Advice firms saw an increase in pre-tax profits of 5 per cent last year as the market began to stabilise, according to Apfa’s latest state of the market report.
The annual report shows that pre-tax profit for all firms with an FCA primary category ‘financial adviser’ was £931m last year, up from £884m in 2013.
However, Apfa says the figures are shown before dividends, and may not therefore reflect the full costs of running advice firms.
The average pre-tax profit for directly authorised advice firms was £178,557 in 2014, 2 per cent higher than in 2013. But the average pre-tax profit per individual adviser fell by 1 per cent to £39,382.
Advisers’ revenue also increased last year.
The report shows the average annual revenue earned by directly authorised financial advice firms for all regulated business in 2014 was £755,597. This is up by 9 per cent from £691,304 in 2013.
The average revenue per financial adviser increased by 6 per cent from £157,046 in 2013 to £166,654 last year. The report shows that as at December 2014, there were 14,550 financial advice firms registered with the FCA, up by 1 per cent from 14,387 in December 2013.
The number of advising staff working in financial advice firms has increased by 7 per cent, from 22,168 in 2013 to 23,640 in 2014.
In addition, the report shows that in 2014, 20 per cent of advisers’ income came from pre-RDR investment business and a further 14 per cent from commission on non-investment business. Some 30 per cent came from ongoing fees, and another 30 per cent from initial fees.
During the previous year, 29 per cent of income came from pre-RDR investment business, plus 15 per cent from commission on non-investment business. Some 23 per cent came from ongoing fees and 27 per cent from initial fees.
The report also reveals that last year, 77 per cent of advisers’ income came from independent advice, and 20 per cent from restricted advice. Another 2 per cent was from focused advice and 1 per cent from direct offer business.
In 2013, 87 per cent of income came from independent advice, with just 9 per cent coming from restricted advice and 4 per cent from focused advice.
Apfa director general Chris Hannant says: “Two years after the RDR was implemented it seems that the adviser market started to stabilise in 2014.
“2014 saw an increase in the number of advisers by over 7 per cent and, despite the volume of high profile mergers and acquisitions, there was a small rise in the number of advice firms.”