As Australia heads toward a pivotal federal election this week, the financial advice profession finds itself at a critical juncture. After three years of profound transformation that has reshaped its foundations—stabilising adviser numbers, shifting toward independence, and improving profitability—the upcoming election could determine whether this hard-won progress accelerates or faces new challenges.
The Transformed Landscape: A More Resilient Profession
Since the last time we went to an election, the financial advice sector has evolved from a profession in retreat to one that has stabilised and begun strategic growth. This resilience is evident in the fact that advisers' intention to remain in the industry has jumped from 78% to 85%, with only 10% planning to exit, down dramatically from 26% in 2020. Adviser numbers have settled around 15,600, while practice numbers have declined moderately to 6,073 in 2025.
Perhaps the most profound shift has been the wholesale transformation in ownership structures. Privately owned firms now represent an overwhelming 96% of all practices, up from approximately 67% in 2023. The institutional retreat has been dramatic, with diversified financial institutions seeing their adviser representation shrink from 20% to just 4% since 2017, while bank-aligned advisers have fallen from 23% to merely 1%.
This transformation has not only created a more independent, profitable and resilient profession, but also one that is proactively addressing the regulatory challenges it faces as the election approaches.
The Regulatory Journey: Progress and Unfinished Business
Reflecting on the past three years, while there have been significant regulatory developments (although, to be fair, probably even more regulatory discussion), the results for the profession have been mixed.
The DBFO Reforms: Promise vs. Reality
The current Labor government, under Financial Services Minister Stephen Jones, implemented the first tranche of the Delivering Better Financial Outcomes (DBFO) reforms focused on fee arrangements. However, the more substantial second tranche remained unimplemented and largely undefined as the Government called the election.
This second tranche would:
- Replace Statements of Advice (SOAs) with more principles-based Client Advice Records (CARs)
- Modernise the Best Interests Duty by removing the "safe harbour" steps
- Create a framework for a new class of financial adviser (NCA)
Jones argues his government has "moved the reform dial significantly" and claims he "just needed six more months to finish off advice reforms." However, industry response to the draft DBFO Tranche 2 legislation has been lukewarm. Many advisers have criticised the CARs as merely "SOAs with a different name," suggesting the reforms don't go far enough to reduce red tape.
The CSLR Crisis: An Urgent Challenge
Perhaps the most pressing regulatory issue is the Compensation Scheme of Last Resort (CSLR), which began operating in 2024, making its first payments of compensation (in somewhat auspicious timing) this week. Designed to compensate consumers where financial firms cannot pay determinations, the scheme has quickly become unsustainable even before the CLSR made its first payments.
The CSLR has already triggered several AFSL cancellations, with Minister Jones himself acknowledging the scheme is "unsustainable" in its current form. Some industry and consumer groups are pushing for significant changes, some would like the entire financial services industry to contribute to the scheme, and some would like to see an expansion of the scheme's compensation to cover managed investment schemes and general advice to ensure the right sectors compensate consumers for loss. Meanwhile, AFCA has warned about potentially staggering increases in claims handling costs given the number of claims being made (which again, will only increase costs).
The financial strain the CSLR places on remaining advisers has become a critical concern for the profession, with many questioning its long-term viability in its current form. The increased costs and potential for staggering increases in claims handling costs, as warned by AFCA, could significantly impact the profitability of advisers and the overall health of the profession.
Election Choices: Competing Visions for Advice
As the election approaches, the major parties offer different approaches to addressing the profession's regulatory challenges:
The Labor Approach: Continuity with Adjustments
If returned to power, Labor would likely:
- Continue implementing the DBFO reforms, potentially with adjustments based on industry feedback and the preferences of a new Financial Services Minister, given the retirement of Stephen Jones from Parliament
- Address the CSLR sustainability issues, though specific solutions remain unclear
- Proceed cautiously with the new class of adviser framework
- Maintain the current trajectory of regulatory oversight
Jones has indicated he believes his government's approach is on the right track but needs more time for implementation. Critics argue this represents incremental rather than transformative change.
The Coalition Promise: Bold Reform Agenda
The Coalition, led in the financial services portfolio by Shadow Treasurer Angus Taylor, Shadow Minister Luke Howarth (and economic spokesperson Jane Hume), has made stronger promises:
- Implementing advice reforms within 100 days of taking office
- Targeting a doubling of the adviser population to 30,000
- Potentially compensating advisers who left the profession due to regulatory changes
- Conducting a comprehensive review of the CSLR
This ambitious agenda has received support from some industry bodies but faces questions about implementation feasibility.
Industry Associations' Election Priorities
Various industry bodies have outlined their reform priorities for the next government, highlighting the breadth of regulatory concerns across the financial services sector:
This diversity of priorities highlights the complex regulatory landscape facing the next government. While there is consensus on some issues—particularly the need to fix the CSLR and reduce unnecessary red tape—the specific approaches recommended vary significantly.
Critical Election Issues for Advisers
For financial advisers, the election and what comes after present several key regulatory considerations:
1. Documentation Reform Reality
Will the replacement of SOAs with CARs deliver meaningful change, or simply rebrand the current burdensome documentation requirements? The devil will be in the details of implementation, regardless of which party wins.
What matters is whether the new documentation requirements actually reduce compliance burden while still protecting clients. The profession needs meaningful reform, not just cosmetic changes to terminology.
2. CSLR Sustainability
How will the next government address the CSLR's structural issues without placing an unfair burden on remaining advisers? Both parties acknowledge problems with the current system, but their approaches may differ significantly.
The FAAA has emphasised that no matter which party wins, fixing the CSLR must be the priority, highlighting the urgency of this issue.
3. Adviser Access to ATO Portal
Industry groups have been pushing for adviser access to the ATO portal, with the Joint Associations Working Group (JAWG) collectively and individually arguing this would significantly improve efficiency and client outcomes.
The SMSF Association has stated that it is critically important to include financial advisers in ATO portal access, noting this could reduce costs and improve advice quality.
4. New Class of Advisers Implementation
The controversial NCA proposal has been "put on ice" for now, but its future remains uncertain. How this would be implemented—and whether it would enable superannuation funds and product providers to offer limited advice in a meaningful way—could significantly reshape access to advice for significantly more Australians.
The Path Forward: Preparing for Regulatory Change
With significant regulatory shifts on the horizon, regardless of the election outcome, advisers should adopt a strategic approach to navigate the changing landscape:
Developing Regulatory Resilience
Scenario Planning: Rather than waiting for specific reforms to be announced, forward-thinking practices are already developing contingency plans for multiple regulatory scenarios. This involves identifying how different reform outcomes would impact business models, documentation processes, and resource allocation.
The most adaptable practices don't just react to regulatory change—they anticipate it. They map out potential regulatory paths and prepare response strategies for each.
Compliance Systems Review: Now is the ideal time to evaluate whether current compliance frameworks are flexible enough to accommodate the coming changes. Practices with modular, technology-enabled compliance systems will likely adapt more quickly to new requirements than those with rigid, paper-based processes.
Policy Engagement Strategy: Successful practices are developing systematic approaches to policy engagement, including designating team members to monitor regulatory developments, establishing relationships with key industry bodies, and creating streamlined processes for submission responses.
Leveraging Technology for Regulatory Adaptation
Documentation Automation: With documentation reform on both parties' agendas, investing in systems that can easily adapt to new requirements could provide a competitive advantage. AI-enabled documentation systems that can be reconfigured without extensive reprogramming will be particularly valuable during the transition period.
The technology investments made now will determine how smoothly practices can transition to new documentation requirements. The goal should be systems that are flexible enough to pivot quickly when new rules are finalised.
Compliance Monitoring Tools: Advanced compliance monitoring solutions can help practices identify potential issues before they become regulatory problems. These tools are especially valuable during periods of regulatory transition when interpretation may be uncertain.
Data Management Systems: As regulatory requirements evolve, the ability to access, analyse, and report on client data efficiently becomes increasingly important. Practices should assess whether their current data management systems can support emerging compliance needs.
Client Communication Planning
Reform Impact Messaging: Developing clear, concise explanations of how regulatory changes will affect clients should be a priority. This includes preparing communication templates that can be quickly customised once reforms are finalised.
Clients don't need to understand every regulatory detail, but they do need to know how changes might affect their experience. Preparation now means clearer communication later.
Service Evolution Preparation: If reforms enable new service models or documentation approaches, practices should consider how to present these changes as enhancements rather than disruptions to client relationships.
Fee Structure Transparency: With fee disclosure remaining a focus area for regulators, practices should review how they communicate value and justify costs to clients, particularly if regulatory changes require fee structure adjustments.
Strategic Business Positioning
Specialisation Assessment: Some regulatory changes may create new opportunities for specialised advice offerings. Practices should evaluate whether their current areas of specialisation align with likely regulatory directions.
Competitor Analysis: Understanding how other practices are preparing for regulatory change can provide valuable insights. This includes monitoring not just traditional competitors but also potential new entrants enabled by regulatory reform, such as superannuation funds offering expanded advice services.
Alliance Development: Strategic alliances with complementary service providers may help practices navigate regulatory transitions more effectively. These could include technology partners, compliance specialists, or other professional services firms.
The most successful practices view regulatory change not just as a compliance exercise but as a strategic opportunity. They ask: 'How can we use these changes to strengthen our value proposition?'
Conclusion: An Inflection Point for Advice
The 2025 federal election represents an inflection point for financial advice in Australia. The profession has successfully weathered its most tumultuous period, emerging more independent, more efficient, and more client-focused. Now, the regulatory decisions of the next government will determine whether this positive trajectory accelerates or faces new headwinds.
What's clear is that the coming regulatory changes will significantly impact not just adviser business models but also broader access to financial advice for Australians. With median advice fees having jumped 67% over five years to reach $4,668, addressing the growing advice gap will require both innovative business models and supportive regulation.
The profession now has the foundation for sustainable growth—the election will determine whether the regulatory environment enables or hinders this potential. Those advisers who proactively prepare for the regulatory shifts ahead will be best positioned to not only survive but thrive in Australia's evolving financial advice landscape.
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Comments1
"As an example, when a new tax is introduced - it rarely if ever gets reversed. Don't hold your hopes on any changes happening in the Financial Services Industry."
Ted Carroll 13:00 on 01 May 25