Financial Conduct Authority 

Advisers see profits grow 25%

Advisers see profits grow 25%

Financial advice firms saw their pre-tax profits jump by 25 per cent to £872m last year, according to the latest figures released by the regulator.

In data published on the Financial Conduct Authority's website today (June 6) 96 per cent of financial advice firms reported making a profit last year, with pre-tax profits jumping to £872m, from £698m in 2017.

Revenue earned by retail investment intermediaries increased by 12 per cent in 2018 to £4.42bn, with fees and charges accounting for 80 per cent of revenues, and commission for 17 per cent. 

Commission has been declining steadily as source of revenue for retail investment advisers since the implementation of the Retail Distribution Review in 2012, which effectively banned it for investment products.

Mortgage intermediaries saw their revenues increase by 16 per cent to £1.18bn, driven by a dominant source of commission at 79 per cent, and non-investment insurance intermediaries saw an 8 per cent boost in revenues to £18.2bn. 

The figures were collected as part of the Retail Mediation Activities Return, which companies complete and send to the FCA to be used in a supervisory capacity. 

The regulator reported small companies remain a "significant" part of the intermediary sector, with almost 9 in 10 financial adviser and mortgage broker businesses having five or fewer adviser staff. 

The FCA stated it had seen an increase in the proportion of financial advice firms needing to hold more than the minimum capital for retail investment business, at £20,000, jumping from 33 per cent to 37 per cent since 2017. 

The regulator confirmed this was likely to reflect the "strong revenue growth" seen in the sector, meaning the capital required to be held by firms has also increased.

rachel.addison@ft.com

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