As April begins, the financial advice profession finds itself at a critical juncture, with the upcoming federal election, ongoing CSLR challenges, and regulatory reforms driving industry discussions. With adviser numbers showing positive growth for the first quarter of 2025, there's cautious optimism amid persistent regulatory pressures.
Regulatory Pressures & Industry Response
The federal budget's apparent neglect of financial advice issues has heightened the significance of the upcoming election for advisers. In a promising development for the profession, Shadow Treasurer Angus Taylor has committed to implementing advice reforms within 100 days if the Coalition wins office, signaling the political importance of advice accessibility.
One year after its implementation, the Compensation Scheme of Last Resort (CSLR) continues to strain the industry, with concerns that there's only "so much meat left on the adviser bone" for levies. The budget papers have foreshadowed little relief from these costs, maintaining pressure on practice economics.
Legal experts have raised concerns that a narrow legal interpretation could make Statement of Advice (SOA) reforms "essentially redundant", highlighting the challenges in implementing meaningful regulatory change. Meanwhile, licensees are showing mixed reactions to SOA replacements, revealing industry divisions over reform implementation.
The professional conduct landscape continues to evolve, with the Financial Services and Credit Panel (FSCP) reprimanding an adviser over non-concessional contribution cap errors, underlining the ongoing scrutiny of technical advice. In more severe regulatory action, ASIC has imposed penalties on advice licensees for authorising advisers who provided advice while unregistered.
Advisers are being urged to avoid a "regulatory waiting game" and adapt proactively to the evolving landscape, regardless of potential political changes.
Practice Management & Growth
The adviser population continues its recovery, with adviser numbers rising to 15,576, showing strong growth in Q1 2025, building on momentum from late 2024. This positive trend is supported by the recent ASIC financial adviser exam, which saw a strong pass rate of 67% in March, though this represents a slight decline from previous sessions.
Practice profitability remains robust despite regulatory challenges, with 83% of advice practices reporting increased revenue. This growth comes as licensees increasingly compete to attract practices, creating a favorable environment for practice owners.
The M&A landscape continues to evolve with several significant transactions:
- WT Financial and Merchant Group have launched their joint venture with a three-firm merger, creating a substantial advice hub
- Count has acquired an Adelaide advice firm, strengthening its South Australian presence and approaching $10 million in revenue.
However, some acquirers are being deterred by complex advice portfolios, suggesting a preference for standardised business models in the current M&A market.
Client Engagement & Retention
The impending intergenerational wealth transfer, estimated at $3.5 trillion, continues to drive industry discussions. Research from Fidelity indicates that Gen Z is most likely to seek advice following inheritance, presenting a significant opportunity for advisers. However, data shows that over half of inheritors lack an ongoing adviser relationship, highlighting the need for improved engagement strategies.
The impact of the new Aged Care Act on retirement planning is becoming a critical consideration for advisers, as demographic shifts increase the importance of aged care advice.
Communicating value remains challenging, with advisers exploring new approaches to demonstrate their worth to prospective clients. This comes as some advisers recognise the benefits of working with external experts to enhance client service and manage complexity.
Economic uncertainties are creating new client engagement opportunities, with recession concerns prompting advisers to proactively communicate with clients about portfolio positioning and risk management.
Technology & Innovation
Artificial intelligence continues to transform the advice landscape, with projections suggesting that AI could enable advisers to double their client capacity within two years. The profession embraces this shift, with CA ANZ launching an AI fluency certificate for finance professionals to enhance digital capabilities.
The managed accounts sector is experiencing significant growth, approaching a $200 billion market that warrants increased scrutiny. This expansion is driven by a decade of innovation, though questions remain about managing conflicts with in-house managed accounts.
Licensees are developing varied approaches to Bitcoin on approved product lists in the crypto space, reflecting the industry's cautious engagement with digital assets.
Cybersecurity threats continue to evolve, with ASIC warning about "hydra-like scammers" targeting financial services. SMSF trustees, in particular, are being warned to stay vigilant as cyber threats increasingly target superannuation assets.
Notable Industry Movements
In significant industry news, the Australian Financial Complaints Authority (AFCA) has confirmed an end date for United Global Capital's membership, marking a decisive regulatory action. Meanwhile, the Federal Court has approved a $3.54 million settlement in the Caddick auditor class action, bringing some closure to this high-profile case.
On the international front, New Zealand has launched a financial advice accessibility review, potentially offering insights for the Australian market on addressing advice gaps.
Fitzpatricks Private Wealth has named a new Head of Product in personnel movements, strengthening its leadership team.
Looking Ahead
As the industry progresses through Q2 2025, several key developments warrant attention:
- The federal election campaign and its implications for advice reform
- Continued impact of the CSLR
- Evolution of AI applications in advice delivery
- Progress on SOA reforms and their practical implementation
- Further consolidation in the licensee and practice landscape
Key Takeaways for Advisers
- Monitor election developments and prepare for potential regulatory shifts
- Review practice efficiency to maintain profitability amid ongoing CSLR costs
- Develop strategies to engage the next generation of clients amid wealth transfer
- Assess AI implementation opportunities to enhance capacity and service delivery
- Consider managed accounts strategies while carefully managing conflicts of interest
- Strengthen cybersecurity measures to protect practice and client data
Despite regulatory challenges, the profession continues to demonstrate resilience and innovation. The positive adviser number growth, strong practice profitability, and technological advancements provide a foundation for cautious optimism as the industry navigates a complex and evolving landscape.
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