think. All it
takes is for a more aggressive player to target their sector of the
market and their position could be jeopardised.