As January draws to a close, the financial advice industry faces mounting pressure on several fronts, from ongoing CSLR concerns to practice efficiency challenges. This week's developments highlight both immediate challenges and emerging opportunities for advisers and practices.
Regulatory Pressures & Industry Response
The Financial Advice Association of Australia (FAAA) has intensified its campaign against the current structure of the Compensation Scheme of Last Resort (CSLR), with growing concerns about its impact on advisers. A recent Treasury Q&A revealed what many industry leaders describe as a "complete disregard" for the CSLR's impact on financial advisers. The association is urging the government to address these concerns before the upcoming election.
The Shadow Treasurer, Angus Taylor, has acknowledged there's "no silver bullet" to fixing advice affordability and access issues but emphasised the opposition's commitment to reform. Taylor indicated that all options are being considered, particularly in relation to risk advice reform, suggesting potential changes to the sector's regulatory framework.
Practice Management & Growth
The M&A market remains highly active, with reports indicating "20 or 30 buyers to every seller" in the advice practice market. This week saw Wealth Architects announce dual acquisitions, continuing the trend of practice consolidation. The imbalance between buyers and sellers suggests practice values will likely remain strong through 2025.
A notable industry shift is occurring in fee structures, with data showing advice fee increases are slowing after a seven-year climb. This stabilisation comes as practices achieve greater operational efficiency and adapt to post-royal commission regulatory requirements.
Client Engagement & Retention
Practices are increasingly focusing on retaining the services of post-PY candidates, with industry experts suggesting firms should approach PY retention with the same strategic focus as client retention. Data is already showing firms' reluctance to engage with PY requirements, which hinders the professions' growth opportunities.
The challenge of managing difficult client situations has emerged as a key focus area, with advisers sharing strategies for handling conflicts and maintaining professional boundaries. This comes as practices face increasing pressure to justify their value proposition to both existing and prospective clients.
Technology & Innovation
Artificial Intelligence continues to gain traction in the advice sector, with more advisers exploring AI applications for practice efficiency. However, debates continue about whether digital advice is actually helping solve the affordability challenge, with some industry leaders questioning its current impact on access to advice.
Notable Industry Movements
AdviceIQ announced a leadership transition, with General Manager Paul Harding-Davis set to retire. Meanwhile, the industry was reminded of the importance of professional standards as ASIC permanently banned a former adviser convicted of fraud, reinforcing the ongoing focus on consumer protection.
Looking Ahead
Several key themes are emerging that will likely shape the industry through early 2025:
- The CSLR debate looks set to intensify as the election approaches
- Technology adoption, particularly AI, will continue to evolve as firms seek operational improvements
- Talent acquisition and retention will become increasingly important in a competitive market
Key Takeaways for Advisers
- Review your PY engagement strategy to ensure you're not missing growth opportunities
- Assess your practice's technology roadmap, particularly regarding AI implementation
- Consider your position on fees and service delivery as the market stabilises
- Stay engaged with industry advocacy efforts, particularly around the CSLR
- Evaluate your practice value and succession planning in light of strong M&A demand
As the industry continues to evolve, advisers who can balance regulatory compliance, practice efficiency, and client service delivery will be best positioned for success in 2025. The coming weeks will likely bring further clarity on regulatory reforms and their implementation, making it crucial for practices to stay informed and adaptable.
