Australia’s financial advice licensing framework is long overdue for an examination, according to the Financial Services Council (FSC), which has put forward a number of proposals to reform the system in a new green paper.
The Value and Future of Advice Licensing, which the FSC said was informed by CoreData research, aims to kick off a “broad, forward-looking conversation about how the licensing regime needs to adapt to meet today’s challenges”.
The driving force of the paper is what the FSC described as a “growing concern that risks in the system are no longer appropriately accounted for or borne fairly amongst the varied industry participants”.
“A series of reforms have helped financial advice mature into a true profession. But the licensing framework that underpins it has not had a holistic review since its inception almost 25 years ago,” FSC chief executive Blake Briggs said.
“It was never designed for the scale, structure or regulatory complexity of the industry today.”
The proposals are broken into three categories across what the FSC aims to create:
- A recalibrated licensing regime that responds to firm diversity.
- Balanced accountability between licensees and advisers that empowers individual practitioners.
- Financial resource and other requirements that adequately protect consumers.
Recalibration
Under the first of these, the FSC envision a “simpler and more flexible framework” that would tailor the licensee’s regulatory obligations to its size, complexity and risk exposure.
“This approach would ensure that the regulatory burden is commensurate with the licensee’s operational scale, the sophistication of its services and the potential risks to clients and the financial system,” the paper said.
“It should also consider a degree of regulatory relief where there is evidence of established governance structures and robust compliance systems. By refining the AFSL regime in this way, regulators could create a more responsive and efficient system that accounts for the diverse business models operating within the financial advice sector.”
According to the paper, while there are a range licensees are required to meet certain financial requirements and training and development standards, the current regime overlooks other risk factors.
The FSC pointed to the type of products on their approved product lists; the qualifications, experience and specialisations of their personnel; situations where a licensee operates as a “licensee for hire”, providing licensing to third-party advisers with potentially limited oversight or accountability; and the reliance of smaller-scale AFS licensees on third-party service providers, along with carrying a higher client remediation risk.
Alongside the tiered framework, the paper proposed an accreditation framework for third-party compliance service providers, which could require them to meet “defined standards of competency, governance and accountability”.
The paper explores how industry fragmentation, varied financial requirements and professional indemnity insurance coverage, the introduction of the Compensation Scheme of Last Resort, and finite regulator resourcing are combining to increase systemic risk in the financial advice industry. In this context, it is timely to re-examine the licensing framework.
Balancing accountability
According to the FSC, the current framework has created a situation in which licensees bear an outsized share of liability for the advisers they authorise, even in cases of adviser misconduct.
As a result, it said, the financial and operational risks associated with holding an AFSL have increased considerably, “driving up compliance costs and discouraging new entrants”.
“As a result, licensees can face disproportionate exposure to financial and reputational harm due to the actions of individual advisers,” the paper said.
“This dynamic can dilute personal accountability and create misaligned incentives, where advisers may rely on their licensee’s oversight rather than proactively managing their own professional obligations.”
The government could, the FSC added, explore reforms to shift liability and responsibility closer to individual practitioners in line with other professions.
“This could include a greater role for professional associations in accreditation, alongside an enhanced adviser registry,” it said.
Part of this could be a practicing certificate model, which would require advisers to obtain a practicing certificate confirming their compliance with registration, continuing professional development, and ethical standards.
“By making advisers more accountable for maintaining their professional standing, this could encourage greater ownership of their actions and ensure that advisers are not only fulfilling regulatory requirements but also meeting the ongoing expectations of their profession,” it said.
While the Delivering Better Financial Outcomes reforms are still midstream, Briggs argued it is the right time to take the “next step”.
“With the government’s advice reforms already well advanced, the next step is ensuring the licensing framework continues to support a professional, sustainable and trusted industry across all business sizes,” Briggs said.
Following industry and public feedback, which is open until 21 November, the FSC said it will deliver a white paper on the future of advice licensing in early 2026.
An article full of self interest. The current system grants excessive power to AFSL’s under the guise that they carry most of the risk. This is only half true. AFSL’s have their ARs and CARs indemnify them against any loss.
What no one seems to address is the absolute control an AFSL has over the AR’s asset and income. If an AFSL wants to make it difficult for you to move licenses, they simply weaponise their transfer deed and place excessive fees on the exit. If they want to charge a fee they simply impose it and take the money.
If AFSL’s truly want to grow and be more profitable, they need to remember who their client is and start treating them accordingly
Must be too many advisers leaving the big AFSL’s so the FSC to come up with a “solution” based purely around there no being enough breach reporting. Laughable.
Breach reporting in large licensees is primarily a weaponised compliance tool used against ARs who don’t sell enough of the licensee’s product.
OMG it’s so simple have competent responsible managers who have qualifications in governance risk and compliance when licensing an organisation so you have at least some minimum standard of competency and capability
Seperately make them and directors fully accountable for their actions including conflicts of interest as they have in the UK
Perhaps then we will stop seeing scenarios like Dixons
The paper floats requiring individual advisers to carry their own PI insurance, presenting it as a potential government reform to “create a more direct form of accountability.” While not making this a firm recommendation, the FSC suggests government should “assess the appropriateness” of mandating that advisers be covered individually rather than through their licensee. This proposal fundamentally misunderstands how financial services achieve affordability through scale. AFSLs currently negotiate group PI insurance rates and pool compliance costs across multiple advisers, saving practices $70,500 annually according to the paper’s own data. Individual PI insurance would be prohibitively expensive for most advisers – destroying the cost efficiencies that make advice remotely affordable and forcing thousands more advisers out of the industry. New entrants would find it particularly impossible to obtain affordable coverage without an established track record, further constraining the already diminished adviser supply.
Despite claiming to reduce regulatory burden, the paper calls for extensive new government intervention: a tiered licensing framework, accreditation systems for compliance providers, expanded adviser registries, proactive PI insurance oversight, practicing certificates, and revised capital requirements. These proposals would create additional bureaucratic layers, monitoring oversight bodies, and compliance costs in an already over-regulated industry that has lost nearly half its advisers.
The paper’s most glaring contradiction uses large firm failures like Dixon Advisory to justify concerns about micro-licensees. Dixon was a substantial firm, not a micro-licensee, yet the paper illogically uses such failures to argue for restrictions on small firms without any evidence linking firm size to failure risk.
The compliance evidence directly contradicts the paper’s narrative. Only 10% of smaller licensees reported breaches versus 81% of large ones, and self-licensed firms successfully manage their own compliance with 93% valuing the flexibility. Yet the paper frames the growth of 450 micro-licensees as problematic rather than a market response to adviser needs.
Most damaging is how the proposals would worsen the accessibility crisis they claim to address. The paper acknowledges advice is unaffordable, adviser numbers have collapsed, and regulatory burden drives 70% of client onboarding costs. Yet it proposes fragmenting the efficient licensee model and adding more regulation, which would inevitably increase costs and accelerate adviser exodus—achieving the opposite of improved accessibility. The paper never explains how adding layers of cost and complexity would somehow improve access to advice; it simply assumes more regulation will help.
The paper’s comparison to accounting and law professions reveals a fundamental misunderstanding of financial advice as a service. Unlike lawyers who charge $400-800 per hour for discrete transactional work, or accountants who perform annual compliance tasks, financial advisers provide ongoing relationship-based guidance covering investments, insurance, retirement planning, and life transitions over decades. The average Australian cannot afford legal services precisely because of the individual practitioner model—most people only engage lawyers for crises like divorce or crime. Financial advice, by contrast, aims to be a democratized service helping ordinary Australians build wealth and security. The paper ignores that lawyers and accountants serve primarily businesses and wealthy individuals, while financial advisers aspire to serve teachers, nurses, and tradies planning for retirement. Furthermore, legal and accounting work involves standardized procedures with predictable risks, while financial advice encompasses unpredictable market outcomes and long-term projections where client losses can occur despite good advice. Law and accounting built their professional models over centuries of evolution, yet the paper expects financial advice to transform overnight. Forcing advisers into an individual practitioner model would transform financial advice from an accessible middle-class service into another elite profession available only to those who can afford to pay lawyers’ rates—completely defeating the purpose of helping everyday Australians achieve financial security.
Hey FSC, good try to distract from the real problems, MIS FRAUD & FAILURES.
MIS MUST PAY FOR THEIR OWN EVILS.
As usual FSC tries to shift narrative and blame to Advisers.
It is an oversimplification to claim that “licensees bear an outsized share of liability for the advisers they authorise, even in cases of adviser misconduct.” In reality, AFSL leadership teams exercise significant control over their authorised representatives. Advisers operate within the frameworks, procedures, and directives set by their licensees—they are told what to do, how to do it, and when to do it.
Therefore, the risk does not lie solely in adviser misconduct. A more accurate and pressing concern is the conduct and oversight practices of AFSL leadership teams themselves. The way these leaders supervise, direct, and manage their advisers is where systemic risk truly resides. Holding advisers accountable without scrutinising the governance and culture of the licensee is both incomplete and potentially misleading.
The best and simplest way is to abolish the licensee system. Let’s begin with individual adviser to be licenced by a government body and so every adviser is responsible for himself/herself. This is the case for accountants, lawyers and doctors already. The current licensee fees are too much overpriced without much value. Let’s create a new service to provide compliance help only to individual advisers or advice practices to simplify the current duplicated mess. Each adviser should be periodically allocated a complicance rating which is used to rate his PI cost and that would be fair. Then, we do not need any CSLR anymore because their PI should pay for it.
Here, here! Most practical and common sense comment on the page. Well said. AFSL style fees are not paid by other so-called ‘professions’ so why should they exist in financial advice or risk advice.
Yeah, cause vertical integration has never caused any issues.
Perhaps the title should be “Clearly conflicted group tries to retain relevance for themselves and those who fund them”
Look at sample sizes for some of the survey data. n=44 for the capital requirement starting at $15K per adviser!
Is that AFTER or INSTEAD OF CSLR pillage?
Big End of town trying to put squeeze on GROWING independent space.
They must feel THREATENED…
This is hilarious. Nothing to do with big licensees wanting to protect their business model? What a joke.