The FCA published their figures on the 2020 retail intermediary market yesterday. These annual market updates continue to be a valuable and rich source of insight on the movement of the market.

There is no surprise that the 2020 results are lukewarm. The figures shine spotlight on a complex year with a global pandemic and rocky exit from the European Union. With that in mind, 2020 marks the third year in a revenue plateau – so clearly there is a slightly more persistent trend to consider. However, there is a silver-lining, numbers of end clients grew again in 2020: on-going client numbers for firms rose 6% from 2019.

Source: The retail intermediary market 2020, FCA

Revenues

Total revenue from retail investment business in 2020 is down, albeit slightly, 1% from 2019. Revenues from commission and ‘other’ sources drove this decrease as financial advisers continue to transition away from commission generating products of the pre-RDR era. Revenue from fees/charges increased slightly but at only 1% in comparison to figures of 17% and higher from 2018 and previous years. In a similar downward trend, revenues from mortgage broking also fell decreasing by 4.4% and non-investment insurance firm revenues follow a similar trend to retail investment in terms of a revenue plateau, although there was a slight (1%) increase from 2019 to 2020.

Number of firms

In addition to decreasing revenues, the FCA’s figure show the number of retail investment firms is on a slow decline – down 2% over the last 3 years. It is also worth noting that the decline was sharpest among mid-sized firms (firms with 6 to 50 advisers) that tend to be of highest interest to consolidators. Firms with 6 to 50 advisers decreased 5.2% in number from 2019.

Source: The retail intermediary market 2020, FCA

In summary

No one can say that 2020 was an easy year and the results reflect that story for the retail intermediary market. In fact, the advisers we surveyed in our Financial Adviser Business Benchmark 2020 anticipated this – 75% of advisers expected revenues to be down. Also worth mentioning is that this negative sentiment was most prominent with firms that had between 6 to 50 advisers which perhaps sheds some like on why the mid-sized firms are in decline.

Certainly, the challenges are not over but looking forward, we hope that in hindsight we will consider 2018-2020 as an inflection point for the industry as it adopts new models for servicing clients. Let us know if there was anything else in the report that you found interesting in the comments below or on social media.