Below are some trends and data on the financial adviser market based on today’s FCA Data Bulletin. The data bulletins can be a rich source of data and insight on how the adviser market is evolving.
This year’s bulletin confirms what we already know (adviser revenue is up and most advisers charge as a percentage of assets). But it also shows that the market continues to be dominated by SMEs (no sign of consolidation shifting the balance yet), firms with 6-50 advisers still make more revenue per adviser and the revenue per adviser is rising more quickly than for other bands of firm.
Below are some of the points I thought most interesting but the full bulletin is worth a read.
Revenue is up for advisers
- Financial adviser businesses earned more revenue from retail investment business (up 21% in 2017) and more firms earned revenue from retail investment business (up 10% in 2017).
- Total revenue earned by financial advisers was £4.5bn, up £0.8bn in 2017. 84% of their revenue was earned from advice on investments, 11% from insurance and 5% from mortgage products.
Adviser market still dominated by SMEs. Growth in adviser numbers driven by big firms
- The financial advice profession continues to be dominated by SMEs. Despite a lot of talk of consolidation (and much M&A activity in 2017), 89% of firms have 5 advisers or fewer – the same percentage as last year.
- 26,311 adviser staff at adviser firms, a 3% increase year on year suggesting we continue to see a steady increase in the number of advisers. The data bulletin notes that it is large firms driving this increase.
- Firms with between 6 and 50 adviser earn more revenue per adviser and revenue per adviser is growing faster
- Firms with the highest average retail investment revenue per adviser have between 6 and 50 advisers but the difference between 2 to 5 adviser firms and 6 to 50 adviser firms is pretty marginal. Firms with 6 to 50 advisers are showed the strongest year on year gain in average retail investment revenue per adviser, up 21%. And this is the second year in a row with strong gains in for this profile of firm (2016 revenue was up 24% year on year).
- The FCA data bulletin reports that intermediary firms paid in excess of £300m in PII premiums in 2017.
- Smaller firms pay a larger proportion of their regulated revenue in PII premiums. PII premiums for firms with up to £100k in revenue pay 4.2% of their regulated revenue in PII premiums. This compares to 1.2% of regulated revenue for firms with over £10m in revenue.
- It will come as no surprise that NextWealth research suggests that financial adviser say PII premiums are on the rise. We’re still waiting for the results to come in but most firms that have renewed their PII in 2018 have seen premiums go up (so far only one quarter haven’t seen premiums rise). About one third of firms are telling us that premiums have gone up by between 10% and 25%.
- Some people think that the current furore over PII cover is pushing small firms into networks. It’s too early to tell what the consequences will be. But in the short run, most advisers tell us they are increasing fees for some services as they need to pass on the extra costs to clients.
Most advisers charge as a % of assets and most adviser fees are facilitated
- 93% of financial adviser charges were facilitated, up from 91% in 2016. This is a huge number! But probably not a big surprise and underscores the dominance of platforms. It also highlights the importance for providers to facilitate charging if their product isn’t offered on platform
- 73% of firms charge clients as a percentage of investment value. The table below shows the approaches for charging. Note percentages don’t add to 100% – as firms can use more than one approach!
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