This week in financial advice, the profession was hit by a flurry of regulatory actions and revelations about industry costs, painting a picture of a sector under immense pressure. The Australian Securities and Investments Commission (ASIC) continued its enforcement blitz, banning multiple advisers and cancelling licences, while releasing its estimated industry funding levies. The actual cost of the Compensation Scheme of Last Resort (CSLR) became clearer, sparking intense debate and calls for reform. Amid this, adviser numbers continued their decline, even as some firms pushed forward with significant consolidation, highlighting the growing divergence within the industry.
Regulatory Storm Gathers Force
The regulatory environment intensified significantly, with ASIC at the forefront of a sweeping series of enforcement actions. The regulator permanently banned former adviser Barry King for dishonest conduct and banned several other advisers for misconduct related to fees-for-no-service and inappropriate advice, including former directors and advisers from MWL Financial Group and Lighthouse Partners. The actions extended to cancelling the AFS licences of two providers for failing to pay industry funding levies, demonstrating a zero-tolerance approach to non-compliance.
ASIC also turned its attention to pushy super switching campaigns, issuing a stark warning to advisers, platforms, and research houses involved in schemes that may not be in the clients' best interests. This was complemented by the SMSF Association backing ASIC's alert, highlighting the risk of unsolicited offers that can lead to poor member outcomes. Further demonstrating its enforcement reach, ASIC secured travel and asset restraint orders in its investigation into First Guardian.
Adding to the profession's challenges, the pass rate for the June financial adviser exam dropped to just 57%, the lowest result since October 2023. This outcome raises further questions about the pipeline of new talent and the existing pathways to qualification.
The Soaring Cost of Advice
The financial burden on the industry was a dominant theme this week. ASIC released its cost recovery implementation statement, estimating the total levy for financial advisers providing personal advice at $46.2 million for the 2024-25 financial year. This figure, while a slight decrease per adviser, continues to place significant pressure on practice profitability.
However, the most contentious issue was the Compensation Scheme of Last Resort (CSLR). A revised estimate for the scheme's second levy period was released, knocking $3 million off the bill. Despite the reduction, industry bodies were quick to point out the scheme's fundamental flaws. The Financial Advice Association Australia (FAAA) argued the slight reduction hides a substantially worse long-term impact. At the same time, the SMSF Association urged the government to expedite a review of the scheme, highlighting the moral hazard it creates. The potential cost of claims related to the failed Shield Master Fund, estimated at between $480 million and $580 million, underscored the potential for future levies to skyrocket.
A Profession Divided: Contraction and Consolidation
The shock continued to be felt this week following news last week that the financial advice profession saw its numbers slump below 15,300, with a loss of 358 advisers in June, marking the biggest monthly drop of the year. Recovery has commenced with a net increase of 17 advisers following the return of 32 advisers and registration of 16 new advisers over the past week. This continued decline in capacity contrasts sharply with significant movements in the market that point towards aggressive consolidation.
In a landmark merger, Sydney-based firms Prime Private and Omnia Financial have joined forces, creating a national entity with $2.5 billion in funds under management. This move exemplifies the trend of creating scaled, multi-disciplinary businesses to navigate the challenging environment. The inside story of AMP's exit from financial advice provided further context to the structural shifts reshaping the industry landscape.
On the personnel front, Viola Private Wealth appointed former Australian test cricketer Stuart Clark AM as a partner, while the Stockbrokers and Investment Advisers Association (SIAA) announced its long-serving chief executive Judith Fox will step down in September.
Innovation continues to be a key focus for survival and growth. Yodal, an estate planning software provider, launched a new tele-estate planning tool designed to streamline the process for advisers. Meanwhile, the debate over life insurance remuneration reignited, with strong adviser support for a review of the Life Insurance Framework (LIF) commission structure to ensure the sustainability of risk advice.
Context, Looking Ahead & Takeaways
This week’s events confirm the "bifurcation" narrative that has dominated 2025. The intense regulatory crackdown and mounting CSLR costs, which previous updates flagged as major threats, are now hitting home, catalysing both an exodus of advisers and aggressive consolidation by well-capitalised firms. The drop below 15,300 advisers, combined with the significant merger of Prime Private and Omnia, provides the clearest evidence yet of this divergence. The industry is being reshaped under pressure, with regulatory enforcement acting as a powerful catalyst.
Looking forward, the financial impact of the CSLR levy and ASIC’s industry funding will be a critical focus for practice viability over the next year. The government's promised review of the CSLR has now become a crucial political test. For practices, the pressure to demonstrate value and find efficiencies has never been greater, pushing technology adoption and specialised service models to the forefront.
Key Takeaways:
- Short-term (0-3 months): Practices must immediately factor the confirmed ASIC levies and estimated CSLR costs into their 2025-26 budgets. Review all client communication and marketing, particularly around superannuation switching, to ensure it aligns with ASIC’s heightened scrutiny.
- Short-term (0-3 months): Advisers should proactively engage with clients on the importance of portfolio assurance and model portfolio construction, to reinforce value beyond compliance.
- Medium-term (3-12 months): Practice principals must critically assess their business models. The merger, creating a $2.5 billion entity, highlights that scale is becoming a key determinant of survival. Explore strategic partnerships, technology investments, or specialisation to remain competitive.
- Medium-term (3-12 months): All industry stakeholders should actively participate in advocacy efforts calling for an urgent review of the CSLR. The current trajectory of the scheme is unsustainable and poses an existential threat to the entire profession.
