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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.

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