"The eight leading firms reported a composite 2.7 percent organic revenue decline for the [third] quarter," Mr. Wevodau said in a statement. "In other words, if you remove the benefit of acquisitions and foreign currency exchange fluctuations, organic revenue growth among the industry's leading firms has actually begun to shrink."

"For comparison purposes, this same segment posted 10.2 percent [in organic revenue growth] for the same period in 2003."

"Product rate stabilization (the softening market) continues to hinder the industry leaders," he continued. "The overall direction of the market would strongly suggest that these firms have only begun to experience difficulties."

Mr. Wevodau continued that, "When you combine a product rate stable environment with lost consumer confidence," as a result of the suit by New York Attorney General Eliot Spitzer alleging broker-insurer fee misconduct, "it only makes the uphill climb steeper for this group."

He said that adding to their difficulties, "several leading firms have opted to forego contingent commissions which further exasperate matters."

According to Rob Lieblein, managing principal of WFG, "Many of the industry leaders have begun to more aggressively pursue acquisitions in specific service areas to allow them to more effectively contend with lost revenues."

Mr. Lieblein said, "Many firms are up against enormous shareholder demands, and while heavily leveraging acquired growth does not necessarily reflect an ideal scenario, it does demonstrate continued commitment to core competencies while deploying market capitalization toward growth."

"Acquisition strategies have now begun to shift in favor of acquirers as many report very full pipelines," he observed.

That information, Mr. Lieblein said, "would strongly suggest that many smaller firms are facing similar situations as the industry leaders."

He said the uncertainty of contingent commissions "coupled with rate declines have forced many privately held firms to reassess their strategies, leaving many to seek combining their business with a larger organization. The resulting effect is that industry consolidation should continue at its record pace."

The full report is available at www.wfgca.com, through the "Publications" link, or by calling (717) 780-7800.