As the financial advice sector settles into 2025, several key themes are emerging that will shape the year ahead. As we start the year, the adviser population has stabilised at around 15,500 practitioners, marking a pivotal moment for the profession as it embraces technological innovation and adapts to regulatory reforms.
Technology and AI Take Center Stage
The integration of artificial intelligence in financial advice continues to accelerate, with predictions suggesting that up to 80% of advisers could be utilising AI tools by the end of 2025. This adoption rate represents a significant increase from last year, where the 2024 Australian Financial Advice Landscape Report (AFLR 2024) indicated that 45% of practices are currently using or planning to use AI. However, some practitioners are questioning whether AI has lived up to its initial hype, particularly in terms of enhancing practice efficiency and client service delivery.
For high-net-worth (HNW) focused practices, AI is increasingly becoming a competitive differentiator, enabling the delivery of more sophisticated, personalised services. This aligns with growing demands for hyper-personalisation in HNW advice, reflecting a broader industry trend toward tailored service delivery.
Regulatory Landscape and Practice Economics
The profession continues to grapple with regulatory changes and their economic impact. Recent Freedom of Information (FOI) documents have revealed concerns about the Compensation Scheme of Last Resort (CSLR), with the FAAA calling for greater transparency around cost implications for advisers.
Meanwhile, adviser remuneration remains a pressing issue, with salary growth stagnating in most states. This comes as practices face increasing pressure to optimise their operations and embrace new efficiency measures.
Practice Management and Growth Opportunities
At the start of 2025, we see an increased focus on practice preparedness and growth strategies. Private equity firms are showing renewed interest in the advice sector, particularly in the lower mid-market segment, suggesting potential for practice consolidation and investment.
For practice owners, getting business-ready for 2025 involves careful consideration of succession planning and growth strategies. One area in particular practices need to start focusing on relates to findings that 40% of practices still lack a nominated successor, despite nearly half having a succession horizon of under 10 years.
Platform Evolution and Practice Efficiency
This week, there was a discussion of a significant shift in how practices approach platform relationships, with a trend toward platform "monogamy" replacing historical platform "promiscuity". The consolidation of platform relationships is seen as key to improving practice efficiency and maintaining consistent client experiences.
Gender Diversity Challenges
The industry continues to grapple with gender representation issues in financial services, highlighting the need for structural changes to attract and retain female talent. This challenge is particularly pressing given AFLR 2024 findings that practices with a higher ratio of female-to-male staff show increased revenue and profit growth year-on-year compared to those with a lower ratio.
New Class of Financial Adviser Debate
The profession continues actively engaging with proposals for a new class of financial advisers, with discussions centred on maintaining professional standards while expanding advice accessibility. With only 10.4% of Australians currently receiving financial advice, there remains a significant opportunity for market expansion if more advice services can be provided.
Investment Trends and Portfolio Construction
Investment strategies are evolving in response to market conditions and client needs. Recent analysis suggests that traditional bucket investment strategies may overlook nuances in alternatives, while a survey of millionaire investors reveals common pitfalls in wealth management. The studies, however, contrast with the investment strategies being implemented by advisers, which showed a continued shift toward passive management, with actively managed asset allocation declining from 65% to 59% over two years.
Licensee Engagement and Support
Industry discussions have highlighted that AFSLs are notably absent from cost of advice discussions, raising questions about their role in shaping industry reform. Given the continued growth in self-licensed practices, with privately owned licensees with less than 10 staff now representing the market's largest segment, it may make sense to reconsider the role of licensees in the continued professionalisation of financial advice.
Looking Ahead
As the industry moves forward, several key developments warrant attention:
- The ongoing implementation of the Quality of Advice Review recommendations
- The evolution of AI applications in advice delivery
- Continued focus on practice efficiency and profitability
- Growing emphasis on succession planning and practice valuations
The 2024 Australian Financial Advice Landscape Report showed that practices embracing technological innovation while maintaining strong client relationships are best positioned for success in this evolving landscape. As we progress through 2025, the ability to balance these elements while navigating regulatory changes will be crucial for practice success.
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