This page provides our latest analysis of the intermediary sector based on data drawn from the Retail Mediation Activities Return (RMAR).
Firms that provide advice on, or arrange, mortgages, insurance policies or retail investment products for consumers must send us information about their activities on the Retail Mediation Activities Return (RMAR).
We use this information to help us supervise the activities of these intermediary firms and inform our other regulatory functions. We have published data from the RMAR since 2016. This analysis gives an update on firms in the retail intermediary sector based on data for 2018.
- Key findings
- Revenue earned from regulated activities 2014-2018
- Revenue earned by type of firm
- Capital resource requirements
- Professional indemnity insurance premiums
- Retail investment advice and charges
- About the source data[1]
Key findings
- Revenue earned by intermediary firms increased in 2018 compared to 2017, continuing the trend seen in recent years. Revenue earned by mortgage, retail investment and non-investment insurance firms increased by 16%, 12% and 8% respectively in 2018.
- Commission remains the dominant source of revenue for mortgage and insurance broking, accounting for 79% and 84% of revenue respectively. For retail investment business, commission accounted for 17% of revenue while fees/charges accounted for 80%.
- 96% of financial adviser firms reported making a profit with total pre-tax profits up to £872m from £698m in 2017.
- Small firms remain a significant part of the intermediary sector. Nearly 9 in 10 financial adviser and mortgage broker firms have 5 or fewer adviser staff. Over 6 in 10 financial adviser and mortgage broker firms are required to hold only the minimum base capital specified for their type of business.
- Premiums paid in 2018 for renewal of professional indemnity insurance (PII) cover remained steady as a proportion of revenue (around 1.5% across all firm types). The smallest firms pay a higher proportion of their revenue at around 4%.
- The proportion of revenue earned by financial adviser firms from restricted advice has been increasing relative to fully independent advice, up from 33% in 2016 to 37% in 2018.
Download underlying data for 2018 (XLSX)[2]
Chart tips: hover over data series to view the data values and filter the data categories by clicking on the legend.
Revenue earned from regulated intermediary activities 2014 to 2018
This section provides an overview of the revenue earned from each of the 3 specific regulated activities reported by firms in RMA-B (Profit and Loss account). The data featured here reflect only intermediary firms that submit their revenue details on RMA-B (a population of around 11,850 firms for 2018).
Retail investments
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Data table
Figure 1 shows that total reported annual revenue from retail investment business increased by 12% between 2017 and 2018 (from £3.95bn to £4.42bn). Revenue for 2018 is up by 58% on 2014 and the number of firms reporting revenue (5,131) up by 9% over the same period.
Commission declined further as a source of revenue, accounting for 17% of revenue earned in 2018 compared to 20% in 2017. This continues the trend seen since the implementation of the Retail Distribution Review (RDR) at the end of 2012.
Home finance (mortgage) mediation
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Data table
Figure 2 shows that total reported revenue earned from the mediation of regulated mortgages was £1.18bn for 2018, an increase of 16% on 2017 (£1.02bn). This includes £67m earned from second, or subsequent, charge mortgage business - a 10% increase on 2017 (£61m). Please note that data for 2017 and 2018 include revenue from second, or subsequent, charge mortgages. Commission continues to be the main source of revenue for mortgage mediation, accounting for 79% of revenue earned in 2018 (up from 76% in 2017).
Note: last year’s publication of RMAR data[3] (June 2018) stated that total mortgage revenue was £1.08bn for 2017. This figure inaccurately double-counted revenue from second charge mortgages. The 2017 total has been restated in Figure 2 above (£1.02bn) and in the underlying data[2] that support this publication.
Non-investment insurance distribution
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Data table
Figure 3 shows that overall reported revenue earned from non-investment insurance distribution was £18.2bn in 2018. This represents an increase of 8% over 2017 (from £17.1bn). Commission continues to be the main source of earnings, accounting for 84% of revenue.
Analysis of revenue earned by type of firm
This section provides information on revenue and adviser staff for 2018 split by type of firm. We give each firm a ‘primary category’ reflecting our understanding of the firm’s main type of regulated business activity, although many firms carry out more than one type of business. Find out more about the source data in this section[1].
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Data table
Financial Adviser firms
Financial adviser firms reported total earnings from the 3 main regulated activities of £5.1bn, up 13% from £4.5bn in 2017. Figure 4 shows that, within this, 12% of revenue came from non-investment insurance distribution and 5% from mortgage mediation.
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Data table
Figure 5 shows that nearly 9 out of 10 firms have 5 advisers or fewer each and these firms account for 3 out of 10 adviser posts at financial adviser firms (reporting at least 1 member of staff advising on retail investments). Firms with over 50 adviser staff (1% of firms) account for 45% of all adviser posts (compared to 44% in 2017). The total number of adviser posts increased by 1% in 2018 to 26,677, the majority of which was accounted for by the large firms. There are also staff who advise on retail investments employed at other types of firms - see the underlying data tables for additional information on adviser staff numbers.
Table 1: Financial advisers – average revenue and profits in 2018
Adviser Band |
Average retail investment revenue per firm (£) |
Average retail investment revenue per adviser (£) |
Average total revenue per firm (£) |
Average pre-tax profit per firm (£) |
Average retained profit per firm (£) |
---|---|---|---|---|---|
1 adviser |
£164,082 |
£164,082 |
£205,296 |
£88,992 |
£31,985 |
2-5 advisers |
£519,110 |
£187,248 |
£623,518 |
£216,761 |
£74,177 |
6-50 advisers |
£2,071,511 |
£194,390 |
£2,448,098 |
£457,449 |
£192,017 |
Over 50 advisers |
£55,113,411 |
£164,756 |
£71,390,513 |
£(539,024) |
£(629,954) |
Table 1 shows that firms in the 6-50 adviser category have the highest average retail investment revenue per adviser at £194,000 (up 13% from £171,000 in 2017). Firms in this category have shown the highest growth on 2017 with average total revenue per firm up 11% and average pre-tax profits up 28% on 2017. In contrast, firms with over 50 advisers showed only a 3% increase in revenue per adviser, a slight decline in average total revenue (down 2%) and an increase in average reported losses per firm from £162,000 to £539,000.
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Data table
Total reported pre-tax profits for all reporting financial adviser firms was £872m for 2018, up 25% from 2017 (£698m). Overall, 96% of firms were profitable. Figure 6 shows that pre-tax profit as a proportion of regulated revenue declined with the size of the firm. 73% of firms with over 50 advisers reported a profit, but across the firms of this size an aggregate loss of £18m was reported due to significant losses reported by a few firms.
Mortgage Brokers
Mortgage brokers reported total earnings from the 3 main regulated activities of £1.31bn, up 13% from £1.16bn in 2017. Figure 4 shows that a third of this (£449m) came from selling non-investment insurance products.
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Data table
Figure 7 shows that a small number of large firms with over 50 advisers account for 70% of advisers working at mortgage brokers. Nearly 9 in 10 firms have 5 advisers or fewer. The total number of staff advising on mortgages was 14,052, up 7% on 2017, most of which was accounted for by the large firms. There are also staff who advise on mortgages employed at other types of firms - see the underlying data tables for additional information on these.
Table 2: Mortgage brokers – average revenue per firm/adviser in 2018
Adviser Band |
Average mortgage revenue per firm (£) |
Average regulated revenue per firm (£) |
Average mortgage revenue per adviser (£) |
Average regulated revenue per adviser (£) |
---|---|---|---|---|
1 adviser |
£42,336 |
£58,879 |
£42,336 |
£58,879 |
2-5 advisers |
£135,934 |
£188,045 |
£48,749 |
£67,437 |
6-50 advisers |
£936,636 |
£1,204,102 |
£73,167 |
£94,061 |
Over 50 advisers |
£19,240,840 |
£30,981,712 |
£61,778 |
£99,475 |
Table 2 shows that the average revenue earned per mortgage adviser generally increases with the size of the firm. Table 2 also shows that the large firms (over 50 advisers) earn a lower proportion of regulated revenue from mortgage mediation (62%) than the other firms. They are therefore more reliant on revenue from other sources (ie insurance mediation). Average revenue earned per adviser increased compared with 2017 for all firms except those in the 6-50 advisers band, where it fell by 14%.
Non-investment insurance intermediaries
Insurance brokers reported total earnings from the 3 main regulated activities of £17.1 billion, up 5% from £16.2 billion in 2017. Figure 4 shows that, in contrast with the other intermediary types, nearly all of this came from their core insurance business.
Table 3: Insurance intermediaries – average revenue per firm in 2018
Revenue Band |
Number of firms |
Total insurance revenue (£) |
Average insurance revenue per firm (£) |
---|---|---|---|
Less than £100k revenue |
1,381 |
£51,944,880 |
£37,614 |
£101k to £500k revenue |
1,460 |
£366,999,417 |
£251,369 |
£501k to £10m revenue |
1,514 |
£3,325,021,530 |
£2,196,183 |
Over £10m revenue |
214 |
£13,250,108,773 |
£61,916,396 |
Capital resource requirements
We require intermediary firms to hold at least a specified amount of capital. The exact requirement for each firm depends on the nature its business and the amount of revenue it earns. There are separate requirements for home finance/non-investment insurance activities and for retail investment activities. Find out more about the source data[5].
Table 4: Number of firms by size of capital requirement
Number of firms |
|||
---|---|---|---|
Capital requirement |
Financial Adviser |
Mortgage Broker |
Non-investment Insurance Intermediary |
£5,000 |
20 |
1,054 |
1,213 |
Between £5,000 and £20,000 |
10 |
336 |
1,765 |
£20,000 |
3,168 |
36 |
72 |
Between £20,000 and £100,000 |
1,529 |
96 |
1,271 |
£100,000 and over |
361 |
43 |
678 |
Table 4 shows that 2 out of 3 mortgage brokers are required to hold only the minimum base capital requirement of £5,000. Table 4 also shows that 24% of insurance brokers are required to hold capital of £5,000 and 35% are required to hold between £5,000 and £20,000. This reflects the fact that insurance brokers are more likely to hold client money, which requires a higher percentage of income and a higher minimum level capital (£10,000) to be held.
The overall picture has not changed significantly since 2017. The most notable change has been an increase in the proportion of financial adviser firms needing to hold more than the minimum capital for retail investment business (£20,000) from 33% to 37% (1,890 firms). This is likely to reflect the strong revenue growth seen in the sector which has meant that the capital required to be held by firms has also increased.
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Data table
Compared with 2017, the overall pattern of capital surpluses held in 2018 has not changed significantly. Figure 8 shows that over 99% of firms held allowable capital equal to or greater than the amount they were required to hold. Figure 8 also shows that the most common level of surplus held is between £10,000 and £100,000, particularly for mortgage brokers and financial advisers. A higher proportion of insurance intermediaries have larger surpluses than the other firm types, which reflects the very large firms in that population. Over 3 in 10 of these firms have a surplus of over £500,000.
Professional indemnity insurance (PII)
Tables 5-7 show average PII premiums reported as paid in 2018 by firms for the 3 main categories of intermediary firm split by size of firm. The data reflect those firms that reported that they renewed their PII cover in 2018 on RMA-E and reported earning revenue from regulated mediation business on RMA-B. Find out more about source data in this section[6].
In March 2019, we announced an increase in the Financial Ombudsman Service’s award limit from £150,000 to £350,000. The increase is applicable to complaints referred to the Service from 1 April 2019 about acts or omissions by firms from that date. The data featured here go up to 31 December 2018 only and so pre-date that change. In our Policy Statement (PS19/8[1]) we outlined the impact that the change to the award limit may have on the future provision and pricing of PII for intermediary firms, in particular, for personal investment firms advising on higher risk transactions.
Table 5: PII premiums paid by financial adviser firms
Revenue band |
Total annualised PII premium (£) |
Average PII premium per firm (£) |
Average regulated revenue per firm (£) |
PII premium as % of regulated revenue |
---|---|---|---|---|
Up to £100k revenue |
£2,219,827 |
£2,347 |
£58,493 |
4.0% |
£101k to £500k revenue |
£12,779,732 |
£5,528 |
£251,748 |
2.2% |
£501k to £10m revenue |
£53,639,576 |
£38,617 |
£1,346,492 |
2.9% |
Over £10m revenue |
£25,807,800 |
£860,260 |
£74,428,551 |
1.2% |
All firms |
£94,446,935 |
£20,194 |
£1,013,579 |
2.0% |
Table 5 shows that the average PII premium paid by financial adviser firms in 2018 was 2% of their average regulated revenue (1.9% in 2017). Financial adviser firms generally paid a lower premium the larger the firm, the exception being those in the £501,000 to £10m revenue band where the average premium as a percentage of revenue was higher than the band below. Compared with 2017, the total spent on PII premiums increased by 16% from £81.7m to £94.4m which largely reflects the growth in revenue earned by these firms.
Table 6: PII premiums paid by mortgage broker firms
Revenue band |
Total annualised PII premium (£) |
Average PII premium per firm (£) |
Average regulated revenue per firm (£) |
PII premium as % of regulated revenue |
---|---|---|---|---|
Up to £100k revenue |
£703,221 |
£877 |
£39,481 |
2.2% |
£101k to £500k revenue |
£1,409,537 |
£3,203 |
£217,757 |
1.5% |
£501k to £10m revenue |
£2,032,335 |
£14,621 |
£1,837,519 |
0.8% |
Over £10m revenue |
£3,896,829 |
£229,225 |
£41,252,487 |
0.6% |
All firms |
£8,041,922 |
£5,752 |
£775,525 |
0.7% |
The average PII premium paid by mortgage brokers in 2018 was less than 1% of average regulated revenue. Firms paid a proportionately lower premium the larger their revenue. Compared to 2017 there has been a decrease in PII premiums paid for all except the smallest firms (up to £100,000 revenue).
Table 7: PII premiums paid by insurance intermediary firms
Revenue band |
Total annualised PII premium (£) |
Average PII premium per firm (£) |
Average regulated revenue per firm (£) |
PII premium as % of regulated revenue |
---|---|---|---|---|
Up to £100k revenue |
£2,440,316 |
£2,056 |
£42,293 |
4.9% |
£101k to £500k revenue |
£8,047,710 |
£5,569 |
£251,397 |
2.2% |
£501k to £10m revenue |
£92,794,257 |
£63,776 |
£2,140,228 |
3.0% |
Over £10m revenue |
£109,465,232 |
£533,977 |
£63,124,451 |
0.8% |
All firms |
£212,747,515 |
£49,568 |
£3,836,909 |
1.3% |
The average PII premium paid by insurance brokers was just over 1% of average regulated revenue. Within this there is significant variation by size of firm with the smallest firms paying a much higher percentage of revenue than the largest firms. Apart from the largest firms, premiums fell slightly as a proportion of revenue compared to 2017.
Retail investment advice and adviser charges in 2018
This section provides information on investment advice and related charges where a firm provides a personal recommendation to a retail client on a retail investment product. The data reflect firms that reported on RMA-K. Find out more about the source data included here[7]. Data are for 2018 unless stated otherwise.
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Data table
Figure 9 shows that in 2018 the breakdown of advice type by number of firms is 84% for Independent, 14% for Restricted and 2% for Both (unchanged on 2017). For firms with the primary category of financial adviser, there is a higher proportion of firms providing independent advice (88%), up marginally from 87% in 2017.
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Data table
Figure 10 shows that total revenue earned from adviser charges by all firms reporting in 2018 increased by £650m to £5.3bn from £4.65bn in 2017. Figure 10 also shows that the split between Independent and Restricted advice based on revenue, has remained largely the same as 2017- Independent (59%) and Restricted (41%), respectively.
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Data table
Figure 11 shows that for financial adviser firms a higher proportion of revenue (63%) was earned from Independent advice although this is showing a downward trend (67% in 2016).
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Data table
Figure 12 shows that revenue from Initial advice charges has increased £107m (6%) to £1.9bn, while revenue from Ongoing charges has increased by £542m (19%) to £3.4bn. Since adviser charges are often linked to the value of investments, the revenue earned by advisers may increase if clients are investing larger sums or, in the case of ongoing charges, the value of investments goes up as a result of stock market performance. Growth across both types is lower between 2017 and 2018 than it was between 2016 and 2017.
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Data table
Figure 13 shows that the breakdown between Direct and Facilitated payment methods has increased in favour of Facilitated (where the product provider or platform facilitates the payment of fees from the client to the adviser) up 3 percentage points to 86% between 2017 and 2018. This trend has increased 7 percentage points from 2016, where it was 79%.
Table 8: Number of initial advice services
Independent |
Restricted |
Total |
|
---|---|---|---|
Number of initial advice services |
660,704 |
622,425 |
1,283,129 |
Table 9: Number of retail clients paying for ongoing services
New in year |
Ceased in year |
Total at year end |
|
---|---|---|---|
Number of ongoing clients |
501,012 |
157,669 |
3,022,674 |
For one-off advice services, Independent advice has increased 180,768 (38%) from 2017 to 660,704, while Restricted has declined 113,304 (15%) to 622,425.
The number of new clients has decreased by 1.2% compared to 2017 to 501,012, while the number of clients ceasing their relationship increased 21% to 157,669.
Find out more about the source data[9] on this page.
Copyright
The data on this page is available under the terms of the Open Government Licence[-5].