Data Bulletin 9 from the Financial Conduct Authority (FCA) reveals that the UK’s retail intermediary firms collectively earned some £20 billion in revenue in 2016 from their insurance, investment and mortgage mediation activities.
Compared to 2015, there was a 5% increase in revenue from insurance activities, an 8% rise in investment revenue and a significant rise of 24% in mortgage revenue. Indeed, the bulletin states that revenue from mortgage mediation has risen by 53% between 2013 and 2016, and the FCA says it believes this reflects not only the growth within the mortgage market in general, but also a growing trend for consumers to seek professional advice when seeking a mortgage.
Investment revenue was £3.25 billion in 2016, compared to £2.6 billion in 2015. Total insurance revenue last year was £15.9 billion.
Not only has mortgage revenue for retail firms risen from £529 million to £807 million over the last three years, but the number of regulated mortgage transactions conducted via intermediaries rose by 47% over the period, and loans made direct from the provider to the consumer fell by 20%.
Given that investment intermediaries cannot receive commission on new sales any more, it is not surprising that only 26% of investment revenue was received in the form of commission, compared to 80% for mortgages and 83% for insurance.
Firms who class themselves as ‘financial advisers’ received 84% of their income from investment activities in 2016, compared to 11% from insurance and just 5% from mortgages. For the purposes of these figures, the investment category includes income from pension-related activities.
The largest firms accounted for a large proportion of the revenue generated. The top 1% of investment intermediary firms (by adviser numbers) produced 43% of the sector’s total revenue, while the top 2% of mortgage intermediaries generated more than two thirds of the total mortgage revenue.
91% of mortgage brokers also reported receiving some form of revenue from insurance mediation, often by advising on income protection products.
The final section of the bulletin concerns investment intermediaries only. Of these firms, 83% still claim to provide independent advice, and 87% of firms who are classed as ‘financial advisers’ are independent at present.
Almost half of firms are using the ‘percentage of investment value’ method as their fee charging model. Slightly more firms are using a ‘fixed fee’ method – where a fixed lump sum is paid for each task within the advice process – than those using an hourly charging method.
The information in the bulletin was largely obtained from firms’ regulatory returns, such as the FCA’s Retail Mediation Activities Return.
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.