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FCA reveals how advisers are charging their clients

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Advisers are charging an average of between £150 and £195 an hour, according to the FCA.

The regulator released a data bulletin today that focuses on retail intermediation firms including financial advisers, mortgage brokers and insurance brokers. It is the first time it has published data submitted through retail mediation activities returns, part of its Gabriel reporting system, including numbers on revenue, capital and charging.

The data reveals that for firms with a single retail investment adviser, the average revenue is £92,000 from retail investment business and £105,000 from retail investment, mortgage broking and insurance broking combined.

Firms with more than 50 advisers had an average retail investment revenue of £124,000 per adviser.

The power of percentage charging

The FCA data shows the most typical charging method used by retail investment advisers remains a percentage of investment value, with hourly rate and fixed fee the other main charging structures.

For percentage charging, the FCA found average charges for initial advice are 1 per cent minimum and 3 per cent maximum. For ongoing charges, the average rates are 0.5 per cent minimum and 1 per cent maximum.

For firms charging an hourly fee, national average minimum and maximum rates vary between £150 and £195 per hour.

Wales and the North East levied the lowest average hourly charges and London and the South East levied the highest, with average hourly charges of £250 and £200, respectively.

The majority of retail investment firms (83 per cent) say they give independent advice with 14 per cent offering restricted advice and 3 per cent offering both.

Restricted advice accounted for 62 per cent of revenue from adviser charges and independent advice 38 per cent. The regulator says this reflects the small number of very large firms that make up the restricted advice market.

The FCA says overall revenue from retail investment business increased by 16 per cent between 2013 and 2015 while the number of firms increased by 6 per cent over the same period.

Commission crunch-time

In 2015, commission accounted for 31 per cent of revenue earned and fees and charges accounted for 64 per cent. In 2013 commission accounted for 56 per cent and fees and charges were 37 per cent. The regulator attributes this shift to impact of the Retail Distribution Review.

The data also shows that payments through providers and platforms, as opposed to directly from clients, are the main form of adviser payment, accounting for 81 per cent of initial charges and 74 per cent of ongoing charges.

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Comments

There are 25 comments at the moment, we would love to hear your opinion too.

  1. Cobblers. As per our published hourly rates and those submitted to the FCA via our GABRIEL Return you would think we charge £200 per hour for a Chartered Adviser. We should be so lucky if we get that so what on earth are these figures supposed to mean? For some clients the hourly adviser rate is below the published rate for administration staff! (That is our problem but it does give you some of the ideas of the problems we are facing which the FCA gloss over) It is all meaningless. There is no context to these figures.
    It reminds me of the dross published I think regarding profitability of small firms and the FAMR when the FCA said profitability is improving. Great – we are working 80 hours a week and not 37.5.

  2. There is surely a whole host of vastly more relevant and pressing issues towards which the FCA should be allocating its resources instead of piddling about with statistics on who charges how much for what and trying to pretend that because it gets this info from its GABRIEL Returns, they’re actually of any practical value. Wankers.

  3. Neil F Liversidge 28th October 2016 at 1:43 pm

    You’re bang on the nail there Sam. I’ve averaged 80hpw for the last 12 years and I don’t see it changing anytime soon.

  4. Aha, so this is what those GABRIEL returns contribute to producing. I feel so much better about how I spent my Saturday morning now

  5. This adds no value to any debate at all with the possible exception of proving what a waste of time Gabriel is

  6. Perhaps they will be able to calculate the cost of regulation per client if they have that much data available, and see if it represents good value.

  7. So pre RDR more initial commission than fees for investment. Post RDR the reverse? Waow our regulators are superb. 81% of fee income is still provider facilitated is it? And the average is still 3 + a half is it? This data demonstrates what a complete and utter waste of time and money the RDR was. In 81% of transactions the client has noticed absolutely no difference in costs to them and the business is transacted in exactly the same way. How many of the 81% do not charge anything if no business is done? I would say the vast majority don’t, but any bets that the FCA don’t know?
    Total industry upheaval, 10 fortunes spent, thousands and thousands of jobs lost, so many unintended consequences that you could shake a stick with them, clients confused and all in the name of removing a bias that the FSA couldn’t find in their first survey so they changed the question to get the response they wanted in a second one. Well done to the FSA and FCA. Billions spent for sweet F A difference. What a bunch to total buffoons.

  8. Anyone working 80 hours a week needs to have a look at what they are doing because you don’t have to work longer hours to give quality advice to clients you have to work smarter. Having over 125 fee paying clients and I dont work more than 40 hours a week. I think we earn a good living providing an excellent service. Never had a client moan about how much I charge mainly because we explain the value of the advice upfront and then continue to deliver it.

    I think the removal of commission to fees has been what the general public have been looking for and I for one am much busier now than I was 3 years ago. Those advisers who relied on upfront selling and don’t advise clients and provide a value based advice process for clients don’t deserve to call them self an Financial Adviser. Yes there is more regulation, yes Gabriel is a pain you find me someone who has the perfect job though.

    • 40 hours a week. I regard that as practically part time. I would guess that you delegate a huge amount and have a legion doing your reports, asset allocations and it would seem that all you do is sit there and chat to clients. In both industry and financial services for 47 years I never worked less than 60 hours. No I wasnt rolling in it, but I did the job to the best of my ability and there was always something to do – even if clients didn’t take up all the time there was always working out ways and implementing how to improve. I would contend that if you only work 40 hours you are not very senior, or don’t own the company or are not really interested in the business.

  9. Gabriel doesnt take into account tiered charges. You put in your maximum charge. So, by default, the FCA data would be maximums and therefore the best they can do with that is ascertain the average maximum across firms.

  10. I read all this and wondered why

  11. Pray tell who are they revealing this to? Our clients know exactly what we charge them – they pay the bill. Is this just another example of those at Canary Wharf just filling the time available?

  12. Some of us are not fortunate to work with high net worth clients and there is a limit to what we can charge. Once we get them on board they then really appreciate what we do and we then find it easier to charge what it actually costs. We also fully disclose our charges in pounds and do not hide behind %s or round things up as the TP guy suggested some IFAs do. We also offer free initial meetings because when offering advice we want to know all the pertinent facts and start a relationship.
    I also think Surrey IFA that you are patronising small IFAs who are struggling in a difficult market to service the middle earners in society. The figure of eighty hours was used as an extreme example to make a point but that point remains – the FCA has no idea of what they are doing when collecting data and then publishing it this way to justify its collection. It is misleading and it should be of concern that the FCA use it to formulate policy and rules.

  13. I wonder if the accountancy, legal and medical regulators do this for their audience of regulated individuals and firms/practices?…. think I know the answer, but not positive!

  14. You have to smile really don’t you ?

    Are the FCA clutching at straws here ?…… quick there seems to be a lot of press about our use (or lack off) the RMAR reporting ……. get something out quick time, to show we do use the data, and if it shows IFA’s in poor light all the better ! AKA-: watch out the boss is in the office this morning…. look busy !!
    hahahaha they (FCA) really are morons the whole lot of them !

  15. Eighty hours a week? I think some people need to have a long hard look at their own busineses. Professional chartered financial planners should be having perhaps two client meetings a day fully supported by a highq quality bteam of suport people – papraplanner/administtrator/technical. Forty quality hours is more than enough to deliver a great service to around 100 clients, each of whom should be paying a minimum of £2,500 a year.

    • I’m at a loss to understand what you actually do as a planner. You speak to two clients a day, but the paraplanner and the technivcal department actually end up providing the plan and the advice. So say you have one paraplanner at (say) £50k p.a One technical bod at the same rate and an administrator at (say) £30k that’s a salary bill of £130k not counting NI and Auto Enrolment. Then there is your own remuneration – shall we say a modest £80k. Then we have PII, the FCA Bill and the FSCS levy as well as office rent, stationery IT costs and all the rest. So are you actually making any profit at all? (Yes, I appreciate that you could count your remuneration as part of any profit). But this looks like a bit of meagre business plan to me.

      Now if you worked a bit longer you would probably save on your paraplanner and technical bod and then your profitability would be transformed. You can wrap it as you please, but from where I stand it just looks like laziness.

    • And dont forget that

      “highq quality bteam of suport people – papraplanner/administtrator/technical”

      can also spell check your reports for you.

  16. Useless data for the sake of data. Ask the FCA to confirm how many firms have sold / are selling unregulated crap without sufficient PII cover to prevent the liabilities falling on the rest of us – if you get a response, it’ll be “no comment”

  17. 80 hours per week for 12 years? So nearly 11.5 hours per day for 7 days a week, for 12 whole years?!!!

    ‘IF’ you are working those hours solidly, you probably need to stop running around like a headless chicken, take a step back and evaluate what you can change to make your business more efficient! If not, you won’t be working those sort of hours for much longer as you’ll be in an early grave.

    Ever heard of a ‘Busy Fool’?!

  18. 60 hours only represents a 12 hour day for 5 days. Then say 5 hours on a Saturday. No big deal. And if you don’t think your work is fun perhaps you need to find another job.

  19. What’s the point of working 80 hours a week if you’re left with no spare time to enjoy the fruits of such labours? There’s the old saying All work and no play makes Jack a dull (or highly opinionated) boy and nothing much more.

  20. Steve D

    You are absolutely right. Unhappy with the industry, but loved my job. (No the same thing at all).

    Indeed there was only one job in my carrer that I didn’t love and that lasted a matter of months before I walked. Othgerwise I can honestly say I loved the other 3 jobs in my carrer. Training, Industry and Financial Services.

    And Julian there was plenty of time for leasure. No I didn’t work 80 hous, but 60 to 68 hours a week still leaves plenty of time.

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