Adviser profits crash as FSCS levy hits firms


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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