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State of the financial advice industry revealed

State of the financial advice industry revealed

The number of advisers has increased but the number of firms has gone down, pointing to greater consolidation in the profession.

Data published today by the Personal Investment Management & Financial Advice Association showed the number of advice firms as of December 2017 had gone down to 13,690.

Meanwhile the number of advisers had gone up by less than 1,000 to 26,311, meaning the average number of advising staff at each firm increased to 4.77.

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The split between directly authorised and appointed representatives has remained stable at 40 per cent and 60 per cent respectively for the past decade.

Meanwhile the proportion of restricted financial advice has fallen - reaching 16 per cent in 2016 compared to 20 per cent two years ago.

Gary Sunderland, head of research and indices at Pimfa, said: "Looking forward, Pimfa remains concerned about the quality and ability of clients to access advice.

"People need help and this is growing and this has been seen in recent studies on the industry as financial clarity and the comprehension of even some basic products is still very low amongst a substanial part of the population.

"The Financial Advice Market Review was of course deemed wise but still further progress has to be made to make advice clear and simply understood."

Meanwhile the Pimfa data showed the business of providing advice became more profitable during 2017.

Consolidated profits before tax increased from £569m to £699m while retained profits more than doubled to £230m.

Both of these measures also increased as a percentage of revenue, reaching 15.58 per cent for the latter and 5.13 per cent for the former.

Consolidated revenue also increased to £4.4bn from £3.6bn, with 84 per cent of this coming from investment business.

The proportion of income coming from post-Retail Distribution Review initial adviser charges and ongoing charges increased, reaching a total of 74 per cent.

Meanwhile the proportion of income coming from commission on non-investment business and pre-RDR business fell from 24 per cent to 22 per cent between 2016 and 2017.

Martin Dodd, a financial adviser with Midlands Investment Agency, said: "From a personal perspective consolidation does matter to me because I wish to remain independent of any management board.

"I personally want to steer my own ship. I am not suggesting these companies are doing anything they shouldn't be doing but if you want to decide who you work with and what service you will offer, if you work in a big consolidated firm you won't have any control over that whatsoever.

"There is definitely a trend towards consolidation and it is a retirement strategy for small IFAs. The tried and tested route is to consolidate into another firm and ease your way out."