New FCA report shows revenues and firm numbers are rising
The financial adviser market looks to be in rude health, judging by the FCA’s latest report on retail intermediaries. If you have not yet taken a look at the report, it is well worth doing so. It offers a great insight into what has been going on in the marketplace and how you can benchmark your firm’s performance against that of your peers.
One is that the report doesn’t probe beneath the data on directly regulated firms through to the roughly 14,000 total number of firms including appointed representatives.
Total revenue from retail investment business was more than £4.4bn in 2018 – 12 per cent up on the previous stonkingly good year and over 46 per cent more than 2015.
Nearly nine out of 10 firms have five or fewer advisers, but 45 per cent of all adviser posts are in firms with over 50 – just very slightly up on 44 per cent of all adviser posts last year.
It is perhaps surprising that adviser numbers in the big firms have increased so little, given the speed with which many of them have been hoovering up smaller businesses. But there is strong anecdotal evidence to suggest every takeover by a large organisation prompts ambitious and restless individuals to set up on their own. Interestingly, larger businesses do not seem to generate as much revenue per adviser as smaller firms.
Those with between one and five advisers brought in an average of more than £187,000 per adviser, while medium-sized firms with between six and 50 netted over £194,000 per adviser. Single-adviser firms and those with more than 50 could only manage a little over £164,000.
Profits in small businesses largely represent owners’ remuneration, unlike large firms. The average firm with between six and 50 advisers has retained profits of more than £190,000 a year. Larger businesses have average retained profits of minus £629,000; in other words, these firms are mostly cash-hungry and losing money.
>But for a fair few, the fact is their adviser businesses do not make much money and most of their overall group profits come from upstream platform and fund management profits. Nevertheless, big or small, 2018 was a pretty good year for advisers. And 2019 is looking fine too.
Danby Bloch is chairman of Helm Godfrey and head of editorial strategy at Platforum