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FCA figures reveal average advice firm profits

Total earnings by financial advisers increased by 22 per cent to £4.5 billion in 2017, FCA data shows.

Figures in the regulator’s latest data bulletin show aggregate pre-tax profits rose 23 per cent to £698m, which the regulator says was driven by growth in headline revenue.

Small firms have the highest pre-tax profit margin, at 43 per cent of total revenue.

The average pre-tax profit for a one-adviser firm was £80,349, with two to five adviser firms seeing average profits of £192,328. Firms with between six and 50 advisers made £358,454 last year.

Adviser pay hits all-time high of £93,000

Revenue firms receive from initial charges rose 24 per cent in 2017. Of this, the share accounted for by restricted services was 40 per cent, up from 39 per cent in 2016.

The data shows 89 per cent of firms have between one and five advisers. Firms employing more than 50 adviser staff account for 44 per cent of all advisers, but less than one per cent of firms. There are around 8,000 appointed representatives working at advice firms as at 31 December 2017.

The most recent breakdown of types of advice provided show 2 per cent of firms provide a mixture of independent and restricted advice, while 11 per cent have just restricted offerings, and 87 per cent are independent.

The number of restricted advisers is slightly lower than that recorded in February in a Freedom of Information request filed by Money Marketing columnist, Paul Lewis. At that time, 13 per cent were restricted at 82 per cent were independent.

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Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. Nicholas Pleasure 7th June 2018 at 11:31 am

    The average pre-tax profit for a one-adviser firm was £80,349, with two to five adviser firms seeing average profits of £192,328. Firms with between six and 50 advisers made £358,454 last year.

    These figures are unlikely to be comparable. A one adviser firms and some smaller firms will likely be owned by the advisers so the profit will be high because they will be paying a small salary, declaring everything else as profit and paying a big dividend.

    Larger firms will be paying a salary and bonus to advisers which will all be an expense against profit. Hence why big firms appear to make less profit per adviser. In this case turnover may be more relevant than profit.

  2. Alistair Cunningham 7th June 2018 at 11:36 am

    I suspect small firms make greater profits as directors are more likely to draw dividends than salary/bonus.

  3. I hope that these profits are on the low side – particularly for unincorporated sole traders. There are so many reliefs that can be written off before profits are declared. (Even a car business mileage can be claimed for instead of being taxed as is in the case of incorporation. All Electric cars also have special deals).

  4. Neil Liversidge 7th June 2018 at 11:45 am

    Interesting. In another publication recently the rather arrogant head of one national firm said that were he in charge of the FCA he’d force all small firms to join a network unless they turned over a minimum of £2.5m and had at least ten advisers. as the figures show however, we small firm owners run our businesses well. Away from the figures we also deliver the personal service which, to get from the big firms, you’d need well into seven-figure wealth to obtain. As one in-the-know industry luminary once said to me, “You’re the private bank for the kind of people who normally couldn’t afford a private bank.” I’m proud of the fact that I run a well-run small firm and there are many like us. I’m proud to represent small firms on PIMFA’s council. Small firm owners do however need to be aware that there are those such as the above-mentioned individual who resent us. They resent the fact that we do so well, that their clients leave them for us and that unlike them, we can change our business models quickly in response to changing circumstances. Most of all they resent the fact that we are independent and earning a paycheck for ourselves, not for them. Networks and large IFAs have their place and I wish them all the well in the world at doing their own thing, but it ill behoves their illustrious ivory-tower dwelling lords and masters to try and force into their servitude those of us who, frankly, would rather have a leg off. So, back off guys, you run your businesses and we’ll run ours. Judging by the numbers above, we’re making a pretty good job of it, and unlike you, we actually talk to clients.

  5. tim sargisson 8th June 2018 at 9:26 am

    Last year’s MM article published on the 2nd June ‘Profits, people and price: Crunching the numbers on the advice market’ Reported profit figures of £779m for 2016 before taxation for advice firms. This was based on turnover of £3bn. (Source: Apfa: the advice market in numbers report)
    This recent FCA Data Report talks about profits up 23% to £698m, from £569m in 2016. Interesting to note that last year’s FCA Data Report published in May 2017 was wholly silent on the question of profit in the retail advice sector, which is why the figure is taken from the APFA report.
    So which is it? Is there really an improvement of underlying profits, up 23%, or a continuing decline, down 10.4% compared to 2016, which last year APFA attributed to ‘increasing regulatory costs’. On the basis that turnover is vanity and profit is sanity, it’s important to understand the true picture.

  6. I suspect that the effect of RDR and recent legislation has been to increase fees and focus on more profitable clients, working smarter not harder.

    The consequence is the so called advice gap, why serve ten small clients when you can make the same money from one large one? We all have our views on the moral issues, but it is human nature to take the path of least resistance.

  7. So the average IFA has gross profit of around £80,000 !! (less for larger firms)

    The FCA’s average wage per person is circa £101,000 !!!

    Discuss ……

    • No its not, the median pay is around £56,000 – See efinancial careers. The lower end salary banding starts at £17,845 according to their website.

      • Oh yes it is !

        Its an easy calculation Matt

        Just divide the FCA salary bill by the number of staff
        It makes no difference that some get paid more than others (that’s an internal issue to argue)fact is the clients pay for it !

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