Australia's Financial Planning and Investment Advice industry is currently navigating a transformative landscape, driven by a confluence of structural changes and regulatory reforms. The sector, traditionally characterized by a multitude of small advisory firms, is witnessing an era of consolidation through mergers and acquisitions, as well as a significant reshaping due to regulatory shifts post the Financial Services Royal Commission (FSRC) findings.
Industry Consolidation Through Mergers and Acquisitions
In recent years, the Australian financial advisory sector has been marked by increased merger and acquisition activity. Leading financial advisory networks such as WT Financial Group and Centrepoint Alliance have been acquiring smaller advisory practices. This strategic consolidation aims to expand their market reach and achieve economies of scale, allowing these entities to better compete in a highly fragmented market.
On the other hand, large diversified financial institutions like AMP and Insignia are executing a contrasting strategy by downsizing their advice segments. This shift highlights a strategic realignment in response to the evolving market conditions and regulatory landscape.
The Impact of Regulatory Reforms
The FSRC's findings were a watershed moment for the industry, exposing sub-standard practices and prompting the Federal Government to implement stringent regulatory measures. These reforms are encapsulated in the “Delivering Better Financial Outcomes” (DBFO) package, which aims to bridge the advice gap by ensuring higher standards and greater consumer protection.
The first tranche of the DBFO reforms, which received royal assent in July 2024, introduced significant changes such as ongoing fee arrangements (OFAs) and new client consent requirements, effective from January 2025. While these measures aim to protect consumers, they have inadvertently accelerated a decline in the number of financial advisors. From over 26,000 in 2019, the advisor pool has dwindled to less than 16,000 by early 2025, exacerbating a labor shortage within the industry.
Market Size and Growth Prospects
Despite these challenges, the Financial Planning and Investment Advice industry in Australia retains a substantial market size, valued at $6.1 billion in 2025. However, the sector has witnessed a compound annual growth rate (CAGR) decline of 1.8% between 2020 and 2025. This contraction is attributed to the regulatory overhaul and the resultant advisor attrition.
Looking forward, the industry is poised for recovery and growth over the next five years. As the regulatory environment stabilizes and firms adapt to new compliance standards, opportunities for expansion are anticipated, particularly in niche segments such as superannuation and retirement advice, which remains the largest revenue stream within the industry.
Competitive Landscape and Key Players
The competitive dynamics within the Financial Planning and Investment Advice industry are characterized as moderate and steady. Key players such as Insignia Financial, Centrepoint Alliance, and WT Financial continue to dominate the market, leveraging their expanded networks and economies of scale to maintain competitive edges.
Moreover, the industry's competitive landscape is further shaped by technological advancements and digital transformation, as firms increasingly adopt digital tools to enhance service delivery and client engagement.
Challenges and Opportunities
The primary challenge facing the industry is the acute shortage of qualified financial advisors, a direct consequence of heightened professional standards and compliance requirements. To address this, industry stakeholders are advocating for measures to attract and retain talent, including easing entry barriers for new advisors and enhancing professional development pathways.
Conversely, the regulatory enhancements present opportunities for firms to differentiate themselves through compliance excellence and consumer trust-building. Additionally, the growing demand for personalized financial advice, driven by an aging population and complex financial needs, offers significant growth potential for advisory firms willing to innovate and adapt.
Conclusion
As the Financial Planning and Investment Advice industry in Australia navigates this period of transformation, the interplay of consolidation, regulatory reform, and market dynamics will continue to shape its trajectory. While challenges persist, particularly in terms of labor shortages and compliance costs, the industry is well-positioned to capitalize on emerging opportunities. Firms that strategically align with regulatory expectations and leverage digital innovation will likely lead the charge toward a more robust and consumer-centric financial advisory landscape in the years ahead.
By embracing these changes and focusing on sustainable growth strategies, the industry can not only overcome current hurdles but also thrive in a competitive and evolving marketplace, ultimately delivering better financial outcomes for clients across Australia.