The Financial Conduct Authority (FCA) recently unveiled insights into how financial advisers charge their clients. The FCA’s data bulletin shed light on the average hourly fees charged by advisers, ranging from £150 to £195. This data was derived from retail intermediation firms, including financial advisers, mortgage brokers, and insurance brokers, marking the first time such information was disclosed through the Gabriel reporting system.
The bulletin also highlighted revenue statistics for firms with varying numbers of advisers. Firms with a single retail investment adviser generated an average revenue of £92,000 from retail investment business, while those with over 50 advisers saw an average retail investment revenue of £124,000 per adviser. The predominant charging method among retail investment advisers was a percentage of the investment value, alongside hourly rates and fixed fees.
According to the FCA, the average charges for initial advice ranged from 1% to 3% of the investment value, while ongoing charges typically varied from 0.5% to 1%. Hourly fees, on the other hand, had national average rates between £150 and £195 per hour. Interestingly, the data also revealed regional disparities in hourly charges, with Wales and the North East levying the lowest average fees and London and the South East charging the highest.
Moreover, the FCA found that 83% of retail investment firms provided independent advice, with 14% offering restricted advice and 3% offering both. The revenue distribution from adviser charges showed that restricted advice accounted for 62% of revenue, while independent advice represented 38%. The FCA attributed the revenue increase within the retail investment business sector to a 16% rise between 2013 and 2015, accompanied by a 6% growth in the number of firms during the same period.
Commission payments in 2015 constituted 31% of revenue, whereas fees and charges accounted for 64%. This marked a significant shift from 2013 when commission made up 56% of revenue and fees and charges only 37%. The transition was attributed to the impact of the Retail Distribution Review. Notably, payments facilitated through providers and platforms, rather than directly from clients, comprised the primary form of adviser compensation, representing 81% of initial charges and 74% of ongoing charges.
The industry response to the data was mixed, with some advisers questioning the relevance and practical value of the information provided by the FCA. Concerns were raised about the methodology used to collect and present the data, prompting discussions about the regulatory focus and resource allocation within the sector. While some advisers emphasized the importance of working efficiently and delivering value to clients, others criticized the regulatory reporting requirements and the perceived lack of meaningful insights derived from the disclosed data.
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