Adviser numbers are down and firms' profits after tax, despite a temporary recovery last year, are lower than the two previous years, according to research from the Association of Professional Financial Advisers (APFA).
According to the trade body's annual report The Financial Adviser Market: In Numbers, 2013 saw adviser numbers drop from 23,865 to 22,790, while income across all regulated products grew from £3.78bn to £3.83bn.
The real increase in productivity per adviser was even higher than 1% in the first year since the Retail Distribution Review (RDR) because of the fall in adviser numbers.
The figures show that firm revenue increased from around £738,000 in 2012 to £760,000 in 2013 while earnings per adviser jumped from £158,000 to £188,000.
Profits before tax rose from £163,000 per firm in 2012 to £189,000 in the year after and from £35,000 per adviser to £42,000.
However, the figures showed the gap between pre-tax and retained profits was widening. Firms retained around 3.33% of their total regulated business revenue in profits last year, up from 2.63% in 2012, but below the 3.57% in 2011 and 4.78% in 2010 when retained profits peaked and the gap was narrowest.
FCA chief executive Martin Wheatley said in January advisers have benefited financially from RDR, attracting much criticism from advisers, who accused him of being "one-sided".
APFA's report also showed an increase in non-advised sales, meaning the proportion of financial products sold on an advised and non-advised basis across all firm types in 2012/13 reached level pegging for the first time.
APFA director general Chris Hannant (pictured) said: "The advice industry has performed well with retained profits up on 2012. Significantly though, they are still down almost a fifth on the level recorded in 2010 - the year the FCA used as a benchmark to justify the increase in the FSCS threshold.
"Profits across the industry have actually been lower in all of the past three years since then. The regulator needs to look again at affordability for levies, and whether the FSCS threshold level is appropriate."
Hannant also called for "greater clarity from the FCA" on non-advised products, citing the Financial Services Consumer Panel's report last year, which flagged that non advised products were causing confusion for consumers around pricing and protection.
He said: "This report provides a snapshot of year one of the RDR, and the rise in non-advised sales is one of the standout findings. It demonstrates the need for a level playing field for financial advice."
The regulator began its probe into non-advised investment sales late last year, saying it wanted to take an "early look" at the distribution channels to ensure good customer outcomes are being delivered.
