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FCA: Adviser revenue falls after years of growth

FCA: Adviser revenue falls after years of growth

Adviser revenue has fallen for the first time since 2016 as the covid pandemic took its toll, according to data from the Financial Conduct Authority.

The data, based on the latest Retail Mediation Activities Return (RMAR) and published today (July 29), found reported adviser revenue fell by 1 per cent in 2020, to £4.4bn. 

Mortgage advisers saw an even bigger dip of 4.2 per cent to £1.22bn. 

This was the first time reported revenue for both groups has fallen since the regulator began publishing the data in 2016.

The number of firms operating in the retail investments market has also fallen for the second year running.

In 2020 there were 5,017 investment advice firms, down from 5,111 in 2019 and 5,131 in 2018.

The number of retail investment adviser posts across all firms also fell in the year, albeit only slightly, to 36,377 from 36,401 in 2019. 

Posts at financial adviser firms accounted for 76 per cent (27,501) of these. Within these, firms with over 50 advisers accounted for 49 per cent of all adviser posts, up from 47 per cent in 2019.

The FCA's data reflects returns submitted by firms for periods ending within 2020, but as firms have different reporting cycles, the extent to which their data covers the coronavirus period from March 2020 will vary from firm to firm.

Meanwhile the share of retail investment revenue accounted for by commission continued to fall, down from 16 per cent in 2019 to 14 per cent in 2020. 

Commission has fallen each year since 2016 while fees and charges have increased, from £2.3bn in 2016 to £3.6bn in 2020. 

Independent advice accounted for 61 per cent of revenue earned from adviser charges, up from 59 per cent in 2019.

The bulk of adviser earnings (74 per cent) came from ongoing advice, up from 70 per cent in 2019.

The FCA said this trend had been prevalent in recent years.

The data comes as earlier this month research by Investment Trends, which surveyed 1,371 financial advisers in March 2021, showed three in ten financial advisers have seen their profitability decline in the past year, a record since the study began in 2012.

These findings were in line with data from Personal Finance Society and NextWealth which found smaller firms, with only two to five employees, had been hit hardest by the pandemic, with 83 per cent reporting a drop in revenue. 

sonia.rach@ft.com

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