The FCA has revealed that financial advisers are more profitable than ever – great news as nobody wants someone who can’t put a pound in their own pocket to advise them on how to manage their cash.
Yesterday (7 June), in a 20-page bulletin based on Retail Mediation Activity Return data, the City watchdog reported financial advice firms saw their total earnings increase by 22 per cent to £4.5bn in 2017.
Meanwhile aggregate pre-tax profits increased by 23 per cent to £698m and, overall, 96 per cent of financial adviser firms made a profit on ordinary activities before tax for 2017.
But why are profits up? Profits are up not because advisers are money grabbing more than before.
The reality is there are fewer individuals in this industry than 10 years ago, greater demand for advice than ever before because of confusion around pension freedoms, the cost of maintaining professional standards is high and the liabilities faced by IFAs never ends.
As the advice a young adviser gives today could come back to bite them on the bottom when they are hoping to retire many years in the future, this has to be reflected in the price they charge for advice in 2018.
The bad news as a result of “increased profits” is the fabulous service offered by human advisers continues to be pushed further and further out of the financial reach of the average member of the public.
Ultimately, the FCA needs to introduce rules that would allow financial advisers to have to set aside less cash for professional indemnity insurance premiums and potential compensation claims far off into the future.
So once again I will argue - we need a long stop, so human financial advisers can reduce the price they have to charge for their services, as they would not have to fear they might need that cash for a rainy compensation day in the future.