This week, the financial advice profession grappled with a potent mix of regulatory housekeeping, significant enforcement actions, and an intensifying debate over who should bear the costs of industry failures. ASIC moved to simplify the rulebook by consolidating several advice-related legislative instruments, a welcome, if complex, development for compliance-focused practitioners. However, this move was overshadowed by the regulator securing a massive $240 million penalty against ANZ for widespread misconduct, a stark reminder of the consequences of compliance failures. For practice principals, the escalating conversation around the Compensation Scheme of Last Resort (CSLR) levy became impossible to ignore, with industry bodies forcefully arguing that the burden must be shared more broadly, possibly even by government. Meanwhile, senior advisers and investment committees are closely watching regulators' increasing scrutiny of private market valuations within superannuation, signalling a new front in risk management for client portfolios. For the profession, a slight uptick in adviser numbers offers encouragement, though debates on hiring practices and non-compete clauses highlight the ongoing challenges of building a sustainable career in the profession.
Advisers, Advice Practices and Clients
The profession saw a glimmer of positive news, with adviser numbers continuing to grow, albeit modestly, and continuing the trend of the last few months. The latest data indicate a net increase, pushing the total number of advisers to 15,417, primarily driven by new entrants passing the financial adviser exam. While only 17 new entrants were generated from the July exam cycle, it represents a crucial, albeit slow, rebuilding of the pipeline. However, a lingering question remains: why are so many qualified individuals not actively advising? One analysis revealed that nearly a third of all individuals who have passed the exam since its inception are not registered as advisers, indicating systemic issues beyond education standards, including the difficulty of securing a placement for the professional year.
This talent pipeline issue is at the heart of a new industry flashpoint: non-compete clauses for new entrants. The Financial Advice Association of Australia (FAAA) warned that a government proposal to scrap non-compete clauses could deter firms from investing in hiring and training Professional Year (PY) candidates, as they fear they would lose their investment if the new adviser quickly moved to a competitor. This position was met with swift criticism, with one commentator labelling the stance as "wild" and arguing it would strip young advisers of their agency and bargaining power. For practice owners, this debate underscores the substantial costs and risks associated with hiring new talent, a challenge exacerbated by a perceived lack of infrastructure and training support across the industry.
On the client front, the Australian Financial Complaints Authority (AFCA) has warned of the “brutal human cost” associated with its growing backlog of disputes. The authority is struggling to manage timelines for failed financial firms, which creates prolonged uncertainty for affected consumers. This operational pressure at AFCA directly impacts clients seeking redress, underscoring the importance of robust internal dispute resolution processes for all practices.
Finally, the increasing role of technology in client interactions continues to evolve. A new survey suggests that nearly half of all retail investors are now turning to Artificial Intelligence (AI) for investment guidance. This trend presents both challenges and opportunities for advisers. While AI can be a powerful tool, it also underscores the importance of advisers articulating the value of human-led, goals-based advice that can navigate the psychological biases that AI cannot. For practices, integrating AI is viewed as a costly but potentially transformative investment.
The Regulatory Environment
This week’s most significant regulatory development was ASIC's move to consolidate several legislative instruments related to financial advice into a single, updated instrument. The regulator stated the new instrument, ASIC Corporations (Financial Advice) Instrument 2025/683, aims to streamline obligations without making significant policy changes. It primarily consolidates relief related to Record of Advice requirements, transaction recommendations, and disclosure obligations. For new advisers and compliance managers, reviewing this consolidated instrument is a critical task to ensure practice documents and processes align with the simplified framework.
The regulator's enforcement arm was also highly active. In one of the largest penalties of its kind, ANZ agreed to pay $240 million for widespread misconduct spanning its retail, commercial, and institutional businesses. The misconduct included incorrect interest rates and fee errors affecting millions of accounts. ASIC Deputy Chair Sarah Court delivered a sharp rebuke, calling the institutional failings "clearly grubby" and highlighting a culture that prioritised transactions over compliance. This case serves as a powerful warning to all licensees, both large and small, about the importance of robust systems and a culture of compliance.
Elsewhere, ASIC’s enforcement activities continued with the Federal Court freezing assets and appointing receivers to entities related to Australian Fiduciaries Limited. The court also extended freezing orders against First Mutual Private Equity to protect investor funds. These actions are crucial for senior advisers to monitor as part of their due diligence on product providers.
The intense debate over the CSLR funding model reached a new peak, with the SMSF Association leading calls for the financial cost of significant industry failures to be shared more broadly. The association argued in a submission that the special levy to cover Dixon Advisory and other collapses should be a shared responsibility among all AFCA members, with a potential contribution from the government. This view was echoed by others, who pointed out that making a small cohort of advisers pay for large, historical collapses is both complicated and inequitable. The Mortgage & Finance Association of Australia (MFAA), however, took a different view, insisting that advisers should bear the levy burden themselves. This issue will remain a key advocacy priority and a significant source of financial uncertainty for practice owners.
The Economy, Investments & Platforms
For senior advisers and those focused on investment strategy, a key development this week was a downgrade of two Metrics Master Income Trust funds by research house Lonsec. The downgrade, from "Recommended" to "Investment Grade", followed a warning from Count Financial about liquidity concerns, specifically related to the fund's direct loan exposure to entities associated with the failed Shield First Guardian group. In a counterpoint, Zenith affirmed its own ratings for Metrics, highlighting the divergence that can occur between research houses and the critical importance of advisers conducting their own due diligence.
Regulators are also turning their attention to the booming private asset class. In a speech, an ASIC commissioner warned that some practices in the private credit sector were inconsistent and that the regulator was closely examining the valuation and liquidity management practices of super funds investing in private markets. This follows remarks from APRA, which noted that geopolitical tensions and the rise of AI were creating new challenges for prudential regulation, particularly in managing risks within large, complex institutions.
On the markets front, the Future Fund announced it had grown to $230 billion, achieving a 9.1% return for the year ending June 30. The result was attributed to strong equity markets and strategic positioning. However, the fund’s Chief Investment Officer, Ben Samild, announced his departure to take on a role with the Abu Dhabi Investment Authority.
In portfolio construction trends, Goldman Sachs research has shown that family offices are increasing their allocations to equities while dialling back their exposure to alternatives. The report also highlighted that APAC family offices, in particular, are holding higher cash allocations as a defensive measure. Meanwhile, the Australian ETF market is approaching a significant milestone, with funds under management nearing $300 billion, driven by strong flows into international equity products.
The Superannuation & Retirement Landscape
The government’s proposed Division 296 tax on superannuation balances over $3 million continues to attract intense criticism. One Liberal senator labelled the tax as "unworkable and out of touch", arguing that recent government backdowns on the details were a result of public pressure. HESTA also weighed in, stating that retirees are being unfairly targeted by the tax changes, which could disincentivise saving. It appears likely that further changes will be made to the proposal following its pause.
In a significant development for members of legacy AMP super products, the company announced an in-principle agreement to settle a class action for $120 million. The lawsuit related to superannuation fees charged between 2008 and 2020. AMP confirmed it is in discussions with its insurers regarding the settlement amount.
On the operational side, several super funds are making moves to support financial advisers better. Aware Super has upgraded its adviser portal with new features, and Australian Retirement Trust (ART) has partnered with State Street to enhance its support and digital tools for advisers. These moves reflect a growing trend of large funds recognising the importance of the advised channel. ART also made headlines by committing $2 billion to impact investing by 2030.
The distinction between providing helpful guidance and financial advice remains a critical issue for funds. The FAAA has urged clear regulatory safeguards to prevent "super nudges" from being mistaken for personal advice, a key point of discussion in the Quality of Advice Review reforms.
Finally, in a move that will impact many clients, Cbus Super has simplified its death benefit claims process. The fund announced it will no longer require a grant of probate for most claims under $250,000. This change is expected to significantly speed up payouts to beneficiaries, following criticism of systemic failings.
Life Insurance & Client Protection
The Life Insurance Code Compliance Committee (Life CCC) issued a strong warning to insurers this week about the use of blanket mental health exclusions in policies. The committee stated that such approaches are reinforcing stigma and may breach industry code obligations. The warning calls on insurers to use more nuanced and individualised underwriting for clients with mental health histories, a development that risk-specialist advisers should communicate to clients.
In product news, Zurich launched a new loan cover product that combines life, TPD, and income protection elements specifically designed to protect mortgage holders. This type of product innovation is crucial for advisers seeking tailored solutions for clients with specific debt-related needs. In another development, Brighter Super announced it would be welcoming Zurich OneCare members as part of a successor fund transfer, which will affect advisers with clients in that product.
Research continues to highlight a disconnect between what the industry offers and what younger clients want. A new report found that young people are seeking more from their life insurance, including more flexible and digitally-enabled solutions that go beyond a simple payout. This presents a clear opportunity for both insurers and advisers to better engage with the next generation of clients.
In the Background: Key Adviser & Licensee Movements
Several notable appointments and partnership announcements were made this week. The Financial Services Council (FSC) appointed two new directors to its board: Nick Hamilton, CEO of Challenger Funds Management, and Alison Telfer, Country Head for UBS Asset Management. At the same time, specialist life insurer PPS Mutual appointed a new independent chair, Mark Millett. In the advice sector, AZ NGA announced a strategic partnership with Queensland-based firm MIQ Private Wealth, continuing its model of acquiring stakes in advice practices to fuel growth.
Key Takeaways for Your PracticeFor New Advisers:
For New Advisers: The consolidation of ASIC's legislative instruments is required reading. Familiarise yourself with the changes to ensure your understanding of the regulatory framework is up to date. The debate around non-compete clauses is also one to watch, as it could directly impact your career mobility and opportunities in the early stages of your career.
For Experienced Practice Owners: The CSLR funding debate is a direct threat to your bottom line. Engage with your industry association's advocacy on this issue. The massive ANZ fine is a timely reminder to review your own practice's compliance culture and systems. Finally, the debate on non-compete clauses will inform your strategy for attracting and retaining new talent.
For Senior Advisers & Investment Committees: The regulatory focus on private market valuations from both ASIC and APRA signals a need for heightened due diligence on unlisted assets. The Lonsec downgrade of the Metrics funds reinforces the importance of critically assessing research ratings and understanding the underlying liquidity of any investment, particularly in the private credit space.
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