The financial advice landscape saw significant developments this week with the release of the DBFO Tranche 2 draft legislation, continued discussions around genetic testing bans in life insurance, and a renewed and crucial focus on client communication tools. This emphasis on client communication is a testament to the industry's commitment to maintaining strong client relationships. Meanwhile, practice acquisitions continue at pace, and adviser sentiment regarding regulatory reform shows signs of frustration with the pace of meaningful change.Regulatory Pressures & Industry Response
The long-awaited second tranche of the Delivering Better Financial Outcomes (DBFO) reforms was released by Assistant Treasurer Stephen Jones, confirming the replacement of Statements of Advice (SOAs) with Client Advice Records (CARs). While the government has positioned this as a significant reform, industry reaction has been mixed at best. The Financial Advice Association Australia slammed the package, with CEO Sarah Abood stating it was "concerning on many levels" and needs substantial change.
Many practitioners have expressed disappointment, with some suggesting the reforms offer little actual change beyond renaming documents. One analysis noted that if the safe harbour steps remain, Australia's advice gap will persist regardless of documentation changes. The Treasury has opened consultation on the draft legislation, providing an opportunity for industry feedback.
In another significant development, the industry continues to grapple with the implications of a proposed genetic testing ban for life insurance, with the FAAA questioning the equity of such measures. Meanwhile, ASIC's reportable situations regime remains under scrutiny, with calls to lift the breach reporting threshold to $1,000 and extend the reporting period to 30 days, as many believe the current system is flooding ASIC with minor issues.
Practice Management & Growth
The M&A market continues to be active, with several notable transactions this week. Insurance broking group PSC Insurance acquired a majority stake in advice firm EWM Group, which also announced a merger with Foster Raffan iFLAN. Meanwhile, Perth-based advice firm Element Private Wealth is targeting $1 billion in FUM, highlighting the ambition and growth potential in the boutique segment.
Adviser movements between licensees continue, with Centrepoint Alliance benefiting from Sequoia exits, showing ongoing churn in the market. This trend reinforces findings from the 2024 Australian Financial Advice Landscape Report, which highlighted the significant shift toward privately owned licensees with fewer than 10 advisers.
In response to this changing landscape, Infocus unveiled a new partnership model offering flexible arrangements for advisers, promoting itself as "a home for every adviser". This innovation in licensee structures demonstrates how the market adapts to adviser preferences for greater flexibility and autonomy.
The week also saw an award-winning financial planner launch their practice with White Rabbit Advisory, beginning operations in Melbourne and continuing the trend of experienced advisers establishing boutique firms.
Client Engagement & Retention
With the federal budget approaching, advisers report that clients express concerns about aged care, housing, and retirement planning. These concerns align with research showing Australians are increasingly overwhelmed by retirement awareness and that more retirees are weighed down by mortgage debt, highlighting the critical role advisers play in helping clients navigate these challenges.
The challenge of elder financial abuse has also gained attention, with AFCA opening a consultation on how to address financial elder abuse and family violence in complaint resolution. This issue is becoming increasingly important as Australia's population ages and wealth transfers accelerate.
For advisers looking to deepen client relationships, understanding what makes clients tick was emphasised, with experts suggesting that emotional intelligence is as crucial as technical knowledge in building lasting client relationships. This aligns with the 2024 AFLR findings that showed that advisers with strong client relationships achieve higher profitability.
With global market volatility following political developments in the US, advisers are also focusing on communicating with concerned clients through potential market downturns. Expert advice suggests transparency, proactive communication, and contextualising market movements within clients' long-term plans.
Technology & Innovation
The integration of artificial intelligence in financial advice continues to accelerate, with AMP North embedding market-first GenAI capability and launching a market-first AI filenote assistant for advisers. This development represents a significant step forward in using AI to enhance practice efficiency, addressing a key challenge identified in the 2024 AFLR, where 45% of practices reported using or planning to use AI.
Digital tools for client engagement also saw innovation, with AstuteWheel launching a tool to improve adviser-client communication. Meanwhile, HeirWealth announced an integration with Class Super, enhancing data connectivity and streamlining administration processes.
These developments reflect the growing recognition that technology adoption is closely linked to practice profitability. The 2024 AFLR highlighted that technologically savvy practices achieve profit margins of 29% on average, compared to just 18% for those less technologically advanced.
Notable Industry Movements
My Dealer Services partnered with CFS to enhance adviser education and technical support, demonstrating ongoing investment in adviser professional development. This move aligns with the increasing focus on adviser education and support services following recent regulatory changes.
Concerning workplace culture development, AMP faced allegations of staff surveillance, which the company has denied. This situation highlights the importance of maintaining positive workplace cultures in financial advice businesses, particularly as the industry works to attract new talent.
The FAAA strengthened its advocacy capabilities by appointing an industry veteran to a senior policy and advocacy role, positioning itself for continued engagement with regulators and policymakers on behalf of the profession.
Looking Ahead
As we approach the federal budget and an expected election later this year, several key developments warrant close attention:
- The consultation process and potential revisions to the DBFO Tranche 2 legislation
- Budget announcements that may impact client financial situations or advice business operations
- Continuing evolution of AI applications in advice practices
- Ongoing practice consolidation and licensee transformations
Key Takeaways for Advisers
- Review your documentation processes in light of the proposed DBFO changes, but recognise that fundamental transformation may require further advocacy.
- Evaluate your client communication strategies for discussing market volatility and economic uncertainty.
- Consider how AI tools enhance your practice efficiency, particularly for administrative tasks like file notes.
- Assess your practice value and succession planning in light of continued strong M&A activity.
- Engage with industry associations on providing feedback to the DBFO Tranche 2 consultation process.
The industry continues to navigate significant change, but advisers who focus on client relationships, embrace appropriate technology, and remain engaged with regulatory developments will be best positioned for success in 2025.
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