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Adviser profits crash as FSCS levy hits firms

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Advice firm profits have dropped drastically over 2015, Apfa’s annual market study reveals.

Last year pre-tax profits fell 10 per cent, from £931m to £835m, while profits after tax and dividends plummeted 64 per cent from £171m in 2014 to just £61m (see graph, below).

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Apfa director general Chris Hannant says: “Overall, the steady increase in turnover continued in 2015 (up by 8 per cent), but profits (both before tax and retained earnings) took a significant hit in 2015 – each down by about £100m which represents a fall of 10 per cent in pre-tax and 65 per cent in post-tax profits.

“In my view this is wholly attributable to the massive increase in FSCS levies. The margins in the sector remain thin.”

The report also shows the split between income sources (see pie chart, below). Post-RDR ongoing adviser charges accounted for 35 per cent of income in 2015, while a third of income is attributed to post-RDR adviser charges/fees.

However, pre-RDR investment business still accounts for 15 per cent of income, while commission on non-investment business contributes 14 per cent.

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There were 14,491 registered advice firms and 23,864 regulated advisers at the end of 2015. Both numbers were broadly flat compared to a year earlier.

However, the proportion of business transacted on a non-advised basis has increased year-on-year (see bar chart, below).

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. And APFA’s plan of action to address this is…….?

  2. Nonsense figures for PR. What of unincorporated and small firms who don’t have to report either at all or in detail? After tax and dividends… are you kidding – for many firms the dividend is part of the owners emolument. One can take out all the profit in dividend if you are so minded. So a daft figure.

    A drop of 10% in profit is hardly a crash. Anyway yet again this tends to show that small is beautiful as the smaller profitable firms don’t feel the hit nearly as much.

  3. Which is all why APFA is ignored – figures are meaningless for us and many other firms although the FCA also use them misleadingly to claim firms are increasing their profits.
    I would say Harry that an interim levy does hit small firms badly – it comes straight out of the owner’s pocket.
    The FSCS is a farce, based on archaic data provided by us and paid by many innocent people – clients and advisers.

  4. From a personal view point, these figure’s are not far off the mark.

    I know and understand what Harry is getting at, but fact still stands huge levies, coupled with increases to PI (mine has risen over 200% in 4 years even with no bad baggage, and no complaints), means this still has to be budgeted for, I know what I have to earn from a personal stand point, so these increase’s mean you having to strip back from the business, resulting in no innovation, no growth, and no development, all this on top of holding and sandbagging valuable cash for the cap ad requirements

    Two points that also raised and eye brow was the lack of new entrants and the big rise in the non advice market !

    Sad to say, and being the most positively negative person I know….. it will only get worse, I will have to move to smaller room…. in my own bloody house, sack the dog, and have Lidl own choccy biscuits with my tea 🙂 and getting my fishing boat will have to wait a while

    I would wager, JGJ and his band of cutthroats wont be going short spending their pieces of eight as fast as we can earn it for them !

  5. Whilst the quoted figures are dubious, it cannot be denied that the levies will undoubtedly have a big impact on profits.

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