As we step into 2025, one of the most significant legislative milestones of 2024 was the introduction of Tranche 1 of the Delivering Better Financial Outcomes (DBFO) reforms. The first DBFO transition period, which began on 10 January 2025, coincides with practices return from the new year break and is primarily focused on modifying the collection and disclosure of fee arrangements. Embracing these new obligations not only opens up new opportunities to rethink fee structures and collection methods but also ensures that you are collecting sufficient fees from clients to run a sustainable and profitable financial advice practice.
Early data from the 2025 Australian Financial Advice Landscape Report reveals that practices are already adapting to better align with regulatory requirements and client needs.
Rising Fee Trends and Regulatory Change
The average adviser fee continued its upward trajectory into 2025, rising by 4% (compared with a 2.8% CPI over 2024) to $4,744 per year, reflecting both increasing operational costs and growing recognition of advice value. It is worth reflecting, however, that while this represents a substantial increase from 2018 when the median advice fee was $2,510, the 4% increase represents the smallest annual fee increase in the past 7 years, which have seen fee increases as high as 16%, suggesting practices have been reluctant to increase more than a nominal CPI rise.
Figure 1: One Off Fee Collection Quantum Distribution %
Source: Adviser Ratings
As we have covered in the last several articles, for advice practices planning their 2025 strategy, the commencement of the DBFO reforms, particularly around fee consent and disclosure, creates opportunities to reconsider how practices structure and collect their fees. The DBFO streamlining of fee processes (see below) allows practices to focus more on client engagement and developing innovative service models that align with the evolving needs of their clients.
Figure 2: Recurring Client Fee Distribution %
Source: Adviser Ratings
One of the key trends emerging in the financial advice landscape is the adoption of client-centric fee models. The shift in perceived value clients receive from financial advice is reflected in the fee data, with practices increasingly confident in pricing their services to reflect their true worth (as can be seen in the significant increases over the past 7 years). Client-centric fee models allow practices to calculate fees based on client satisfaction, retention, and growth by aligning fees with the value advisers deliver to their clients. This approach fosters trust and transparency and ensures that fees are commensurate with the benefits clients receive.
Evolving Collection Methods
As a starting point, the DBFO reforms provide clarification around fee collection for personal advice, particularly in collecting fees from superannuation funds, and provide greater certainty for practices in structuring their fee collection across several different methods. Key changes include:
- Simplified Fee Consent: The DBFO reforms streamline fee consent requirements while maintaining consumer protections, reducing administrative burden for practices
- Superannuation Fee Collection: New clarity around collecting fees from superannuation accounts for personal advice
- Ongoing Fee Arrangements: Modified requirements for ongoing fee arrangements that maintain transparency while reducing paperwork
Figure 3: Fee Collection Method Distribution %
Source: Adviser Ratings
The reforms to simplify ongoing fee collection are of particular note. One of the most significant changes is the removal of the Fee Disclosure Statement (FDS), which was universally acknowledged as a significant administrative burden for advisers given the often time-consuming and complex process of providing detailed information about fees and services to clients on an annual basis.
The other significant benefit of the DBFO fee changes is consolidating and streamlining the client fee consent process. Advisers can now combine multiple consent forms into one form, making obtaining and managing client consents for ongoing fee arrangements and fee deductions from products easier. Streamlining fee consent into a single form reduces the administrative burden on advisers and improves client transparency. Additionally, the reforms provide more flexibility in the renewal period for client consent, giving advisers more time to renew agreements and avoid unintentional terminations.
Overall, simplifying ongoing fee collection processes under the DBFO reforms offers advisers an opportunity to streamline their operations, reduce administrative burdens, focus more on client engagement, and develop innovative service models that align with the evolving needs of their clients. However, this should be aligned with ensuring the fee charges offer value for money for both the client and allow the practice to maintain a sustainable and profitable business.
The Client Value Proposition
While fees continue to rise, practices face the ongoing challenge of demonstrating value to clients. The data shows that while 68% of Australians see the benefits of professional financial advice, only 7% of advisers have fees for new clients under $1,500, highlighting the persistent gap between perceived value and price sensitivity.
Leading practices are addressing this through:
- Tiered service models offering different levels of service at corresponding price points
- Clear articulation of value proposition and fee structures
- Leveraging technology to improve service delivery efficiency
- Enhanced transparency in fee disclosure and collection methods
Technology Integration
Forward-thinking practices are also leveraging technology to improve fee collection efficiency. The Landscape Report shows that practices embracing digital solutions report higher profit margins (24-40%) compared to those without (14-20%). This includes automated fee collection through platforms and improved fee disclosure documentation systems, empowering advisers to streamline their operations and improve their efficiency.
Future Considerations
As the profession adapts to these changes, several key considerations emerge:
1. Fee Structure Innovation: The reforms create opportunities to develop more flexible fee structures that better align with client needs and practice profitability
2. Collection Efficiency: Streamlined fee collection processes can reduce administrative costs while improving cash flow
3. Technology Integration: Investment in digital solutions can improve both fee collection and service delivery efficiency
4. Value Communication: Enhanced ability to demonstrate value through more transparent fee structures and improved service delivery.
Conclusion
The DBFO reforms present a significant opportunity for practices to reevaluate and optimise their fee structures and collection methods. The key to success lies in effectively balancing the new regulatory framework with innovative fee models that make advice more accessible while maintaining profitability.
As advice practices are emerging at the top of the financial services value chain, both financially and from a public good perspective, the evolution in fee structures and collection methods is a crucial part of this transformation, supporting practice sustainability and broader access to professional financial advice.
The data suggests that successful practices in 2025 and beyond will be those that can effectively leverage these regulatory changes to create more efficient, transparent, and client-centric fee models. This may require continued investment in technology, streamlined operations, and innovative service delivery approaches that justify the ongoing trend toward higher fees while making advice more accessible to a broader range of Australians.
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