However profits were hit in 2015 for adviser firms and APFA blames this on the “massive” increase in levies to the Financial Services Compensation Scheme.

In its report out this week The Financial Adviser Market: In Numbers 4.0 it says the number of authorised financial advisers rose “a fraction” from 23,640 to 23,864. Numbers reached a low of 22,168 in 2013. Numbers over the past seven years peaked at 27,080 in 2009. The number of adviser firms fell slightly from 14,550 in 2014 to 14,491 in 2015.

APFA cautions, however, that because of changes in the way that the FCA categorises advisers the numbers may not be completely comparable. Even so, they do indicate some degree of stabilisation in numbers, says the body.

Key facts from the report include:

• There was a steady increase in turnover for firms in 2015 (up by 8%), but profits (both before tax and retained earnings) took a significant hit in 2015 – each down by about £100m which represents a fall of 10% in pre-tax and 65% in post-tax profits
• The number of advisers remains below pre-RDR levels
• Limited company status is becoming more popular for adviser firms but 15% of directly authorised firms are still operating with unlimited liability as sole traders or partnerships.

Chris Hannant, director general of APFA, said: “Three years after the wide-ranging changes that came in following the Retail Distribution Review, the number of advisers remains steady but still below pre-RDR levels.

“The steady increase in turnover over recent years continued in 2015, but profits across the sector were significantly down by about £100m. For me this clearly demonstrates the impact of FSCS levies on the viability of the sector. Retained profits fell 65% to £61m. This shows how unsustainable the current system is, with the FSCS levies severely undermining the capacity to generate funds to invest in the future.”

On the Financial Advice Market Review he said: “Although I believe that the FAMR final report could have gone much further in ensuring access to affordable advice for consumers, we welcomed its recent recommendation that changes be made to the current FSCS levy approach.

“The figures we have released today show the urgent need to replace the existing system with one that is sustainable and fair. Only when advice firms’ business models are sustainable and profitable will they be encouraged to enter the market and innovate to help close the advice gap. We look forward to engaging with the forthcoming FSCS levy review and urge both the government and the FCA not to shy away from undertaking the significant and radical changes which are necessary to reduce the regulatory burden on financial advisers and cut the cost of advice.”

The full report is available on the APFA website.