“Sometimes, you need to be a bit provocative.”
As a mission statement for the Financial Services Council’s Value and future of advice licensing green paper, that might seem a little reductive. For FSC CEO Blake Briggs, though, it gets the point across.
If you haven’t already, you can read the full paper here. It goes into considerable detail about the current state of the AFSL system, but it’s worth mentioning the three main discussion points. These are:
- a tiered licensing system that accommodates the diversity of risk across different licensee categories
- a practicing certificate model that distributes accountability between licensee and practitioner
- new financial resourcing requirements aimed at improving consumer protections
Briggs was well aware that these proposals, which he’s careful to frame as conversation-starters rather than “final policy positions,” would be controversial. This is both because of the subject matter – the ongoing viability of the licensee system has always been a contentious topic, after all – and the messenger.
“For quite some time,” Briggs says, “the FSC really was the big five players. We’re quite open about this. We had a lot of other members, but there was a lot of alignment between the big players in the industry. Everyone else had to fall in line.”
Of course, that kind of confederation doesn’t really exist in the advice world of 2025. The banks are all gone – for now, anyway – and smaller AFSLs now represent a (slim) majority, according to recent Wealth Data figures. The industry has changed, and so too has the FSC’s mandate.
“The disintermediation of our membership and the breakout of the conglomerates has democratised the FSC quite a lot,” Briggs says. “I think that’s fantastic. If you look at the board now, you’ve got a couple of the conglomerates, but they're a fairly narrow cohort. You've got two financial advice businesses represented, and they only do advice.”
Briggs describes this refreshed composition as “healthier” and more representative of both the FSC’s present-day membership and its policy priorities. The green paper was produced in that spirit; he says it reflects the FSC’s obligation to “start the discussions that are immediately relevant to our members.”
He knows it might not always come across that way, though.
“We’re still seen as the big end of town,” he says, “and that means something like this doesn’t always land in the spirit that was intended.”
One-speed system
You can sort of understand why: the tiered licensing framework, mentioned above, is representative of the green paper’s delicate balancing of (ostensibly) competing interests. And depending on your priors, you might see that balance as being a little lopsided.
Per the paper, the current licensing framework was designed to accommodate a market comprising a “small number of large, vertically-integrated institutions.” Even as the market shifted and the industry fragmented, the AFSL system didn’t keep pace.
As a consequence, ASIC’s limited resources are typically “disproportionately concentrated on large licensees.” This can result, the paper says, in “regulatory arbitrage, where some advisers may be incentivised to deliberately opt for smaller licensees to avoid the more stringent compliance oversight imposed on larger firms.”
The proposed tiered licensing framework, then, would create a more “level playing field for licensees” by tailoring obligations and oversight based on specific criteria. Examples include:
- revenue figures
- number of ARs
- risk profile
- scope of services offered
The paper notes that risk isn’t uniform across different licensee tiers; as evidence, it cites 2023-24 ASIC figures suggesting a disproportionate level of participation in the breach reporting regime between large licensees (81%) and smaller ones (10%).
Read a certain way, one could interpret this as an indictment of smaller licensees’ governance and compliance processes. Indeed, according to Briggs, that’s exactly how some advisers have taken it.
“We’ve gotten some calls,” Briggs says, “and they’re asking, ‘How dare the FSC tell me that? I’m an entrepreneur and I’m running my business well!’ But if you then ask them whether they know of any businesses that shouldn’t be doing what they’re doing, they’ll say, ‘Yeah, I can think of some.’”
He continues: “It seems like everyone’s in that boat. So some people might think we’re saying they should be subject to more scrutiny because they’re a small business, but that’s not the point. It’s about making sure that those organisations, big or small, who run their businesses well, are allowed to do so.
“And for those organisations that aren’t – and there are always a few out there – those are the ones that regulators and laws are directed towards.”
Two tribes
The other point of contention in the green paper concerns the practicing certificate model.
As the paper explains, the practicing certificate would allow for a more equitable distribution of liability between adviser and licensee. Currently, the paper argues, the AFSL model is “very top-heavy,” with licensees absorbing most of the financial and operational risk for their advisers’ conduct – even in circumstances where the adviser “may be entirely at fault.”
By shifting adherence to professional and ethical standards (as well as CPD requirements) over to a practicing certificate, advisers could more easily be held individually accountable for their actions. Plus, in more complex (or widespread) cases of misconduct, it could help determine where a licensee’s liability ends and the adviser’s begins.
Theoretically, at least, a practicing certificate would also serve as a professional identifier – something the adviser could use to demonstrate their regulatory compliance and professional bona fides that’s independent of the AFSL regime.
In this way, it could be an effective middle ground between the current framework and the individual licensing system that’s sometimes held up as a non-negotiable component of professionalisation.
“I think a lot of the tribalism around this topic has bogged down the discussion for a while,” Briggs says. “There was a cohort that felt we shouldn’t have licensees – or, at least, everyone should be a micro-licensee.
“The reality is, though, that not every individual adviser wants to take on the responsibility of running a business with compliance obligations. And that’s meant larger licensees and advice businesses have had to really think about where they add value to advisers, which has really improved the offering in a lot of cases.”
Fundamentally, Briggs doesn’t see a partisan approach to the licensing debate as being particularly helpful – either to individual advisers or the consumers who need their services.
“The systems you need to demonstrate the robust level of compliance the regulator expects are costly and complex,” he says. “I would say that is one of the biggest handbrakes advisers face at the moment in terms of being able to grow their businesses.”
“If you think about it,” he continues, “most advisers are at capacity in terms of the number of clients they can serve. And the only way you can get organic growth is by having new advisers in the profession, and new entrants are currently at a chronically low level. Barriers to entry are a big problem right now.”
A modest proposal
While the government’s flagship solution to the new entrant problem – the so-called “NCA” – appears to be stuck in legislative limbo at the moment, it would appear that increasing access to advice via superannuation is still very much a priority.
Last month, Treasury released a consultation paper on voluntary "best practice" principles for retirement income solutions, which included the suggestion that a trustee should “provide access to financial advice services that reflect the composition and preferences of its membership.”
Curiously, the consultation also floated the idea of trustees potentially intervening in members’ advised relationships.
“Whilst recognising the benefits to the member from an advised relationship,” Treasury explained, “trustees [should] have scope to support advised members to achieve positive outcomes by including [them] in member engagement efforts with members approaching retirement, including information on the trustee-designed retirement income solutions and products.”
Briggs says the consultation sits in a “very funny place in the regulatory system.”
“It’s very vague and grey,” he says. “By that, I mean you’ve got the Retirement Income Covenant, which is a requirement on trustees. Then you’ve got statutory obligations. Then you’ve got this ongoing process around giving people access to more affordable and accessible advice and the role super funds will play.
“And now you’ve got these ‘best practice principles’ that have been developed by Treasury on behalf of government. They’re not proposing to make it law. They’re not being done by APRA. It’s very unclear what effect they would have.”
Bridge over troubled water
Even if Treasury’s proposals are only intended as guidelines, though, Briggs is concerned about the implications – particularly regarding trustees including advised members in their “member engagement efforts.”
“There’s a more innocent explanation and a more sinister one,” he says. “The innocent explanation is that Treasury has to grapple with the reality that funds won’t know which of their members are receiving advice from a third party, and the proposal is just aimed at facilitating that sharing of information.”
The sinister explanation, meanwhile, is that it would allow trustees to “intervene at a key point to make sure they retain a member who might otherwise be advised to switch.”
“If it’s being done for that purpose,” Briggs says, “that’s something we should avoid. If you are getting personal financial advice, that is the most sophisticated, best form of advice you can get in the lead up to your retirement.”
Ultimately, Briggs hopes this is the primary message that’s delivered through the FSC’s advice advocacy. The critical role advice plays in Australians’ lives, he says, should be one area where everyone involved – advisers, consumers, government, regulators – can reach an accord.
“That’s the other big piece of feedback we’ve received about the green paper,” he says. “There’s some things people like, other things they don’t, but a lot of people have said, ‘I’m glad someone’s talking about this, even if it’s the FSC.’”
“That’s exactly what we’re trying to elicit,” he adds. “Whether you love it or hate it, we’ve been trying to engender a discussion – because it’s a discussion we all need to have.”
Advisely Team
