£105-124k per RI – average adviser revenue revealed by FCA

FCA logo glass 620x430Bigger firms generate more revenue per adviser than smaller ones, although advisers in large firms are more likely to be supported by other staff, according to figures from the Financial Conduct Authority.

The average revenue for a firm with a single registered individual (RI) is £92,000 from RI business and £105,000 when mortgage and general insurance streams are factored in. That compares with total revenue generated per adviser of £124,000 for firms with more than 50 advisers. A bulletin from the FCA shows that overall revenue from retail investment business increased by 16 per cent between 2013 and 2015 and the number of firms increased by 6 per cent.

In 2015, commission accounted for 31 per cent of revenue earned and fees and charges stood at 64 per cent, compared to 2013 when commission accounted for 56 per cent and fees and charges just 37 per cent. This shift reflects the continuing impact of the Retail Distribution Review (RDR) on the way firms earn revenue from retail investment business.

Overall revenue earned from non-investment insurance mediation increased by 5 per cent between 2013 and 2015, despite a small decrease in the number of firms operating in this sector.

screen-shot-2016-10-31-at-13-43-32The vast majority of RI firms – 83 per cent – report that they provide independent advice with only 14 per cent providing restricted advice and 3 per cent providing both types. But restricted advice accounted for 62 per cent of revenue from adviser charges, with independent advice representing 38 per cent of revenues, as the restricted advice population includes some very large firms that account for a significant slice of the total business conducted.

Facilitated payments are the main form of adviser payment accounting for 81 per cent of initial charges and 74 per cent of ongoing charges by aggregate value of investment, with 19 per cent and 26 per cent respectively being paid direct to the adviser by the client.

The average minimum charge for initial advice is 1 per cent with a 3 per cent average maximum. The average minimum ongoing charge is 0.5 per cent, with an average 1 per cent maximum.

For firms that use the hourly fee method, national average minimum and maximum rates vary between £150 and £195 per hour. There are regional variations in average charges – particularly the maximum charges. Wales and the North East show the lowest average hourly charges with a maximum of £150 in both regions, and London and the South East the highest with a maximum of £250 and £200. The most common hourly rate nationally is £150 per hour. The regulator said it did not observe any material variation in charges between restricted and independent advice.