The retail intermediary market 2019

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 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 2019.

• Key findings
• Revenue earned from regulated activities 2015-2019
• Revenue earned by type of firm
• Capital resource requirements
• Professional indemnity insurance premiums
• Retail investment advice and charges
• About the source data[1]

Download underlying data for 2019 (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 2015 to 2019

This section provides an overview of the revenue earned from each of the 3 specific regulated activities reported by firms in section B of the RMAR (Profit and Loss account). The data featured here reflect only intermediary firms that submit their revenue details on section B or the RMAR (a population of around 12,000 firms for 2019). Find out more information about the RMAR sections[1].

Retail investments 

Home finance (mortgage) mediation

Non-investment insurance distribution

*Non-investment insurance is a contract of insurance which is a general insurance contract or a pure protection contract but which is not a long-term care insurance contract.

Analysis of revenue earned by type of firm

This section provides information on revenue and adviser staff for 2019 split by type of firm. We give each firm a ‘category’ which is based on 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 of the data[3]. 

Table 1: Financial advisers – average revenue and profits in 2019

Table 1 shows that firms in the 6-50 adviser category have the highest average retail investment revenue per adviser at £189,449 (although down 3% from £194,390 in 2018). Average retail investment revenue per firm and per adviser declined in all adviser band categories since 2018 except for those firms with 1 adviser which increased by around 1% per firm and per adviser since 2018.

Average pre-tax profit per firm also decreased since 2018, again except for those with 1 adviser which increased by less than 1%. Average retained profit per firm was down on 2018 for all sizes of firm. Revenue and profit declined the most for those firms with over 50 advisers when compared with 2018.

The loss figures reported for firms with over 50 advisers are reported by a small number of firms:

• the average pre-tax loss was -£10m for the 10 firms making a loss in 2019
• the average profit for 26 profit making firms was £2.5m
• the median profit was approximately £0.5m

Mortgage Brokers

Mortgage brokers reported total earnings from the 3 main regulated activities of £1.39bn up 6% from £1.31bn in 2018. Figure 4 shows that a third of this (£464m) came from selling non-investment insurance products.

Table 2: Mortgage brokers – average revenue per firm/adviser in 2019

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 (63%) than the other firms. Such firms are more reliant on revenue from other sources (i.e. insurance mediation). 

Non-investment insurance intermediaries

Insurance brokers reported total earnings from the 3 main regulated activities of £17.3bn in 2019, up 1% from £17.1 billion in 2018. 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 2019

The 2019 revenue per firm for insurance intermediaries has decreased slightly compared to 2018 for all except the larger firms (those with over £10m revenue).

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 mortgage/non-investment insurance activities and for retail investment activities. Find out more about the source data[4].

Table 4: Number of firms by size of capital requirement

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 25% 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 2018. Once again, 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 37% to 43% (2,173 firms). This is likely to reflect the revenue growth seen in the sector which has meant that the capital required to be held by firms has also increased.

Professional indemnity insurance (PII)

Tables 5-7 show average PII premiums reported as paid in 2019 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 2019 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 2019 so may include some data following the change depending on each firm’s policy renewal date. 

In our Policy Statement (PS19/8[-3]) we outlined that the change to the award limit could have a material impact upon the future provision and pricing of PII for intermediary firms, in particular, for personal investment firms advising on higher risk transactions (such as defined benefit pension transfers).

Table 5: PII premiums paid by financial adviser firms

Table 5 shows that the average PII premium paid by financial adviser firms in 2019 was 2.3% of their average regulated revenue (2% in 2018). 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 2018, the total spent on PII premiums increased by 17% from £94.4m to £110.3m. PII premium as a percentage of regulated revenue has increased in 2019 for financial adviser firms when compared with 2018. The ‘£101 to £500k’ band increased from 2.2% in 2018 to 2.8% in 2019. Whilst this represents an increase of 27% this does not represent a significant change in the burden it places on firms.  These increases are likely to reflect the changes in the Ombudsman award limit and claims experienced by the market. It is important to note that financial adviser firms will also engage in mortgage advice and non-investment insurance to varying degrees.

Table 6: PII premiums paid by mortgage broker firms

The average PII premium paid by mortgage brokers in 2019 was again less than 1% of average regulated revenue. Firms paid a proportionately lower premium the larger their revenue. Compared to 2018, PII increased for the smallest firms (Up to £100k revenue) and the largest firms (Over £10m revenue).

Table 7: PII premiums paid by insurance intermediary firms

The average PII premium paid by insurance brokers was 1.7% 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. In 2019, premiums increased as a proportion of revenue compared to 2018.

Retail investment advice and adviser charges in 2019

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[7]. Data are for 2019 unless stated otherwise.

Copyright

The data on this page is available under the terms of the Open Government Licence[-6].