How Canberra Broke Financial Advice: A Decade of Policy Failure

OPINION

Financial adviser and Financial Newswire contributor, Jarrad Gray, reflects on the frustration being felt by advisers as they find themselves still struggling to navigate a political and bureaucratic regulatory maze.

A decade ago, government set out to clean up financial advice. Scandals had rocked the banks, consumers were burned, and trust was in tatters. Reform was inevitable. What we got was FOFA—the Future of Financial Advice reforms—sold as a consumer-protection revolution. What followed, however, was a slow-motion collapse of a profession, a regulatory maze that rewards paperwork over people, and a system so dysfunctional that millions of Australians can no longer afford the advice they need.

FOFA was the first domino. Launched in 2013, it banned commissions and imposed a “best interests” duty – sound in theory. In practice, it buried advisers in layers of compliance. Opt-in notices, fee-disclosure statements, endless checklists – rules written for bank-aligned salesforces were forced on boutique firms. What began as protection turned into paralysis, and the cost of giving advice soared.

Then came FASEA—the education crusade that broke mid-career planners. Introduced in 2017 to professionalise the industry, it mandated degrees and ethics exams. Few opposed higher standards; most opposed the chaos. Deadlines shifted, rules were rewritten midstream, and guidance was late. Nothing exemplified this more than existing advisers with full Diploma’s in Financial Planning and years of practical experience, being told they were no longer qualified and only approved degrees would suffice – forced to then wait years to be told exactly what those qualifications were. Advisers nearing retirement faced thousands in study costs or an early exit. Many chose the latter. And just as the sector adjusted, FASEA was scrapped in 2022—its functions split between Treasury and ASIC, leaving a trust vacuum where certainty should be.

As advisers bled out, the bureaucracy piled on. After the Hayne Royal Commission, Canberra imposed annual fee consents in 2021. The goal—clarity for clients—turned into a compliance treadmill. Firms now chase signatures like debt collectors; miss one, and revenue stops cold. Clients pay more for the privilege, and anyone with a modest balance is effectively priced out.

And then came the so-called safety net: the Compensation Scheme of Last Resort. Launched in 2024, it promised to protect consumers left high and dry by failed firms. In reality, it slugged advisers with hefty levies to cover collapses they had nothing to do with. The funding model is structurally flawed: advisers—who don’t manufacture products or run managed funds—are underwriting losses from failures often tied to product issuers or operators. Worse, it’s a classic case of bad policy baked in so deeply it’s now politically toxic to unwind. Treasury knows it’s unfair, but unwinding it would mean admitting failure. So advisers wear it. Every year.

And the risk isn’t static—it’s escalating. The Shield & Guardian collapse has exposed how catastrophic this levy could become if claims spike. If future large-scale failures are included without fundamental reform, the levy could blow out to a level that makes staying in advice economically unviable for small firms. In other words, advisers are now carrying an open-ended liability for the next industry disaster—whether they had any role in it or not.

The numbers tell the truth politicians won’t. In 2018, Australia had almost 28,000 financial advisers. Today, there are barely 15,500—a 45% collapse in six years. This isn’t natural attrition; it’s policy-driven extinction. And when the education/experience transition period ends Dec 31 this year adviser numbers are expected to drop even further.  Every lost adviser means thousands of Australians who now turn to Google, Facebook groups, or TikTok for guidance on retirement and investments.

And still, regulators and Treasury congratulate themselves on “raising standards.” They’ve confused activity with progress, compliance with competence. The result is a hollowed-out profession split in two: robo-advice and generic calculators for the masses; high-fee, full-service advice for the wealthy. Everyone else? They’re on their own.

If Canberra wants to fix this mess, it starts with honesty. FOFA needs rationalisation, not more bolt-ons. Education rules need stability and reasonableness, not a revolving door of policy tinkering. Fee-consent bureaucracy needs a digital, one-touch solution—not 30-page legal forms. And the CSLR must spread its funding burden to product manufacturers, not just advisers.

Australians deserve a system that works for them—not a regulatory experiment that looks good in press releases and fails in practice. Until then, financial advice will remain what it is today: a luxury good in a country that desperately needs it to be a basic service. If this is a nightmare for consumers, also spare a brief thought for Advisers who’ve had to live it.

Jarrad Gray is a financial adviser and the Director of Raven Capital Management