Personal Touch, the privately owned restricted network, has shed a fifth of its appointed representatives after a fee model shake-up and has reported a 66% fall in pre-tax profits.
Pre-tax profits fell to £0.4m for last year, down from £1.2m in 2011.
Annual turnover for the year grew 15.7% to £64.9m, compared to a fall the previous year of 6.3%, with turnover in 2011 at £56.1m.
Personal Touch's parent company, Personal Touch Holdings, reported a loss before tax of £3.3m, compared to a loss of £3.9m in 2011.
During 2012 the Personal Touch directors undertook a review of the company's strategy and fee model, which they said has resulted in a number of the network's less profitable firms leaving.
The company had 576 appointed representatives at the end of 2012, a drop of 21% on 2011 when it had 733.
The number of registered individuals also fell, dropping to 1,161 from 1,492, a fall of 22%.
However annual average productivity per adviser has risen from £38,000 in 2011 to £44,000 in 2012, which the company said is in line with its strategic plan.
The gross profit margin of the company remained at 17% during 2012.
However the increased administrative expenses due to the operational restructuring - which were £10.7m in 2012, up from £8.6m in 2011 - led to a reduction in operating profit to £370,074, down from £1.5m in 2011.
Personal Touch chief executive Max Wright (pictured) said: "2012 was a significant year for the business. As part of our long-term strategy to focus on quality, we made significant steps to create a more refined adviser community with higher standards and better productivity, whilst simultaneously removing significant costs from the business through staff realignment.
"The business had traditionally operated at the smaller end of the network member market and the executive team felt this approach needed modification to ensure future stability and growth".
He continued: "Our quality strategy may well have drawn some negative attention for those within the industry who remain focused on numbers but we believe this is an outdated and largely irrelevant criteria to judge distributors on in a consumer-focused era.
"We are also confident that our ultimate audience, the consumers of our member firms, will be the biggest beneficiary, which is exactly how we believe a responsible financial services industry should operate.
"Our new focus on quality has been warmly welcomed by product providers, lenders and of course our adviser members who have chosen to remain with our new, more efficient and wholly service-driven network."
Supporting this strategic realignment, LDC, the largest shareholder of Personal Touch's holding company, injected a further £12.6m during the 2011/12 financial year.
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