Regulatory Pressures & Industry Response
Consumer groups are pushing to quadruple the CSLR payment cap, intensifying pressure on the scheme that continues to be a contentious issue for advisers. This follows earlier concerns about rising CSLR levies and comes as industry bodies like IFPA advocate for expanding the scheme's scope to include wholesale and general advice, potentially spreading costs more widely across the sector.
ASIC's regulatory activities remained prominent, with the regulator permanently banning a Sydney financial adviser for fraudulent conduct. This enforcement action reinforces the profession's commitment to high standards, particularly as evidence emerges that greater ethics requirements contribute to lower industry fraud levels.
Meanwhile, advisers continue to grapple with increasing regulatory costs, with AFCA announcing a 3.5% fee increase for FY25-26. This fee rise comes as practices search for ways to reduce their AFCA fees, highlighting the ongoing challenge of managing compliance costs while maintaining profitability.
Practice Management & Growth
The "democratisation of wealth" continues to accelerate, with nearly 3 in 5 advisers now utilising managed accounts, representing a significant shift in investment delivery models. BlackRock notes that advisers are now driving $200 billion in managed account FUM, showcasing the growing influence of advice professionals in this space. This trend aligns with findings from the 2024 Australian Financial Advice Landscape Report, which highlighted advisers' increasing embrace of managed accounts.
Pricing dynamics remain favourable for advice practices, with the sector enjoying what some are calling a "champagne problem of pricing power." This pricing strength is making the Australian advice market particularly attractive to overseas buyers, with international interest in local practices continuing to grow. However, a recent poll suggests that advice costs have not decreased despite efficiency gains, raising questions about the long-term accessibility of advice.
Practice growth strategies are evolving, with Wilsons Advisory expanding into Western Australia by tapping industry veterans to lead their Perth operations. This move highlights the opportunities in specialised markets, particularly in regions with unique economic drivers like mining. Meanwhile, adviser movement between licensees continues unabated, with one licensee losing 27 advisers in a single AFSL switch, underscoring the ongoing restructuring of the licensee landscape.
Client Engagement & Retention
High-net-worth clients are increasingly demanding access to non-custody assets, presenting both opportunities and challenges for advisers. The profession appears divided on how to approach these solutions, with varying levels of understanding and implementation across practices. This trend reflects the growing sophistication of client demands and the need for advisers to expand their expertise beyond traditional investment vehicles.
Client protection concerns have also surfaced, with the SMSF Association warning against a resurgence in nefarious cold-calling tactics targeting self-managed super fund trustees. These fraudulent approaches pose significant risks to consumers and highlight the importance of legitimate advice relationships in protecting client interests.
The Financial Advice Association Australia (FAAA) is taking proactive steps to nurture the next generation of financially literate consumers by helping guide young Australians to financial freedom. This initiative aligns with research showing that early financial engagement helps boost women's superannuation savings, addressing a key area of financial inequality.
Technology & Innovation
The artificial intelligence debate continues to evolve, with consensus forming that AI will augment advisers rather than replace them. However, interesting dynamics are emerging within practices, with support staff showing less enthusiasm for AI tools compared to advisers themselves. This resistance could slow adoption rates despite the efficiency gains highlighted in the 2024 Landscape Report, which found that technologically savvy practices achieve significantly higher profit margins.
Licensees face critical decisions about technology implementation, particularly around whether to bundle tech costs within their service offerings. These decisions will impact practice efficiency and profitability, especially as technology becomes increasingly central to advice delivery.
Notable Industry Movements
Several significant personnel changes marked the week, with Australian Unity's chief announcing retirement and Ord Minnett poaching Perpetual advisers amid a hiring spree. These movements reflect the dynamic nature of the advice landscape and the ongoing competition for experienced talent. Meanwhile, key appointments at IRESS signal continued investment in advice technology infrastructure.
Adviser numbers saw a small gain amid a busy week of movement, continuing the stabilisation trend noted in previous weeks. This positive movement suggests the profession may be entering a growth phase after years of contraction following professional standards reforms.
Looking Ahead
Several key themes are emerging that will likely shape the industry through Q2 2025:
- The managed accounts revolution continues to accelerate, changing how advice is delivered and potentially improving scalability
- Practice valuations remain strong due to favourable pricing dynamics and international interest
- Regulatory costs continue to rise through mechanisms like AFCA fees and potential CSLR expansion
- Client demands are becoming more sophisticated, particularly in the HNW segment
- AI integration faces both opportunities and internal resistance within advice practices
Key Takeaways for Advisers
- Review your managed accounts strategy in light of growing industry adoption and potential regulatory scrutiny.
- Evaluate your practice's approach to non-custody assets, particularly for HNW clients.
- Consider documentation of key processes to reduce key person risk and enhance practice value.
- Assess your technology roadmap, particularly regarding AI implementation and staff training.
- Stay engaged with industry advocacy efforts, particularly around CSLR developments.
- Monitor your AFCA complaint handling procedures to minimise regulatory costs.
As the profession continues to evolve, advisers who can balance regulatory compliance, practice efficiency, and client service delivery will be best positioned for success in 2025. Despite ongoing regulatory challenges, the growing adoption of managed accounts and favourable pricing dynamics create significant opportunities for practice growth and enhanced client outcomes.
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