What does the average investment adviser charge?

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Advisers are charging an average of between £150 and £195 an hour, according to the FCA.

The regulator released a data bulletin today that focuses on retail intermediation firms including financial advisers, mortgage brokers and insurance brokers. It is the first it has published data submitted through retail mediation activities returns, part of its Gabriel reporting system, including numbers on revenue, capital and charging.

The data reveals that for firms with a single retail investment adviser, the average revenue is £92,000 from retail investment business and £105,000 from retail investment, mortgage broking and insurance broking combined.

Firms with more than 50 advisers had an average retail investment revenue of £124,000 per adviser.

The power of percentage charging

The FCA data shows the most typical charging method used by retail investment advisers remains a percentage of investment value, with hourly rate and fixed fee the other main charging structures.

For percentage charging, the FCA found average charges for initial advice are 1 per cent minimum and 3 per cent maximum. For ongoing charges, the average rates are 0.5 per cent minimum and 1 per cent maximum.

For firms charging an hourly fee, national average minimum and maximum rates vary between £150 and £195 per hour.

Wales and the North East levied the lowest average hourly charges and London and the South East levied the highest, with average hourly charges of £250 and £200. respectively.

The majority of retail investment firms (83 per cent) say they give independent advice with 14 per cent offering restricted advice and 3 per cent offering both.

Restricted advice accounted for 62 per cent of revenue from adviser charges and independent advice 38 per cent. The regulator says this reflects the small number of very large firms that make up the restricted advice market.

The FCA says overall revenue from retail investment business increased by 16 per cent between 2013 and 2015 while the number of firms increased by 6 per cent over the same period.

Commission crunch-time

In 2015, commission accounted for 31 per cent of revenue earned and fees and charges accounted for 64 per cent. In 2013 commission accounted for 56 per cent and fees and charges were 37 per cent. The regulator attributes this shift to impact of the Retail Distribution Review.

The data also shows that payments through providers and platforms, as opposed to directly from clients, are the main form of adviser payment, accounting for 81 per cent of initial charges and 74 per cent of ongoing charges.