The data, released earlier this month, is based on Retail Mediation Activities Return (RMAC) filled out by advisers.
It shows that commission accounted for 26% of income from retail investment business in 2016, down from 31% in 2015.
Around 88% of UK adviser earn some revenue from insurance mediation and 45% from mortgage mediation, although these only account for a relatively small proportion of the overall revenue earned from the three activities (11% and 5% respectively).
Fees and charges now account for 71% of revenue, up from 64% the year before.
“This reflects the continuing trend since the implementation of the Retail Distribution Review (RDR) at the end of 2012 on the way firms earn revenue from retail investment business,” said the FCA.
Under the rules introduced after RDR, firms are no longer permitted to earn commission from new advised business but they can still receive commission from legacy (pre-RDR) business subject to certain conditions and from non-advised business.
Large firms dominate
The figures also show that out of the 4,865 financial advice firms in the UK, 91% have five advisers or fewer.
However, the large firms account for a high proportion of all advice staff, with the top 1% of firms (by adviser number) account for 45% of all advisers and 43% of revenue earned from retail investment activities.
“The large firms typically operate as networks with their advisers having the status of Appointed Representatives (AR),” explained the regulator.
Adviser charging
Charge as a percentage of investment value is the most typical charge method used by advisers, with ‘fee per hour’ and ‘fixed fees’ being the other main types.
Firms may also use more than one method of charging including an upfront fee combined with ongoing fee.
The average charges for initial advice are between 1-3%. For ongoing charges the average rates are 0.5- 1%. These have not changed compared to 2015.
