Financial Conduct Authority  

FCA uncovers state of adviser remuneration

FCA uncovers state of adviser remuneration

Commission accounted for nearly a third of the revenue intermediaries received last year, as figures from the Financial Conduct Authority revealed the changing shape of the financial advice industry.

The report published today (28 October) found 31 per cent of the revenue collected by advisers in 2015 came from commission payments, which is nearly half the level in 2013 when commission accounted for 56 per cent of revenue.

In 2012, commission accounted for 80 per cent of the revenue earned by advisers, which is an indication of the influence of the Retail Distribution Review after it banned advisers from earning commission on new business.

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According to the FCA study, which examined the retail intermediary sector, it was investment advice which had the highest amount of revenue come from fees and charges at 64 per cent.

Yet a large part of insurance and mortgage advice was paid through commission, at 85 per cent and 80 per cent respectively.

According to the regulator, there was no material difference in the hourly charges between independent financial advisers and those with restricted status.

It found hourly rates ranged between Wales and the North East, which charged a maximum of £150 an hour, while advice firms in London and the South East charged as much as £250 per hour. 

While 83 per cent of investment firms provide independent advice, the FCA found that restricted advice accounted for 62 per cent of the total revenue from adviser charges.

“These numbers reflect that, although fewer in number, the restricted advice population includes some very large firms that account for a significant slice of the total business conducted,” the report stated.

The FCA also found that the most typical pricing method was to charge based on the percentage of the investment value, with 4,429 firms choosing this option.

A fixed fee was the second favourite charging method, with 2,060 firms opting for this, while charging per hour was 1,841 firms’ choice, and the remaining 941 companies opting for a combined structure.