05Jun

Financial advisers’ trade association the Association of Professional Financial Advisers (APFA) has published the results of its annual survey The Financial Adviser Market: In Numbers.

This is the fifth time that the Association has carried out this survey, and the latest figures show that many firms are reporting increases in revenue, but that pre-tax profits across the industry are now at their lowest levels for seven years.

The survey found that there were 14,054 firms authorised to give financial advice as of December 2016. This figure is slightly down from the figure of 14,491 from 12 months previously. The number of authorised firms has stayed fairly constant for the last eight years, with the highest figure of 14,884 reported back in 2008, and the lowest annual figure being 13,732 in 2011.

38% of the firms are directly authorised and 60% are appointed representatives, again this ratio is largely unchanged when compared to previous years.

79% of firms operate as limited companies, a figure which has slowly increased from the 72% who were set up in this way back in 2009. Only 4% operate as partnerships – a figure which has halved over the past seven years. 10% are sole traders and 7% are limited liability partnerships.

The number of active advisers increased by almost 4% when compared to 2015, and now stands at 24,761.

Total revenue across the sector was up by more than 9% over the year, at £3.008 billion. Average revenue per firm was £849,794, and per adviser it was £183,474.

Pre-tax profits across the sector were however down by almost 7% at £779 million. This figure is the lowest annual figure since the £702 million reported in 2010. Profit as a share of revenue was just 17.1%, the lowest proportion in the last eight years. The average firm reported annual pre-tax profit of £145,716, and per adviser it was £30,417.

63% of advisers’ activity in 2016 came in the form of pension business. 16% was protection business, 15% came from investment activity and 6% from annuities and drawdown.

The average firm has 114 active clients and 52 reactive clients. These are the lowest such figures reported in the last three years.

Chris Hannant, Director General of APFA, said:
“It has now been four years since the dramatic changes to the market that followed the Retail Distribution Review and the number of advisers has remained steady, although still below pre-RDR levels. While turnover has increased in recent years, pre-tax profits have remained continued to fall to their lowest levels since 2010. Retained profits in the advice market increased since 2015 to £127m, but this remains less than 3% of revenues.

“It is in everyone’s interests to have a thriving and profitable advice market as only then will new firms be encouraged to enter the market and existing firms have the capacity to invest. Although we welcomed the aims of the Financial Advice Market Review (FAMR), we believe that it missed the opportunity for the urgent and radical change that is necessary to reduce the unfair regulatory burden on advisers. The next government must use the 2019 Review of FAMR to undertake deeper root-and-branch reform on the issues of the balance of the liabilities advisers face and the cost and complexity of regulation.”

Since the publication of the survey, APFA has merged with the Wealth Management Association to create the Investment Management & Financial Advice Association (IMFA).

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.