Leader: Pay, profits and the perils of the FSCS

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Pay is a sensitive subject. While the headline amount is clearly important, research has shown what is more crucial is not salary and wealth per se, but how this compares with those around you.

Someone earning £150,000 in a world of £1m-plus salaries will feel relatively “poor”, though that will sound hollow to those struggling to get by.

Our own research on pay shows there is a good story to tell about the earning potential of the advice profession, with nearly a third of respondents on over £100,000 and average pay across restricted and independent advice firms ranging from £75,000 to just under £90,000.

These findings have been challenged, and it is fair to say while some advisers recognise these figures, others do not.

There will, of course, be regional differences in pay in line with disposable income and cost of living.

At close to 500 adviser respondents, the research is judged to be statistically robust. It may be the case that those who are paid more are more likely to complete salary surveys, but I struggle to see that holding true for all respondents.

The positive aspect of all this is that post-RDR, not only are clients beginning to understand the value of advice, but advisers themselves are too. The level of fee income being commanded by some firms goes a long way to establishing advice alongside other professions where fees are levied in proportion to the complexity of the work involved and the value added.

The elephant in the room though is profitability. Advice firms across the spectrum have seen the benefits of pay inflation for the last few years. Yet at the same time profits have dipped, which has been attributed to the never-ending saga of regulatory costs, and specifically the cost of Financial Services Compensation Scheme levies which have been pushed way beyond the “fair and reasonable” limit.

The unpredictable nature of FSCS levies is hurting advisers’ profits, and badly.

It is great to see there are advisers who are being amply and fairly rewarded for the valuable service they provide to clients. What is a shame is firms are earning more, but also paying away a significant chunk, and without seeing material benefits.

The long promised regulatory dividend shows no sign of materialising. The current system rewards the good guys with one hand, but takes with the other.

Natalie Holt is editor of Money Marketing