This Week in Financial Services:
For the week of August 26 to September 3, 2025
Welcome to your executive briefing. This week, our industry confronted a stark contradiction in how systemic failures are being addressed. On the one hand, submissions to the Treasury consultation on the special levy to support the Compensation Scheme of Last Resort (CSLR) were due, a direct consequence of large-scale collapses, such as Dixon Advisory. This places the immediate financial burden of past misconduct squarely on the shoulders of today's compliant financial services firms. On the other hand, the Senate quietly scrapped its much-anticipated inquiry into the very collapse that helped trigger this levy. This decision to deal with the costly symptoms of failure while abandoning a key investigation into its root causes has created a palpable sense of frustration, leaving many to question whether we are doomed to repeat the past. Against this backdrop, regulators continued their enforcement push, superannuation funds took the ATO to court, and the life insurance sector saw a significant profit turnaround, painting a picture of an industry grappling with legacy issues while trying to forge a sustainable path forward.
The Regulatory Environment
The week was dominated by the unavoidable and increasingly fraught issue of the Compensation Scheme of Last Resort (CSLR). Submissions to the Treasury consultation paper on the special levy were due this week, again raising the costs and fairness of compensation claims stemming from the failures of Dixon Advisory, without even considering the significantly larger Shield Mastertrust and First Guardian sagas, which were also front and centre in the media this week. While the consultation presents options for structuring this levy, associations were quick to present their case as to why they are being asked to foot the bill for misconduct often perpetrated by firms that have long since exited the industry.
The Financial Advice Association of Australia (FAAA) response argued the special levy is based on "promises impossible to keep". It urged the government to cap the total levy at $20 million per year for the financial advice subsector. The association stressed that any fix to the CSLR is incomplete without a commensurate overhaul of the Professional Indemnity (PI) insurance regime. This point resonates widely across the advice sector. Some associations have even called for consumers to contribute to the levy, highlighting the depth of concern about its financial viability.
In a development that contradicted these compensation efforts, the Senate officially scrapped its inquiry into the collapse of Dixon Advisory. The decision was met with disappointment, with many seeing it as a major missed opportunity to investigate the systemic issues and regulatory gaps that enabled such a large-scale failure. This leaves the industry in the challenging position of paying for the cleanup without the benefit of a thorough, independent post-mortem to help prevent future collapses.
Meanwhile, ASIC's enforcement activities continued unabated, focusing on individuals linked to past failures. The regulator permanently banned convicted investment manager Brett Trevillian from providing financial services. Further action was also taken against individuals involved in the Shield and First Guardian collapses, with ASIC piling more charges on Ferras Merhi and expanding allegations against another adviser connected to the group. In a separate matter, Milutin Petrovic, a former adviser from the now-liquidated United Global Capital (UGC), was banned for six years. These actions underscore the regulator's resolve to pursue individuals, even as broader system inquiries are put on hold. In other market-related enforcement actions, the ASX fined global investment bank Societe Generale $3.88 million for breaches of the derivatives market, and AUSTRAC issued an infringement notice of $187,800 for late reporting.
On a more forward-looking note, the government officially opened its "Investor Front Door" pilot program. The initiative, announced by Treasurer Jim Chalmers, aims to provide a single point of contact to streamline and encourage significant foreign investment into Australia.
Economy, Investments & Platforms
The corporate landscape saw a significant structural shift this week, with Macquarie Group announcing a major restructure to separate its banking arm from its trading and asset management businesses. The move appears to be a response to growing regulatory scrutiny and aims to create more precise lines of accountability between its retail banking operations and its more volatile market-facing divisions.
In funds management, the divergence between struggling active managers and the growth of alternatives continues. Platinum Asset Management faced another setback as a major client withdrew $580 million, marking the third significant exit in recent times and contributing to its ongoing fund outflows. This contrasts with the continued momentum in the private credit market, which is now tipped to be worth $153 billion. BetaShares is tapping into this growth, launching its first private credit fund as part of a new private capital division.
On the platform front, there is a clear push towards simplification and accessibility. AMP's North platform released a streamlined investment menu, a move explicitly designed to help advisers bridge the advice gap by making portfolio construction more efficient. Praemium also expanded its offering, partnering to provide more global investment options for high-net-worth clients.
Broader economic news was cautiously optimistic, with some economists suggesting GDP growth is poised to pick up, although they warn the recovery remains shaky. The August reporting season sparked record volatility, with small caps notably outperforming their larger counterparts. Investor behaviour reflects ongoing uncertainty, with Australian investors pouring nearly $1 billion into gold ETFs as a hedge, while fixed income ETFs also continue to gain traction. Interestingly, one analysis suggests that unlisted assets are likely to underperform their listed peers in the near term, which could be a potential headwind for some institutional portfolios.
The Superannuation & Retirement Landscape
A significant development emerged this week as several of Australia’s largest superannuation funds, including HESTA and Australian Retirement Trust, commenced legal action against the Australian Taxation Office (ATO) in the Federal Court. The funds are challenging the ATO's decision to deny franking credit refunds, a move that could have significant implications for member returns if the tax office's position holds.
ESG and active ownership remain central to fund strategy. HESTA outlined its engagement priorities to the boards of ASX 300 companies, urging them to adopt a stronger corporate focus on issues such as climate change and gender diversity. However, the Responsible Investment Association Australasia (RIAA) has warned that imposing one-size-fits-all ESG rules could destabilise super funds by failing to account for different investment strategies and member cohorts.
Funds are also reacting to external risks, with UniSuper’s chief investment officer flagging potential volatility in global share markets stemming from US presidential intervention. On the retirement solutions front, Cbus has launched a new product designed to help low-balance members achieve a tax-free retirement, addressing a key challenge in the decumulation phase. This comes as the broader conversation around retirement advice moves beyond a simple focus on the super balance to encompass a more holistic view of members' financial needs.
In a sign of the scale and complexity now inherent in the system, Australian Retirement Trust (ART) is embracing a "total portfolio management" approach to prepare for its next phase of growth. Meanwhile, smaller funds like Brighter Super are leveraging CGT events to deliver value and retain members. On the operational front, regulators are set to test the cybersecurity readiness of super funds, reflecting the growing importance of protecting member data. The fallout from last week's APRA performance test continues to be felt, with analysis suggesting the test would likely have missed the issues at the heart of the Shield Mastertrust and First Guardian collapses, raising questions about its effectiveness in protecting members from all forms of risk.
Life Insurance & Client Protection
The life insurance sector has recorded a strong financial turnaround, with APRA statistics showing that insurers doubled their earnings in the last financial year. The result was driven by a combination of repricing legacy products, strong investment income, and improved performance in key lines such as individual lump sum business. ClearView has been one beneficiary of this trend, reporting an upbeat outlook after successfully repricing its own legacy products.
In response to this improved stability, product innovation is re-emerging. NobleOak is set to launch a new advised life insurance product, signalling confidence in the intermediary channel. There is also a growing chorus of voices calling on regulators and the government to "release the handbrakes" on risk advice, arguing that current regulations are overly restrictive and are hindering consumer access to vital protection.
However, the industry is also facing external headwinds. The Council of Australian Life Insurers (CALI) has flagged potential negative flow-on effects for life and disability insurers from the NSW government's proposed overhaul of its workers' compensation scheme. On the claims side, a recent poll suggests a surge in adviser support for outsourcing claims management, which may indicate a desire for greater efficiency and specialisation in the claims process. However, it also highlights a need for life insurers to improve their claims management services.
Advisers, Advice Practices and Clients
For advisers and their practices, the proposed CSLR special levy represents the most immediate and significant threat to business sustainability. The FAAA has been vocal in its opposition to the current structure, arguing that the government should more aggressively pursue recalcitrant directors of failed firms rather than placing the burden on compliant advisers. One commentator noted that advisers are already facing the prospect of 15% increases in the levy, even before any special measures are implemented. The sentiment is clear: the current model is seen as fundamentally flawed and unsustainable for the profession.
Beyond the levy, the quiet scrapping of the Dixon inquiry has been met with dismay, seen as a failure to learn the lessons from one of the industry's biggest collapses. The adviser population itself continues to experience disruption and movement, an ongoing trend as the profession reshapes itself following the Royal Commission.
On a more positive note, the profession continues to celebrate excellence, with the 2025 Australian Wealth Management Awards winners announced, recognising outstanding contributions to the profession. In the technology sector, a partnership between Bravura and Future Group aims to deliver a new digital advice solution, underscoring the ongoing effort to find scalable solutions to address the advice gap.
In the Background: Key Financial Services Organisation Movements
Several key leadership changes occurred this week. The chief executive of the NSW government's investment arm, TCorp, announced their retirement, with a successor named from within the organisation. In the funds management space, the chief executive of Clime Investments has also resigned from their role.
Key Takeaways for Your Sector
For Superannuation Executives: The legal challenge against the ATO regarding franking credits is a critical development with the potential to impact investment returns and tax strategies materially; monitor this case closely. The growing focus on cyber resilience is a clear directive from regulators; ensure your fund's defences are being tested and upgraded. Finally, the evolution towards "total portfolio management" at large funds like ART signals a new level of sophistication in managing scale and complexity, a trend smaller funds will need to watch.
For Life Insurance Executives: The doubling of industry profits provides a welcome period of stability, but this is the moment to invest in sustainable product design and digital transformation, rather than simply enjoying the tailwind from investment markets. The concerns raised by CALI regarding the NSW workers' comp changes highlight the need for proactive engagement on policy issues that can indirectly impact the viability of life and disability products.
For Investment & Platform Executives: Macquarie's restructure is a sign that even the most prominent institutions are adapting to heightened regulatory expectations around structure and conflicts. The struggles of active managers, such as Platinum, contrasted with the growth in private credit and thematic ETFs, underscore the ongoing shift in investor and adviser preferences. For platforms, the move by AMP's North to simplify its menu is a key strategic response to the advice gap; efficiency and ease of use are becoming powerful competitive advantages.
For Advice Licensee Executives: The CSLR special levy consultation is an existential issue. It is imperative to engage directly with the Treasury consultation and through your industry association to advocate for a more sustainable funding model. The cancellation of the Dixon inquiry means the systemic risks that led to the current CSLR crisis remain largely unaddressed, heightening the importance of your own due diligence and risk management frameworks.
