Veterans of financial services know one thing for sure: the rules never stop changing. Licensees and advisers finally get comfortable with requirements and regulatory expectations, and another wave of changes engulfs them. Regulatory reiteration and the hope of reform can make survival feel like an uphill battle, but these forces also create opportunities and wealth for those who can adapt.
“Nothing is built on stone; all is built on sand, but we must build as if the sand were stone” – Jorge Luis Borges, Head of Operational Risk.
To navigate these changes effectively, advisers and licensees should consider the following strategies:
- Consent and Engagement Focus: The reforms underscore the importance of understanding clients’ financial circumstances. Advisers should deepen their relationships with clients, focusing not just on transactional advice but on comprehensive, life-stage-based planning.
- Continuous Professional Development: The emphasis on higher ethical standards and the ongoing review of the Financial Adviser Code of Ethics means that advisers must stay updated on the latest regulatory expectations and best practices.
- Embrace Technology: As the government explores new channels for advice, including digital models, advisers who integrate technology into their practices will be better positioned to offer scalable, compliant, and client-centric solutions.
- Engage with the Reform Process: The government has committed to ongoing consultation with industry stakeholders. Advisers and licensees should actively participate in these discussions to influence the final shape of the reforms and ensure that their concerns are addressed.
Regulators, both nationally and internationally, are shifting their focus, and with those shifts come new expectations for advisers and licensees. Understanding these changes early is critical. Before you know it, how you approach advice will likely look very different, and those who don’t prepare risk being left behind.
Of course, if you’ve been following us for a while, you’re probably already set to thrive in this new environment.
If you haven’t, here are the key changes and our suggestions and advice on how to stay ahead in a shifting landscape.
1. A Post-Disclosure Regime.
If there’s one clear trend, regulators now understand the limitations of disclosure and are moving, or have moved, towards a more client-centric model that prioritises consent, engagement and understanding. The days of tedious disclosure and product-driven recommendations are, if not long gone, at least on their last legs. Lawyers and market-leading financial services software companies will eventually have to accept that regulatory and legal risks are better served by the clear and straightforward advice documents consumers prefer. The very future of advice and state will focus less on ticked boxes than the client’s legitimate needs and best interests. You’ve already seen this with the FSCP’s renewed focus on the Best Interests Duty, but expect this focus to sharpen even further.
This shift means advisers can’t hide assumptions and sales-driven reasons behind impenetrable documents. To engage clients and secure their genuine consent, advisers will need to be more thorough in understanding their clients’ needs, preferences, and circumstances. They’ll also have to become far better at securing their clients’ informed consent. It’s no longer enough to recommend a product that “works”—recommendations need to be more clearly explained, more reasonable, and a more appropriate fit for that specific client at that particular time.
Regulators will become more focused on clients’ need to properly understand the recommendations made to them and the reasonableness of their consent.
How to stay ahead: Supplement fact-finding with reason-finding. Take time. Make your client fact-finding processes as robust as possible. Don’t just collect data—dig deeper into their goals, fears, and personal circumstances.
Future-proof your practice by ensuring that your intent, process, and outcomes are aligned when you engage with each client.
2. Increased Scrutiny on Conflicts of Interest and Duty
Commissioner Hayne famously observed that for advisers and licensees, it was often “simply easier to disclose the conflicts rather than do anything meaningful to address or avoid them.” Unfortunately, advisers and licensees can no longer simply ignore conflicts of interest and duties. Your review of recent ASIC activity and their proposed future focus should cement your apprehension that Regulators look hard at conflicts of interest and duties and how they’re managed. This isn’t just about ensuring you avoid actual conflicts—perceived conflicts can be just as damaging. As ASIC and the FSCP explore how licensees and advisers practically respond, regulations are likely to impose even stricter standards on how advisers and licensees handle conflicts, especially around associated entities and own products.
What does this mean for advisers? Despite what your Compliance Managers tell you, you’ll need to go beyond ticking boxes and provide clear, transparent justifications for your advice. It’s not enough to say that a recommendation is conflict-free; you’ll need to prove it, and regulators will want to see that you’ve thought through potential issues.
How to stay ahead: Review your processes for identifying and managing conflicts of interest. Be transparent with clients about associations, obligations, and benefits and proactively address any grey areas that might lead external reviewers to raise their eyebrows.
3. Technology and AI are Taking Over
Every year, and at an increasing speed, technology plays a more significant role in financial advice. As language models evolve, traditional advisers face new competition with the rise of AI-driven financial tools. Clients expect faster, more convenient services, and regulators are starting to embrace technological innovation to ensure consistency and transparency in advice. The tension between compliance and convenience is currently unresolved, but the competent players are already watching where the regulatory puck will go.
This trend isn’t slowing down. If anything, the integration of technology into our lives and financial advice will only increase, and those who don’t adopt it will struggle to keep up.
How to stay ahead: Understand your risk appetite and embrace the tools available. Automated systems can help with compliance, client onboarding, and even parts of the advice process. Consider incorporating digital tools to streamline your operations and offer clients a more seamless experience.
4. Data Privacy and Security Are Non-Negotiables
As the use of digital tools expands, so do data privacy and security concerns. Understand your liabilities and the key risks. With clients’ financial and personal information increasingly handled online, the risk of data breaches has never been higher. RI Advice may have been the first, but Regulators are paying close attention to how advisers and licensees store, access, use and protect client data.
Expect tighter rules around data handling, especially with international movements like the General Data Protection Regulation (GDPR) influencing local regulations. Non-compliance in this area isn’t just a regulatory risk—it’s a reputational one. Nationally, the Privacy Act has been reviewed to address similar issues, and the Government has flagged their intention to make changes.
How to stay ahead: Invest in solid cybersecurity measures now. Ensure your data storage and handling processes comply with current standards and be ready for future stricter requirements. This isn’t just a regulatory issue; your clients expect their data to be safe.
5. Standards and expectations will continue to rise.
The bar for professionalism in financial advice continues to rise. Advisers already face more stringent education and training requirements, and regulators are raising the minimum standards for those entering the profession. Ongoing professional development is no longer optional—it’s mandatory.
But it’s not just about qualifications. Regulators (including the FSCP) also examine how advisers conduct themselves in practice financial education, focusing on ethics and professionalism. This means that advisers who don’t meet the mark in education and practice may find themselves edged out of the industry.
The Future of Advice in a Changing Regulatory Environment
The whole financial product advice landscape in Australia is (always) undergoing significant transformation, often driven by a series of reactive regulatory reforms aimed at increasing product distribution while simultaneously making financial advice more accessible, affordable, and consumer-focused. As we grapple with legacy issues and as these changes take shape, advisers and licensees must stay ahead by understanding the key areas of reform and adapting their practices to meet new standards.
Delivering Better Financial Outcomes
One of the most impactful shifts comes from the Australian Government’s response to the Quality of Advice Review. The reforms outlined in the “Delivering Better Financial Outcomes” package emphasise reducing unnecessary regulatory burdens while with financial advice measures enhancing consumer protection. This includes:
- Removal of Safe Harbour Provisions: The Best Interest Duty was so consistently and deliberately misinterpreted that significant change was needed to release the professional obligation from calcifying processes and unnecessary complexity. Although it may not be necessary now, the steps institutional licensees require advisers to follow are simplified. This move is expected to reduce the compliance costs of delivering financial advice while maintaining a high client care standard.
- Simplified Disclosure: The reforms propose consolidating multiple fee disclosure documents into one, making it easier for clients to understand the costs of financial advice. This is part of a broader effort to streamline the delivery of advice, reducing the administrative load on advisers.
- Enhanced Retirement Income Advice: Superannuation funds will play a more significant role in providing personal advice to their members, particularly around retirement income. This change is designed to close the advice gap for Australians nearing retirement, ensuring they receive tailored advice considering their financial situation.
The Implications for Advisers and Licensees
These regulatory changes present both opportunities and challenges for financial advisers and licensees. Reducing red tape lowers the operational costs of providing advice, allowing advisers to serve a broader clientele. On the other hand, advisers must be prepared to meet new standards, particularly as the scope of advice expands to include more holistic retirement planning services.
For licensees, the evolving landscape means rethinking compliance frameworks. The shift from prescriptive regulations to more principles-based standards requires a deeper focus on ensuring that all advice genuinely serves clients’ best interests without relying on checklists.
These reforms require advisers and licensees to rethink their approach to compliance. By integrating these changes into your practice, you can not only meet regulatory requirements but also enhance client relationships and streamline your operations. For tailored advice and strategies to achieve this, Assured Support offers comprehensive consultancy services that can guide you through these transitions.
Staying Ahead in a Dynamic Environment
How to stay ahead: Make professional development a core business strategy. Subscribe to Three Hit Tuesday to stay informed about new requirements and go beyond the minimum. Clients value expertise and regulators are increasingly expecting it.
The future of financial advice is evolving fast, and the advisers who thrive will be those who stay ahead of the curve. It’s not just about following the rules—it’s about anticipating where the future of financial advice rules are headed and preparing your business to meet them.
Don’t wait until the changes are here. Download our Future of Advice Guide for insights into upcoming industry regulations, or speak with our team for personalised advice on adapting your business for what’s next.
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Accepting the limitations of disclosure
Download our articles for insights into upcoming regulations, or speak with our team for personalised advice on adapting your business for what’s next. Stay ahead of the curve with Assured Support and ensure your practice thrives in this dynamic environment.
