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Mortgage adviser revenue hits £95k as PII bill soars 27 per cent

  • 24/07/2020
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Mortgage adviser revenue hits £95k as PII bill soars 27 per cent
Mortgage brokers saw their total income grow six per cent to almost £1.4bn in 2019, however some advisers did better than others and the methods of revenue generation also varied.


On average, income per adviser grew by almost £2,000 last year to reach more than £95,000 – a roughly two per cent increase on the £93,000 typically earned in 2018.

However, professional indemnity insurance (PII) bills rose by an eye-watering 27 per cent to hit a combined £10.2m across the sector.

Latest figures from the Financial Conduct Authority (FCA) show brokers within the largest firms earned most revenue per year while those in firms of two to five advisers saw the biggest increase.

The totals include all forms of regulated financial advice activity conducted by registered mortgage brokers and also reflect a market which saw the number of mortgage advice firms regulated by the FCA rise to 1,596 and number of advisers hit 14,575.


Adviser earnings

Individual advisers were largely unchanged in number and overall earnings, taking home £59,153 last year on average, a pay rise of around £274.

However, their revenue from mortgage broking fell by nearly £2,000, suggesting these advisers were focusing more on other types of income.

This trend was mirrored by firms with between six and 50 advisers, although their revenues generated were higher although largely unchanged at an average of £94,706 per adviser.

The biggest winners were those working in firms of two to five advisers who saw average earnings rise £4,400 to hit £71,867 – a 6.6 per cent increase.

These firms saw their increase come almost wholly from additional mortgage broking activity as that topped £53,000.

And advisers working at the largest firms also saw their income rise appreciably to hit £102,000 – breaking through the £100,000 barrier with a 2.6 per cent increase.

Likewise, the main driver of increased revenue was through mortgage advice activity which increased by roughly £2,500.

The largest firms also continue to account for the main body of the mortgage advice workforce – just 27 firms account for 9,759 adviser staff, more than double the total advisers with all other firms combined.


Fees growing income stream

Overall, revenue earned from regulated mortgages alone was £1.28bn in 2019, up 8.5 per cent from £1.18bn in 2018.

This includes £88m earned from second, or subsequent, charge mortgage business – a 31 per cent increase on the £67m in 2018.

The FCA noted this is partly in line with general increases in second charge mortgage lending between 2018 and 2019.

Commission continues to be the main source of revenue for mortgage mediation and rose by £46m to hit £162m. However, brokers are also increasingly using fees and charges as part of their business model, with this rising by £32m to reach £221m.

As a result, commission accounted for 77 per cent of income in 2019, down slightly from 79 per cent in 2018.


PII leaps

Professional indemnity insurance (PII) has been a key subject for advisers as in March 2019 the FCA announced an increase in the Financial Ombudsman Service’s (FOS) award limit from £150,000 to £350,000.

The increase applies to complaints referred to the FOS from 1 April 2019, about acts or omissions by firms from that date.

As a result, mortgage brokers saw their bill rise by 27 per cent to hit £10.2m from £8m in 2018.

The largest firms bore the brunt of this as their average PII costs soared by more than 55 per cent to £356,000, from £229,225 in 2018.

In contrast, smaller firms saw their typical PII costs either slightly increase or even drop, with firms in the £501,000 to £10m revenue category paying £12,408 – more than £2,200 less than in 2018.



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