As February closes and March begins, the financial advice industry continues its recovery with 90 new entrants joining the profession in 2025 already—a positive sign for a sector still grappling with adviser shortages. This week has been marked by significant CSLR developments, practice valuation insights, and a surge in AI tools explicitly designed for advisers. Meanwhile, the retail life insurance sector shows encouraging signs of recovery after years of decline.
Regulatory Pressures & Industry Response
The controversial Compensation Scheme of Last Resort (CSLR) has remained firmly in the spotlight this week. Despite legal opinions that there's no arguable basis to challenge the legality of CSLR levies, industry bodies are not backing down in their fight for reform. The FAAA's call for changes to insolvency laws amid CSLR failures and the Securities and Investment Advisers Association (SIAA) 's argument that the scheme is built on moral hazard indicate the industry's engagement. Critics also point out that Dixon Advisory and fundamental design flaws are hurting the adviser, further fueling the need for reform.
The SIAA has also questioned AFCA's methodology, adding another layer to ongoing regulatory concerns. Meanwhile, many advisers are worried about receiving their ASIC levy notices, reflecting continued pressure from multiple regulatory costs.
In a significant win for consumer protection, ASIC has shut down 10,000 investment scam sites, demonstrating the regulator's unwavering vigilance against fraud. This victory, following last week's regulatory actions against professional misconduct and the Federal Court's decision to freeze the assets of Melbourne financial adviser Ferras Merhi related to the Shield Master Fund failure, should reassure us of the regulator's commitment to maintaining the integrity of our industry.
Practice Management & Growth
The M&A environment for advice practices remains exceptionally competitive, with significant wealth players experiencing "FOMO" amid a heated environment. This aligns with last week's observations about the considerable imbalance between buyers and sellers, creating favorable conditions for practice valuations. Those considering exiting the profession should take note that the current market conditions present an excellent opportunity to maximise value.
Several dealer groups are executing ambitious growth strategies. Count Financial has reported lifting profits post-Diverger acquisition, with growing client demand and equity partnerships driving revenue growth. Integro has formed a strategic partnership, expanding its national reach, while Centrepoint has identified three growth opportunities for advice businesses.
In an interesting development for practice funding, AZ NGA has secured a $345 million private credit deal from Barings, potentially signaling new financing options for growth-oriented practices. This follows AZ NGA's appointment of the former Fitzpatricks chief as CFO.
When selecting core service providers, advisers are encouraged to carefully consider what to look for when choosing a research house, with Bennelong FM offers tips to navigate this critical decision.
Client Engagement & Retention
The retail life insurance sector is finally showing signs of growth, with advisers urged to consider life insurance benefits amid surging cost-of-living pressures. This comes as insurance through superannuation stages a comeback, providing advisers with multiple options to address client protection needs. However, health insurance is increasingly viewed as a dispensable expense as financial pressures mount for many households.
Data from Ausiex reveals that diversification is a key marker of advised SMSFs, highlighting the value advisers bring to self-managed super fund portfolios. Meanwhile, younger women are embracing geared investment strategies, presenting an opportunity for advisers to engage with this demographic.
In evolving client service areas, the FAAA has called for consistent protocols on handling suspected financial abuse, an increasingly important consideration for advisers working with vulnerable clients. Advisers are also exploring how philanthropy fits into financial advice, reflecting growing client interest in values-based financial planning.
For advisers working with superannuation issues, guidance on the early release of superannuation on compassionate grounds offers valuable insights for client conversations. It's worth noting that external advisers maintain the lion's share of $1.7 billion in super fund advice fees, underlining the continued importance of adviser relationships with super funds.
Technology & Innovation
AI continues to transform advice practices, with new solutions now focusing on client meeting effectiveness. An advice consultancy group is promoting an AI-powered app to enhance meeting performance, while Certainty Advice is set to release an AI-backed client debriefing app. These developments aim to support advisers in improving client interactions.
However, a recent survey indicates that advisers struggle with AI and require additional support to leverage these technologies fully. This aligns with the advice to maximise existing tech stacks before adding shiny new tools, suggesting that a more measured approach to technology adoption might be beneficial.
Industry insiders are observing a war on inefficiency as platforms try to standardise processes, potentially streamlining adviser workflows. For practices looking to improve operations, outsourcing remains a viable strategy for enhancing efficiency without sacrificing quality.
Notable Industry Movements
Fitzpatricks Group has made significant leadership changes, expanding its senior leadership team and appointing a marketing veteran as its new CEO. The new CEO has outlined plans for "smarter, more efficient" growth, signaling a strategic shift for the dealer group.
Data on progress toward gender equity shows that financial services are gradually closing the gender pay gap, though more work remains to achieve parity.
Looking Ahead
Several important trends are emerging that will likely shape the coming months:
- The CSLR debate will continue to intensify as industry bodies push for structural reforms
- Practice valuations should remain strong with continued M&A activity in the advice sector
- AI adoption will accelerate but with greater focus on practical applications that enhance client service
- Life insurance advice presents a growing opportunity as the sector recovers and cost-of-living pressures increase
- Investment strategies will evolve as interest rates fall and markets adjust
Key Takeaways for Advisers
- Review your practice valuation in light of favorable market conditions, particularly if you're considering succession options
- Evaluate current life insurance strategies for clients facing cost-of-living pressures
- Consider how AI tools might enhance client meeting effectiveness and follow-up processes
- Assess your research house relationships against business needs and client outcomes
- Develop clear protocols for identifying and addressing suspected financial abuse
- Monitor CSLR and regulatory levy impacts on practice finances
- Consider how BlackRock's "three Ps" might shape portfolio construction in a changing interest rate environment
- Explore how philanthropy might be integrated into advice offerings for values-driven clients
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