Advisers nedd to be able to identify how complaints are defined, recorded and reported under RG 271, including ASIC’s increased scrutiny of complaints data.

Complaints are so big right now

2026 has been a big year for financial services complaints, and not just numerically.

Certainly, the volume of complaints is noteworthy. AFCA data^[1] released in August 2026 showed it had received over 100,000 complaints for the third year in succession, an unwanted kind of hat trick. And yes, complaints about investments, advice and superannuation recorded the biggest increases, with advice complaints jumping 56% on the prior period, although that increase is almost solely explained by the Shield and First Guardian failures^[2].

But arguably the bigger reason for complaints being in the spotlight is the launch in March 2026 of the ASIC Internal Dispute Resolution (IDR) dashboard^[3], which gives unprecedented public visibility of AFSL-level complaints data and represents a new era of comparability and accountability in the way client dissatisfaction is managed.

For advisers, these developments make it timely to revisit some of the fundamentals around complaints, starting with the deceptively simple question of what actually constitutes a complaint. This article will look at where that line is drawn under RG 271, what advisers and licensees need to do once it has been crossed, and how complaints are captured through the IDR reporting regime. We will also look more closely at ASIC’s new public dashboard, what it means for the visibility and comparability of complaints data, and why the way complaints are identified, recorded and reported is taking on greater regulatory significance.

What are you complaining about?

Across the broad financial services ecosystem, AFCA received a record 119,949 complaints for the 25/26 financial year, an increase of 19 per cent on the previous year.

In raw numbers, banking and finance complaints accounted for the largest share, with 66,971 complaints, an increase of 23 per cent. Transaction accounts were the most complained-about financial product overall, followed by motor vehicle insurance and credit cards.

The Superannuation and Investments & Advice categories stand out for a different reason, recording increases of 42 per cent and 56 per cent respectively, although as previously explained, the First Shield and Guardian failures account for much of the increase in advice complaints.

These numbers do nevertheless provide an important snapshot of the quantum of complaints that have progressed as far as external dispute resolution by AFCA. Before a matter ever reaches AFCA, however, it generally starts much closer to home, as an expression of dissatisfaction made directly to a financial firm.

Which raises an important question for advisers and licensees: when does client dissatisfaction actually become a complaint? In an era where AFSL performance on this front is open for all to see, answering this question has arguably never been more critical.

What is and isn’t a complaint?

Not every unhappy client is lodging a complaint. But more clients are complaining than many advisers probably realise, because when it comes to defining a complaint, RG 271 – the ASIC Guide to Internal Dispute Resolution^[5] – sets the bar lower than most would assume.

RG 271 adopts the definition of ‘complaint’ set out in the Australian Standard for complaint management, AS/NZS 10002:2014^[6]. Critically, it doesn’t require a client to say the word ‘complaint’, put anything in writing, or point to a dollar figure they’ve lost. Rather, three things need to be present:

1. Has dissatisfaction been expressed?
2. Does that dissatisfaction relate to the firm’s advice, service, staff or handling of a previous issue?
3. Is some kind of response explicitly or implicitly expected, or legally required?

While these points seem clear-cut, grey areas requiring judgement calls can be quite common. A client venting about market volatility isn’t necessarily complaining about their adviser. A client who’s had to chase the same request three times almost certainly is, even if they never use the word.

The table below illustrates just how “messy” things can become:

The variance in understanding about what constitutes a complaint became evident through surveillance conducted by ASIC in 2025^[7]. In reviewing a cohort of licensees suspected of under-reporting complaints – including some that had never submitted IDR data – ASIC found that some licensees believed they only needed to report complaints involving serious issues or claims for compensation, or complaints that could not be resolved immediately^[8]. A small number of the AFSLs reviewed also showed persistent non-compliance across IDR, financial reporting, and other obligations, leading ASIC to consider regulatory action as a result^[9].

ASIC made its response to this under-reporting issue clear, via its February 2026 Financial Advice Update^[10]. Put simply, once an expression of dissatisfaction meets the RG 271 definition, neither its severity nor how quickly it is resolved removes the obligation to capture it in the firm’s IDR reporting.

For advisers and licensees, correctly identifying a complaint is only the first step. What happens next can be equally important, particularly where a complaint is resolved quickly.

The complaint you resolve immediately still counts as a complaint

Another area of confusion identified by ASIC concerned complaints that were resolved immediately, or shortly after they were raised^[11].

RG 271 makes an important distinction on this point^[12]. The speed with which a complaint is resolved may affect what the firm needs to do next but doesn’t determine whether the complaint existed in the first place.

RG 271 specifically requires firms to record all complaints they receive, including those resolved to the complainant’s satisfaction at the time they are raised. If a client rings their adviser to dispute a fee and the adviser identifies and fixes the error during the same phone call, the fact that the client went away happy doesn’t erase the complaint, nor the obligation to record it.

Where quick resolution can make a difference is in the need to provide a formal written IDR response back to the complainant.

Under RG 271, firms generally don’t need to provide a written IDR response where a complaint is resolved to the complainant’s complete satisfaction within five business days, or where the firm has provided an explanation or apology and there is no further action it can reasonably take to address the complaint.

There are, however, exceptions to this five-day rule.

A written response is still required if the complainant asks for one, and regardless of how quickly they’re resolved, complaints involving hardship, a declined insurance claim, or the value of an insurance claim must also always receive a written IDR response.

A quick resolution does not mean it wasn’t a complaint – it may simply mean a formal written IDR response isn’t required. For advisers, this means the instinct to deal with client dissatisfaction quickly is a good one. That instinct only becomes problematic if a fast and successful resolution means it never makes it into the records.

Since 2024^[13], all financial firms covered by the IDR reporting regime have been required to report complaints data to ASIC every six months, meaning complaints are no longer just an internal matter. And from earlier this year, the launch of the publicly visible IDR dashboard makes the correct recording and reporting of complaints even more critical.

From complaints to regulatory intelligence

Those mandatory six-monthly submissions – even when the complaint count is ‘nil’ – give ASIC much more than a simple complaint count. The data provides market-level insights across a number of dimensions, including the products and services complained about, the issues raised, resolutions, complaint channels, resolution times and the financial value of any remediation.

This level of detail makes complaints data a potentially powerful source of regulatory intelligence, with patterns and trends revealed at an aggregate level helping ASIC identify emerging issues and areas of potential consumer harm.

The IDR dashboard makes your complaints data public

ASIC’s IDR dashboard has fundamentally changed the visibility of complaints data in Australian financial services.

For the first time, consumers, advisers, licensees, journalists and competitors can search for individual financial firms and examine the complaints they have reported to ASIC. Firms can be searched by name or licence details and compared against each other across measures including complaint volumes, issues, outcomes, resolution times and monetary remedies.

(Note that, as a compromise in response to industry submissions^[14], ASIC excludes some data – including demographic information, postcode data, and whether a complaint relates to an authorised representative– from public view.)

ASIC Commissioner Alan Kirkland described the dashboard as providing a ‘bird’s-eye view’ of how the financial sector handles complaints^[15], making it easier to identify trends and flag emerging issues before they become more serious problems.

But ASIC’s enthusiasm around transparency was not shared universally, with significant concerns expressed about the potential for data to be misinterpreted.

During ASIC’s consultation on the proposed dashboard, the FAAA raised this very concern^[16], noting that different firms could potentially take different approaches to identifying and recording the same expression of dissatisfaction, making simple comparisons of complaint volumes problematic.

The FAAA also questioned whether publishing data in this way could effectively become a ‘name and shame’ exercise^[17], particularly if consumers or the media interpreted higher complaint numbers as evidence of poorer performance without considering the size or nature of the businesses being compared.

ASIC has acknowledged the potential for this issue^[18], and in their guidance accompanying the dashboard have explicitly warned a high number of complaints doesn’t necessarily indicate poor performance. Complaint numbers can reflect market share and product mix, while a firm with a strong complaints management culture and well-trained staff may actually identify and report more complaints than a comparable firm.

After consulting industry, ASIC has built more contextual information into the dashboard¹⁹ and moved the emphasis away from raw complaint counts alone, placing greater weight on measures such as resolution times.

What this means for advisers and licensees

At a high level, the take-out for advisers and other client-facing staff is simple – they need to be able to recognise the signs of a complaint even if they don’t hear that word. Familiarity with the RG 271 three-part test for a complaint is essential.

For licensees, the shift is less about individual complaints and more about what the pattern is showing. Is a particular product or adviser generating disproportionately more complaints? Is resolution time getting longer? These are questions only the licensee’s own IDR data can answer. Externally, the licensee also needs to think about how its aggregate numbers look against peers, knowing that the dashboard now allows ASIC, competitors and journalists to make that comparison themselves.

Five questions every adviser and licensee should be able to answer

1. Are we confident our complaints data is accurate?
   A low complaint count is only a good result if client dissatisfaction, including at the individual adviser level, is being consistently recognised and recorded.
2. What does our complaints data tell us, adviser by adviser and product by product?
   Look beyond total numbers. Which advisers, products, services and issues generate complaints, how quickly are they resolved, and are those measures changing?
3. How do we compare with similar businesses?
   The IDR dashboard provides a new opportunity to benchmark performance, but comparisons need to take account of differences in size, business mix and complaint-recording practices.
4. What are we doing about the patterns we find?
   Identifying recurring complaints about the same adviser, process, service or product is only useful if those patterns trigger investigation and, where necessary, changes to the way the business operates.
5. What would someone else conclude from our data?
   Clients, competitors, journalists and ASIC can now see much of the same firm-level information. Licensees should understand what their publicly available complaints data says about their firm before somebody else draws their own conclusions.

Conclusion

2026 has indeed been a ‘big’ year for financial services complaints, but the record AFCA figures are only part of the story.

While the rules around complaints reporting haven’t changed, the visibility of that data has, courtesy of the public IDR dashboard. What was once largely an internal record of individual client issues can now provide ASIC, competitors, journalists and consumers with a much broader picture of how a business manages client dissatisfaction.

The dashboard is just one example of an elevated regulatory focus on complaints handling and the extent to which complaints can signal potential consumer harm arising from financial products, processes and advice.

For advisers and licensees, that makes the fundamentals covered in this article – recognising a complaint, recording it properly and understanding the patterns in the data – foundational to effective complaints management and regulatory compliance.

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References:
[1] https://www.moneymanagement.com.au/investment-advice-afca-complaints-up-56-in-fy26
[2] Ibid.
[3] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-051mr-asic-launches-financial-complaints-data-dashboard/
[4] https://www.moneymag.com.au/afca-financial-complaints-record-high
[5] https://download.asic.gov.au/media/3olo5aq5/rg271-published-2-september-2021.pdf
[6] Ibid.
[7] https://www.asic.gov.au/about-asic/news-centre/news-items/financial-advice-update-february-2026/
[8] Ibid.
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] https://download.asic.gov.au/media/3olo5aq5/rg271-published-2-september-2021.pdf
[13] https://www.asic.gov.au/regulatory-resources/financial-services/dispute-resolution/internal-dispute-resolution-data-reporting/
[14] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-outlines-approach-to-breach-and-complaints-data-publications/
[15] https://www.insurancebusinessmag.com/au/news/breaking-news/asic-unveils-internal-dispute-resolution-dashboard-across-financial-firms-568950.aspx
[16] https://download.asic.gov.au/media/h0zpcw0v/financial-advice-association-australia-faaa-_redacted.pdf
[17] https://financialnewswire.com.au/financial-planning/purpose-and-cost-of-asic-name-and-shame-regime-challenged/
[18] https://www.asic.gov.au/regulatory-resources/financial-services/dispute-resolution/internal-dispute-resolution-data-dashboard/
[19] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-outlines-approach-to-breach-and-complaints-data-publications/

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ASIC’s review of the FAR demonstrates that meeting the qualification standard is only half the compliance task.

Imagine you were qualified but nobody told ASIC

Imagine you had met the exacting educational standards to practice as a financial adviser, but someone didn’t tell ASIC, or at least, didn’t tell them correctly, and as a result you weren’t authorised to give advice.

Incredibly, that happened to over 100 advisers in the middle of 2026, following the 1 January Financial Adviser Register (FAR) deadline for adviser qualifications, and a subsequent ASIC review into AFSL adherence.

To help readers avoid falling into the same trap, this article explores the legislative framework underpinning adviser and licensee obligations around adviser educational standards, the record-keeping failures identified by ASIC through their review, and the practical steps firms can take to ensure they would withstand similar regulatory scrutiny.

Education – the foundations of a profession

Foundational to the credibility of financial advice profession – in the eyes of the community, regulators, and policy makers – is the framework of professional standards within which advisers must operate. As with other professions, this framework includes both educational and conduct standards.

Financial advice made its first serious strides towards such a framework in 2017, when the Federal Government passed the Corporations Amendment (Professional Standards of Financial Advisers) Act^[1]. This Act introduced the standards we now take for granted, including the need to complete the national adviser exam and Professional Year, the Code of Ethics, continuing professional development (CPD) and of course the minimum education/qualification standards.

While the educational standards became effective 1 January 2019^[2], the quantum of the change, and advocacy on behalf of the profession, saw a number of transitionary arrangements put in place.

The 1 January 2026 qualifications deadline

After several years of these transitionary arrangements, 1 January 2026 finally saw a single, universal deadline by which every existing adviser had to meet the qualifications standard, (either through formal education or the permitted Experienced Provider pathway).

In the lead up to this deadline, ASIC was very active in reminding advisers about the need to not only meet these requirements, but to properly record their compliance with these requirements via the FAR^[3]. ASIC concerns were well founded – as late as 1 December 2025, their own figures showed 2,326 of the 15,469 relevant providers on the FAR had yet to meet the qualifications standard^[4], a gap IFA reported was leaving thousands of advisers “at risk” of missing the cutoff^[5].

ASIC’s review after the 1 January deadline

While ultimately that prediction didn’t come to pass, independent analysis published in Money Management in February 2026 suggested there were still around 200 advisers registered but not qualified^[6].

This was much closer to the figure uncovered by ASIC themselves when they conducted their own review in the first half of 2026.

Specifically, ASIC found 132 advisers had no record of any qualification or training course meeting the required standard, with some relying on nothing more than passing the adviser exam^[7].

As the responsibility for adviser records on the FAR sits with the licensee, ASIC intervened directly with the 82 AFS licensees responsible for these advisers (rather than the advisers themselves). Following this intervention, 106 of these records were corrected, while the remaining 26 advisers had their authorisation to provide personal advice withdrawn.

In its own guidance following the review, ASIC advised^[8] that licensees should check that “the financial adviser exam has not been incorrectly marked as going toward meeting the qualifications standard” – the specific error at the centre of the 132 flagged cases.

What is remarkable about this finding is that over 100 advisers were in breach of their compliance obligations – and operating without authorisation – not because they weren’t qualified, but because they (or more precisely their licensee) hadn’t recorded those qualifications properly.

ASIC’s review is thus a timely reminder that meeting the qualifications standard is only part of the compliance task. Advisers and licensees must also be able to demonstrate that compliance through accurate and up-to-date records.

What the law says about adviser qualifications

The adviser qualifications standards are legislated and defined in the s921B (2) of the Corporations Act, and in the Corporations (Relevant Providers Degrees, Qualifications and Courses Standard) Determination of 2021^[9].

New advisers

For new advisers (anyone entering the profession after the standard took effect on 1 January 2019), the educational requirements are straightforward. The legislation requires ‘relevant providers’, (advisers authorised to give personal advice to retail clients on relevant financial products), to hold an approved degree or an equivalent qualification.

Approved degrees and qualifications are clearly defined in Schedule 1 of the 2021 Determination, and in the vast majority of cases are traditional business degrees, including commerce, accounting, finance, and financial planning. Schedule 1 goes to a further level of granularity, listing approved courses by institution, enrolment date, and even specific units required within that course.

Existing advisers

For advisers already practising before the standard took effect, the requirements are/were more complex. Existing advisers were able to meet the same standard required of new entrants (a matching Schedule 1 degree) or use one of two transitional pathways. In total that meant three routes to complying:

1. A formal degree
   Completing a bachelor’s degree or higher that matches exactly a qualification listed in Schedule 1 of the Determination (see above).
2. An equivalent qualification under Part 3 of the Determination
   A separate route for existing providers, allowing them to meet the standard by giving them credit for existing qualifications, including those offered by professional associations (such as the FAAA). In many cases the standard was able to be met by supplementing these ‘equivalent qualifications’ with one or more recognised bridging units (including Ethics, Behavioural Finance, and Regulatory & Legal obligations). 1 January 2026 was a hard deadline for this route.
3. The Experienced Provider pathway
   One of the more substantive decisions regarding adviser education standards related to the treatment of the many advisers already in the profession, who had been successfully serving their clients for years. After much lobbying^[10], an ‘Experienced Provider’ definition was introduced in 2023, and advisers meeting this definition (see below) can access this pathway by making a written declaration to their AFS licensee confirming they satisfy this requirement. There is no fixed deadline for making this declaration, however advisers who wished to continue providing personal advice without interruption from 1 January 2026 needed to have made the declaration before that date if they were relying on this pathway. Advisers who failed to do so lost their relevant provider status from 1 January 2026. ASIC’s INFO 281^[11] makes clear, however, that they may subsequently regain that status if they make the declaration before being re-authorised and otherwise satisfy the legislative requirements.

Definition of Experienced Provider

To satisfy the definition, an adviser must have had at least ten years’ cumulative experience giving personal advice to retail clients between 2007 and 2021, a clean disciplinary record as of 31 December 2021, and a pass in the financial adviser exam by their cut-off date of either January or October 2022^[12].

The recording of qualifications on the FAR continues to be problematic

Interestingly, the problems identified by ASIC in the 2026 FAR review were also discovered in 2024^[13], when their spot-check found the same category of error occurring frequently enough to be concerning.

Common errors uncovered in 2024 included:

• some of the qualifications marked as ‘approved’ did not accurately match the wording of the course in the 2021 Determination
• some of the qualifications marked as ‘approved’ were not approved qualifications, they were professional designations (e.g. ‘Certified Financial Planner’)
• some of the qualifications marked as ‘approved’ were not, in isolation, approved qualifications, they were bridging courses. These may be listed in the Determination but are required to be coupled with another qualification to meet the requirements of the professional standard, and
• some of the qualifications marked as ‘approved’ were not approved qualifications under the Determination (examples included: the Financial Adviser Exam, Australian Qualifications Framework 1-5 qualifications, and Regulatory Guide 146 training/qualifications).

Following that process, ASIC called on AFS licensees to assess the accuracy of what they had recorded on the FAR in relation to their advisers.

The FAAA had raised near-identical concerns with its own members a month before the deadline^[14], flagging two of the most common issues it was seeing – advisers who hadn’t flagged which pathway they intended to use, and Experienced Provider pathway advisers who either began advising too late to qualify or hadn’t passed the exam before their cut-off.

Is qualification granularity part of the problem?

Advisers typically value concrete – as opposed to vague – guidance from the regulator, however when it comes to complying with the qualifications standard, this specificity may actually be contributing to non-compliance through inaccurate recording.

As explained earlier, Schedule 1 of the Determination lists specific degree titles, from specific universities, often tied to a specific enrolment date range and a specific list of named units. The same degree name can appear multiple times as different versions of itself, because the unit structure changed over the years, and each version carries its own conditions. Some versions may require an ethics bridging unit, while others will explicitly exempt from that requirement.

What is challenging is that none of this is visible just from looking at a degree certificate or someone’s CV. A licensee who recognises a familiar degree name can easily miss that the adviser enrolled outside the approved window or completed a different combination of units to the one that particular version requires. This can lead to the situation where the adviser appears qualified on paper, while on the FAR the qualification recorded doesn’t actually satisfy the law.

What does the right evidence actually look like?

Acting in good faith is not, in itself, sufficient. Licensees, as those responsible for completing FAR records, need to ensure they have the right documentary evidence to (1) support any entry they make on the FAR, and (2) rely on in the event that ASIC knocks on the door.

The most obvious starting point is of course the adviser’s final academic transcript, not a degree certificate, and not a CV listing the qualification by name. A transcript shows the actual units completed, the dates they were completed, and the specific course code, which is what needs to be checked against the relevant item in Schedule 1 of the Determination. Where an adviser’s academic transcripts or other records do not demonstrate that a listed degree satisfies all of the conditions specified in the Determination, the licensee should obtain either written confirmation from the education provider that those conditions have been met, or written approval from the Minister that the qualification is equivalent to the approved qualification.

A pass in the financial adviser exam is not, on its own, sufficient evidence of anything beyond the exam itself. As ASIC’s own review made clear, this was one of the most common errors: an exam pass recorded as though it satisfied the qualifications standard in isolation. The exam is a separate requirement, and while it’s necessary for most pathways, it should be treated as an addition to – not instead of – an equivalent qualification, or an Experienced Provider declaration.

For advisers relying on the Experienced Provider pathway, the relevant evidence is the written declaration itself, correctly dated and held by the licensee, confirming the adviser meets the definition – ten years’ experience within the specified window, a clean disciplinary record as at the specified date, and an exam pass by the applicable cut-off.

At a high level, the evidence threshold is therefore quite simple – there needs to be a specific document, matched against a specific requirement.

Practical steps for licensees

Good governance requires robust processes, even around requirements that seem basic. There are a number of steps AFSLs should consider in order to strengthen their compliance with adviser qualification standards.

• Make verification continuous not one-off
  Qualification verification should not be a one-off compliance exercise, only to be completed when an adviser first joins a licensee. Advisers can expand their authorisations and change licensees. Periodically review qualification records to minimise the risk of FAR records gradually becoming out of date.
• Assign clear accountability
  Licensees, not advisers, are responsible for maintaining accurate FAR records. Firms that clearly assign responsibility for verifying adviser qualifications and require that supporting documentation is complete before authorisation is granted or renewed, are less likely to experience the issues identified by ASIC.
• Licensee transfers are an obvious verification point
  Every transfer between licensees should trigger the verification of qualifications from scratch. Under ASIC’s guidance on the Experienced Provider pathway, a new licensee should independently confirm an adviser’s eligibility rather than relying solely on checks performed by a previous licensee.
• Rely on primary documentation
  As previously discussed, the granularity with which approved courses are listed in the legislation means verification should rely on primary source documents rather than secondary evidence. Use full academic transcripts rather than CVs or certificates or even LinkedIn profiles. Formal documentation is preferable to self-reporting. Matching degree titles, enrolment periods, completed units and any applicable bridging requirements against Schedule 1 of the Determination helps minimise the types of recording errors identified during ASIC’s reviews.
• The Experienced Provider pathway is still open
  As explained earlier, missing the declaration required under the Experienced Provider pathway does not necessarily prevent an adviser from relying on that pathway in the future. As detailed in INFO 281, advisers who lost relevant provider status because they failed to make the declaration before 1 January 2026 may still be able to regain that status by making the declaration before being re-authorised, provided they continue to satisfy the legislative requirements.

Additionally, the ASIC website provides comprehensive guidance on assessing qualifications^[15] and updating the register^[16].

In summary

ASIC’s review of the FAR demonstrates that meeting the qualification standard is only half the compliance task. Licensees must also be able to prove, through accurate FAR records and appropriate documentary evidence, that each adviser meets the standard they are relying on. For many firms, that means shifting qualification verification from an administrative task completed once, to an ongoing compliance process capable of withstanding regulatory scrutiny.

There is some urgency with this task, with ASIC already signalling their scrutiny isn’t finished.

As Money Management reported^[17], ASIC may yet conduct a further review of the specific qualifications and training courses licensees have marked against the standard, rather than simply confirming that a qualification of some kind has been recorded. Meaning time, as always, is of the essence.

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References:
[1] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/professional-standards/
[2] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-issues-update-on-compliance-with-the-financial-adviser-qualifications-standard/
[3] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-renews-warning-for-afs-licensees-ahead-of-deadline-for-financial-advisers/
[4] https://www.moneymanagement.com.au/asics-final-warning-shows-15-advice-industry-risk/
[5] https://www.ifa.com.au/the-final-countdown-2300-advisers-still-at-risk-of-missing-education-deadline/
[6] https://www.moneymanagement.com.au/registered-but-unqualified-far-records-reveal-advice-discrepancy/
[7] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-issues-update-on-compliance-with-the-financial-adviser-qualifications-standard/
[8] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-issues-update-on-compliance-with-the-financial-adviser-qualifications-standard/
[9] https://www.legislation.gov.au/F2021L01848/latest/text
[10] https://www.professionalplanner.com.au/2023/04/the-sun-wont-set-on-the-experience-pathway/
[11] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/professional-standards/accessing-the-experienced-provider-pathway/
[12] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/professional-standards/accessing-the-experienced-provider-pathway/
[13] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2024-releases/24-142mr-asic-urges-afs-licensees-to-correct-records-on-the-financial-advisers-register/
[14] https://www.adviservoice.com.au/2025/12/faaa-calls-for-advisers-to-check-records-to-ensure-they-are-eligible-to-provide-financial-advice-into-2026/
[15] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/professional-standards/qualifications-standard/assessing-relevant-provider-qualifications/
[16] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/professional-standards/qualifications-standard/updating-the-financial-advisers-register-qualifications-and-training-details/
[17] https://www.moneymanagement.com.au/asic-reveals-adviser-qualification-review-outcome/

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AFCA’s Lead Decisions provide a roadmap for defensible financial advice, highlighting how robust documentation, informed consent, and best interests evidence strengthen compliance and client outcomes.

Introduction

In February 2026, the Australian Financial Complaints Authority (AFCA), reached a significant milestone when it issued its 1,000th Dixon Advisory determination^[1]. Up until that point, this represented the single largest single batch of complaints AFCA has ever managed.

With that record likely now in the history books – with AFCA themselves recently reporting that they had received over 3,400 complaints relating to the high profile collapse of the First Guardian and Shield (FG&S) funds^[2] – the Dixon case remains significant for a number of reasons, one being that it was the first time that AFCA’s ‘Lead Decision’ mechanism came to prominence in advice circles.

Against a backdrop of soaring complaints, the Lead Decision methodology was designed by AFCA to help drive process efficiencies, effectively acting as a form of precedent that could be used in similar cases.

For advisers, these Lead Decisions are powerful learning opportunities, to be interrogated for the lessons and insights they provide. In particular, they lay bare the questions AFCA asks whenever advice is disputed – questions about how client information was gathered, whether alternatives were genuinely considered, and whether the specific recommendations were demonstrably in the client’s best interests.

In this article, we will decode four of the 5 lead decisions issued in relation to the FG&S cases, uncovering the practical signals they are sending advisers on how to make their advice more defensible.

Complaint volumes drive the need for efficiencies

Advisers and licensees aren’t the only members of the advice ecosystem concerned with efficiency.

AFCA would very much see efficiency as a priority as they are forced to deal with complaint volumes that continue to set new records. During the 2025 calendar year, a record 111,373 complaints were received, a 14 per cent increase from the prior year^[3]. Over the same period, superannuation complaints – notoriously complex – grew 29 per cent to 7,687, a figure projected to exceed 8,000 during 2026.

In a way, Lead Decisions act as precedents, although not in the strictest legal sense. By providing a guide for future determinations and identifying the commonalities in issues encountered and appropriate responses, they can significantly aid an efficient review and decision-making process.

Given the large volume of complaints AFCA received in relation to FG&S, it is therefore unsurprising that AFCA invoked the Lead Decision mechanism for this batch of complaints also.

What is a Lead Decision?

A Lead Decision is a determination made by AFCA on a complaint that is representative of a group of similar complaints. When complaints share common facts or issues, AFCA selects a case that best represents the group, investigates and decides that case first. The outcome – called the lead decision – sets a clear direction for how similar complaints will be resolved. This approach helps resolve large numbers of similar complaints efficiently and fairly, ensuring consistency for everyone involved.

Importantly, AFCA makes it clear that the reliance on Lead Decisions does not come at the expense of individual complainants, with each case still treated on its merits:

“While lead decisions provide an overview of how AFCA may address similar complaints, each complaint is still investigated and determined on its own circumstances.”^[4]

Understanding the overall thread of AFCA’s Lead Decisions on FG&S

In digging deeper into the specifics of individual FG&S lead decisions, it becomes apparent that there is a common thread binding these decisions together.

That thread is the principle that the  collapse of the FG&S master funds – which saw 12,000 investors lose close to $1 billion^[5] – was not simply a product failure, but a more widespread governance failure which exposed serious gaps in platform trustee due diligence, research house and licensee accountability, lead generation oversight and penalty and compensation frameworks.

The complaints about the FG&S failures – and the lens through which AFCA views them – relate not to the products but to the advice that drove investors into these products in the first place.

What AFCA is examining is something more specific: whether the advice to invest in these products was appropriate, given what the adviser knew – or should have known – about the client and the investment at the time the recommendation was made.

The questions they will ask as they run the rule over each FG&S complaint will thus be the similar:

• Why was this recommendation made?
• What client information was gathered, and how?
• Were there warning signs in the product that a diligent adviser should have identified?
• How genuinely were alternatives considered?
• Was the strategy in the client’s best interests?

Lesson one: advisers cannot outsource fact finding

The first of the Lead Decisions issued by AFCA involved Financial Services Group Australia (FSGA)^[6], a firm that had provided advice to invest through an SMSF structure into First Guardian.

At the centre of AFCA’s concerns was the way client information had been gathered and relied upon.

According to AFCA, much of the information used by FSGA when preparing their advice had been obtained through a referral partner, rather than directly from the client. AFCA found that the adviser had limited direct engagement with the client before making their recommendations – which involved the establishment of an SMSF and the rollover of existing superannuation benefits into First Guardian.

For AFCA, this raised a fundamental question: how can an adviser be confident they fully understand a client’s objectives, circumstances and needs if key information has been gathered by someone else?

To fulfil their best interests’ duty, advisers must make reasonable enquiries into a client’s relevant circumstances and to base their advice on an accurate understanding of those circumstances. Decoding the AFCA determination, it is clear that even if aspects of those enquiries are delegated or outsourced, this should not be treated as a substitute for direct adviser engagement, and the adviser themselves will still ultimately be held accountable for them and the resultant advice.

(The proposed reforms which would see the banning of lead generation activities in relation to superannuation are a direct response to this).

In their published decision, AFCA said:

“The panel is satisfied Mr C (the adviser) relied entirely on the lead generator’s inquiries to establish the client’s relevant circumstances. This is despite the lead generator not operating under an AFSL. Given this, it is unclear whether the lead generator was equipped and qualified to understand what relevant inquiries to make.”^[7]

For advisers, several practical questions emerge:

• How much of your fact-finding process is conducted directly with the client?
  • What steps are taken to verify information obtained from referral partners or introducers?
  • Is there clear evidence on file demonstrating that key client objectives, needs and concerns were discussed directly with the adviser?
  • Could an independent reviewer determine, from the file alone, how the adviser came to understand the client’s circumstances?

The broader lesson is that advice responsibility – and accountability – cannot be outsourced. Referral partners may introduce clients. Lead generators may collect preliminary information. Administrative staff may assist with documentation. However, AFCA’s reasoning makes clear that responsibility for understanding the client, testing assumptions, and ensuring advice is appropriate, remains firmly with the adviser.

Lesson two: AFCA looks for Best Interests’ Duty in practice

The MWL^[8] and United Global Capital (UGC)^[9] Lead Decisions relate to switching, and are instructive for the fundamental questions they ask about Best Interests’ Duty – why this recommendation, for this client, at this time?

The basis for switching must be rock solid

In the MWL decision, the SOA recommended the complainants exit their existing superannuation funds on the basis that Shield had “a higher performance track record which can assist you in meeting your long-term retirement income objectives.”

To the extent Shield had been registered as a managed investment scheme for less than a year at the time of the advice, it had no meaningful performance history, let alone a superior one.

AFCA was – understandably – unimpressed, noting:

 “It is objectively misleading to suggest it had not performed well… Shield in fact had no performance history, and the SOA’s suggestion the complainants’ existing funds had lacklustre returns was not accurate.”

Moving a client from an established, performing fund into something new and unproven requires a clear and documented rationale that holds up to scrutiny if the recommendation is later reviewed. Projected returns and performance comparisons built on incomplete or inaccurate data will clearly not pass muster.

Why an SMSF?

Both the MWL and UGC decisions found that the advice recommending the establishment of an SMSF lacked justification. In the MWL case, the SOA cited benefits including access to margin lending and direct property investments, neither of which was a strategy under consideration for the clients, and both of which AFCA noted would have been inappropriate for their circumstances.

AFCA concluded that the real underlying justification for the adviser recommending the SMSF structure “was to facilitate the complainants’ investments in Shield.”

The UGC decision reached a similar finding. The complainant had no prior investment experience beyond an APRA-regulated super fund and had not considered an SMSF before being cold called by the firm’s representative. AFCA found there was no evidence the firm made sufficient enquiries about whether the client had the time, resources, skills or experience to operate her own SMSF, and given her inexperience and poor health, she was not well placed to do so.

Cookie Cutter advice has long been on AFCA’s radar, and these decisions reinforce that recommending an SMSF requires more than listing generic advantages such as control, flexibility or investment choice. Advisers must be able to demonstrate why an SMSF is appropriate for that particular client, including whether they have the time and capability to become trustees of their own fund.

Three things AFCA wants to see

Distilling down the MWL and UGC decisions into practical adviser take outs, AFCA is really looking for evidence of three things in advice:

• Alternatives analysis: Was there a genuine consideration of other options, and if so, why were they not proceeded with?
• Tailored not generic: Was the recommended strategy actually suited to this client’s specific circumstances, not just generically appropriate?
• Objective alignment: Is there clear and specific alignment between the recommendations and what the client has said they are trying to achieve

Where an SOA cannot demonstrate all three, it is clear that AFCA’s interpretation will be that Best Interests’ Duty has not been met.

Lesson three: genuinely informed consent

While disclosure is an important pillar of financial consumer protection, it is never enough by itself. You cannot merely disclaim away any risks or conflicts or obligations –by giving a client a PDS, TMD, or an SOA with lots of fine print. There must be clear and documented evidence that the client was not only informed, but also, they understood and consented to the matters in question and was capable of acting on them.

In the UGC decision, the SOA contained warnings about the risks and responsibilities of running an SMSF. As the complainant had no prior experience with SMSFs, had not proactively sought one, and had no meaningful understanding of trustee obligations, AFCA found these warnings to be insufficient, noting that the warnings in the document did not change the fact that the complainant “was not well placed to take on the additional responsibilities of an SMSF structure because of her inexperience and poor health.”

The MWL decision similarly found they had recommended an SMSF structure “without clearly explaining what this would entail and ascertaining their capability to act as trustee.”

For advisers, this has practical implications for how file notes and SOAs are constructed. Listing risks in a disclosure section is not sufficient evidence that a client understood those risks. AFCA will look for evidence – through meeting notes and client correspondence – that the client’s comprehension was tested.

Lesson four: SMSFs and concentration risk

Concentration risk is a recurring theme in most discussions about SMSF advice, and understandably so – ATO data shows that a material proportion of SMSFs hold extremely concentrated portfolios.

Almost 30 per cent of SMSFs have 90 per cent or more of their assets invested in a single asset class, with around one-third of those funds concentrated in property^[10]. This level of concentration significantly increases exposure to liquidity risk, valuation risk and sequencing risk, particularly as members approach retirement.

Concentration risk was a clear and consistent theme across the FG&S lead decisions, appearing in three of the four decisions covered in this article.

In the UGC decision, the complainant invested nearly 95 per cent of her rolled-over superannuation in First Guardian, with the remainder held in cash or paid out as fees.

AFCA’s observation on this was pointed:

“This lack of diversification concentrated risk for the complainant and was inappropriate. For example, if this specific investment did not perform, close to the entirety of her superannuation could be impacted or lost.”

The MWL decision identified the same problem with Shield. Despite purporting to be a multi-manager fund, Shield effectively used only two managers, neither with an extensive track record. AFCA noted that investing the complainants’ entire superannuation balance in a single fund with limited history and limited funds under management resulted in a “significant underweight position to other more liquid asset classes, including listed equities and more defensive assets.”

AFCA also noted that the adviser in question had failed to properly consider the fact that Shield’s own PDS described it as suitable for satellite investment, not as the core of an investment strategy.

The UGC and Next Generation Advice joint decision^[11] also involved concentration risk. In that complaint, the client was advised to take his superannuation out of a well-diversified retail fund and place 71 per cent of it into Fund S, a property lending fund investing in subordinate debt and preferred equity, which its own PDS described as a high-risk investment strategy. AFCA found this “compounded their concentration risks because, if that specific investment failed, close to all his retirement savings could be lost.”

All advisers understand the risks of concentration, and again the lesson here is whether such concentration is justified, avoidable, and whether the client genuinely understood its existence and implications.

Conclusion

The Shield and First Guardian Lead Decisions are not simply about failed investments, they provide a window into AFCA’s expectations around fact-finding, best interests, advice suitability, informed consent, documentation and adviser oversight.

This article reviewed the five published decisions in the FG&S failure case, and across all of them, AFCA repeatedly asks the same question: can the adviser demonstrate a clear, client-specific rationale for the recommendations made?

Advice defensibility depends not on the volume of disclosures, but on the documented evidence that the adviser gathered accurate information about the client, thoroughly assessed alternatives, made recommendations suited to the client and their specific circumstances, and made sure the client understood that advice and the associated risks. When these processes are incomplete, poorly executed, or absent altogether, both the client and adviser are put at significant risk.

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References:
[1] https://www.afca.org.au/news/media-releases/afca-receives-record-number-of-complaints-in-2025-calendar-year
[2] https://www.professionalplanner.com.au/2026/06/shield-and-first-guardian-afca-complaints-almost-3500-amid-awareness-drive/
[3] https://www.afca.org.au/news/media-releases/afca-receives-record-number-of-complaints-in-2025-calendar-year
[4] https://www.afca.org.au/news/latest-news/afca-publishes-video-update-explaining-the-mwl-financial-services-lead-decision
[5] https://www.afr.com/companies/financial-services/asic-sets-sights-on-equity-trustees-over-65m-first-guardian-failure-20260521-p5zzbl
[6] https://www.afca.org.au/news/latest-news/afca-publishes-video-update-explaining-the-fsga-lead-decision
[7] Ibid.
[8] https://www.afca.org.au/news/latest-news/afca-publishes-video-update-explaining-the-mwl-financial-services-lead-decision
[9] https://my.afca.org.au/searchpublisheddecisions/kb-article/?id=3233850f-ddc8-f011-bbd3-7c1e5289d307&_gl=1*1pwj702*_gcl_au*MTk0NjgyOTM3Ni4xNzgxMzk4NDcz
[10] https://www.adviservoice.com.au/2026/02/cpd-smsf-advice-under-the-microscope-what-rep-824-means-for-advisers/
[11] https://my.afca.org.au/searchpublisheddecisions/kb-article/?id=93e3af8b-4a73-f011-b4cc-00224897fe37&_gl=1*1cijanx*_gcl_au*MTk0NjgyOTM3Ni4xNzgxMzk4NDcz

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For advisers, AI is rapidly moving from an experimentation phase to core advice infrastructure, and regulators are making it clear that governance expectations must keep pace.

Regulator scrutiny of AI governance just got serious

In years to come, they may well call it the ‘Mythos effect’ – the point in early 2026 where all the concerns about AI use in financial services came to a head and prompted the regulators to get serious.

ASIC has been watching this issue particularly closely since October 2024, when it published Report 798^[1], an examination of AI governance practices across financial services licensees. But when Anthropic (the company behind ‘Claude’) began inviting selected organisations to trial Mythos^[2] – a model built specifically for cybersecurity and autonomous coding – regulator anxiety shifted to a whole new level. Within weeks, ASIC had issued an urgent call^[3] for cyber uplift in the face of agentic AI, and APRA had written^[4] to all regulated entities demanding a ‘step change’ in AI risk management, warning that governance practices were falling dangerously behind the pace of advancements.

For advisers, the rapid adoption of AI gives this scrutiny extra relevance. A recent survey^[5] found that 74% of Australian advisers are already using or planning to use AI in their business – well ahead of the global average of 64% – with practices already putting AI to work drafting file notes, generating statements of advice and client communications, and accelerating research and compliance tasks.

For readers, this article takes a timely and practical look the nature of AI risks, the extent to which existing compliance frameworks and obligations acknowledge these risks, and what you can do now to close the governance gap and protect yourself and your clients.

AI is rapidly becoming advicetech infrastructure

The increasing adoption of AI by advisers has seen it rapidly progress from being an add-on tool to becoming a central element underpinning the technology stacks of advice practices.

The 2025 Adviser Landscape Report^[6] identified the key areas practices were already applying AI:

• 86% were using it for file notes and meeting documentation
• 53% were using it for client engagement applications such as newsletters
• 48% were using it for marketing, and
• 46% were using it with SOA or ROA production.

Given these rates are based on 2025 data, they are almost certainly higher now, as is the number of AI systems being used by advisers.

AI no longer just means ‘ChatGPT’, as advisers are presented with an ever-growing choice of generative AI tools developed specifically for advice, including Paradino, Saturn, and Marloo. At the same time, platforms and CRMs including Iress XPlan and Netwealth are rushing to offer various degrees of AI functionality, while the ubiquitous Microsoft 365 platform includes the rapidly improving Copilot.

The more innovative firms within the advice ecosystem are already pushing into more sophisticated territory. Melbourne-based Yarra Lane, working with outsourcing specialist Vital Business Partners, has been running AI-assisted workflow automation that literally goes to work overnight: bots review adviser calendars, access client systems, download portfolio reports and stage everything in SharePoint so advisers are ready to go before the first meeting of the day. As CEO Nick Perrett summed up, “our planners are working throughout the day, and our bots go to work at night.”^[7]

The next evolution will be ‘agentic AI’ – systems capable not just of automating fixed tasks, but of reasoning, making decisions and adapting when circumstances change, all without constant human direction. While still in its nascency within advice, the lightning pace of change, and the enthusiasm many advisers have for new technology, will likely drive a very sharp adoption curve.

But its power creates governance challenges

The power of AI to transform financial advice is already beyond doubt. Terry Dillon, Chief Executive of Shadforth Financial, expects his advisers to see 50 per cent-plus more clients thanks to AI, without dropping the amount of client contact or the quality of the advice.

“We’re not talking incremental change. We’re talking a step change in the number of clients advisers will be able to see over time,” Dillon says^[8].

As well as speed, AI can be consistent at scale, reducing the variability that can occur across different staff members or even across different decisions by the same team member.

Entireti’s Neil Younger argues this consistency “means you’re starting to introduce advice at lower cost points than we see in the traditional model.”^[9]

But this scalability and power is a double-edged sword. Any flaw in the AI, whether it be a hallucination, an algorithmic bias, or inadequate personalisation, can be propagated across hundreds of client files before anyone realises.

And the unseen nature of some AI tools – which run in the background of more comprehensive systems, rather than being standalone – can amplify the governance challenges.

ASIC’s central finding from REP 798^[10] is that these risks are real and growing, and businesses are struggling to ensure their governance practices can keep up with the explosive pace of change.

What ASIC found in Rep 798

ASIC’s Report 798 was based on a review of 624 AI use cases across 23 licensees, including banks, credit providers, insurers and financial advice businesses. What they found was that governance frameworks put in place by many of these businesses were failing to evolve at the same speed as the technology.

More alarming was the observed variability in standards – while some licensees had documented strategies and board-level reporting, others had no AI specific policies or governance framework at all.  Among the specific findings:

• Only 12 of the 23 licensees had policies addressing fairness or bias in their AI systems
• Only 10 had any documented approach to disclosing AI use to consumers
• None had implemented ‘contestability’ arrangements (mechanisms allowing clients to challenge decisions in which AI had played a role)
• 30% of all use cases relied on third-party AI models, and many licensees could not explain what those models were actually doing.

ASIC illustrated the practical implications of these governance shortcomings with a powerful, real life case study : a credit scoring model that had been running for months with no governance documentation, no risk rating and where the provider “could not explain the variables in the scorecard or the impact they are having on an applicant’s score.”^[11]

It is easy to imagine the same sort of ‘black box’ scenario in risk profiling software, which, if some unknown error or bias crept in, could allocate erroneous risk profiles to clients, undetected, for a significant period of time, potentially opening those clients up to significant financial harm.

Cyber risks take centre stage

While AI related cyber risks received little focus in Rep 798 (being mentioned only twice), the ‘Mythos effect’ has seen the topic become much more prominent in ASIC’s recent thinking, culminating in their May 2026 call for ‘cyber uplift’.

In an open letter^[12] from Commissioner Simone Constant, ASIC noted:

“The rapid evolution of frontier artificial intelligence models marks a significant shift in the cyber threat landscape. These models are accelerating both capability and accessibility, lowering the barrier to sophisticated cyber activity, increasing the speed and scale of attacks, and enabling new forms of exploitation that were previously out of reach for most actors.”

“This is not a distant or hypothetical risk. It is here now, evolving quickly and requires the attention of boards and executives.”

While ASIC weren’t targeting one specific industry sector with this message, the sensitive nature of client data stored and used by financial advisers makes advice firms an attractive target for ‘bad actors’, giving this statement added resonance for the advice profession.

In particular, it forces AFSLs to reckon with a problem not previously factored into most AI governance thinking – the extent to which AI dramatically expands the “attack surfaces” (exposure to untrusted networks).

When client data is fed into third-party AI tools, for example to generate file notes, draft SOAs, or summarise meeting transcripts, it is leaving the firm’s ‘controlled’ environment. The data handling practices of the AI vendor and the security of the API connection become a critical part of the firm’s cyber risk profile. The more vendors used, the bigger the attack surface.

APRA puts all regulated entities on notice

During a targeted review of large banks, insurers and superannuation trustees in late 2025, APRA identified a number of gaps which echoed those uncovered in Rep 798, including cyber security, governance maturity, and third-party concentration.

Following their review, APRA wrote to all regulated entities in April 2026 warning that while AI adoption is accelerating across the sector, associated governance and risk management practices are not keeping up^[13]. Boards were singled out as needing to develop the ability to challenge AI-related risks and ask hard questions of management.

AI governance – advisers’ existing obligations

ASIC frequently makes the point that the law, and its associated guidance, is ‘technology neutral’. This makes it easier for the regulatory framework to adapt to unforeseen technological advancements (video SOAs anyone?), and also means advisers have a base level of compliance obligations that apply regardless of the technologies used.

Key examples of obligations that are directly relevant to the use of AI in advice include (but are not limited to):

• Providing services “Efficiently, honestly and fairly” (under s912A)
  • You can’t blame an AI tool for incorrect outputs
• Not making “False and misleading representations” (under Australian Consumer Law)
  • AI hallucinations remain a significant risk
• Best Interests Duty
  • Professional reasoning cannot be delegated to a model
• Record keeping
  • The same evidentiary standards apply to AI generated file notes as to human generated documents.

A practical adviser framework for AI governance

In addition to the foundational compliance obligations that apply regardless of the technology used, the governance questions included by ASIC in Report 798 are a valuable starting point when building a practical, AI specific, governance framework for advisers.

An example of such a framework is below:

• Do an AI inventory check
  It is crucial to understand where AI exists in your practice. Start with a simple inventory: every AI tool in use, what it does, who is accountable for it, and what client data it touches. Include tools embedded in CRMs and wealth platforms, not just standalone AI applications.

• Have a documented AI policy
  At some stage, it is likely that having a documented AI policy will be mandatory, so get ahead of the curve. Your policy should cover:

• • which AI tools are approved for use and for what purposes?
  • what AI tools are not permitted (particularly for client-facing outputs without human review)?
  • what data may and may not be input into AI tools?
  • what review is required before AI-generated content is relied upon or sent to clients?
  • what client information is being fed into AI tools?
  • who stores those prompts, and what are the privacy implications?

• Assign accountability
  Someone in the practice needs to own AI governance. In a small practice this may be the principal adviser. In a larger licensee it may require a formal role or committee. ASIC’s May 2026 cyber statement is explicit that this responsibility sits at board and leadership level.

• Conduct meaningful human oversight
  Having genuine human oversight of AI output – often referred to as ‘Human in the loop’ – means the adviser can stand behind every recommendation in the document, explain the reasoning, and confirm it reflects the specific client’s circumstances. Anything short of this means such oversight doesn’t really exist.
• Train your staff on the tools they use
  The black box phenomenon, where no one really understands how AI is generating the answers it does, is clearly dangerous. Staff need to understand what each AI tool does, what it can get wrong, and where their judgement needs to take over.
• Make your vendors accountable too
  Most AI powered software is provided by a third party, and you need to be comfortable about their own governance standards. Find out from the vendor what model they provide to you, how it is trained and updated, how errors are identified and corrected, and what happens to client data entered into the system. 

• Address cyber risk specifically
  ASIC’s May 2026 letter placed active management of third-party cyber risk squarely on the licensee. Review which AI tools are receiving client data and under what terms. Assess vendor security practices and data handling as part of your outsourcing governance.
• Tell your clients where you have used AI
  There is currently no mandatory requirement to disclose AI use to clients in the advice context. But Rep 798 flags this as an area of emerging expectation, and voluntary disclosure is now better practice. Consumers have a growing expectation that AI is used by businesses and indeed may even use AI to critique your recommendations. Providing a brief, plain-language explanation of where AI is used in the advice process can protect you and the client down the track.
• Build in regular reviews
  AI vendors can update models, add capabilities and change data handling practices at breathtaking speed. The governance framework you put in place today will likely date faster than almost any other document in your business, meaning regular reviews are critical.

In summary

For advisers, AI is rapidly moving from an experimentation phase to core advice infrastructure, and regulators are making it clear that governance expectations must keep pace. Recent interventions from APRA and ASIC – for which new ‘frontier’ and agentic AI systems were the catalyst – signal that improving AI oversight is something for entities of all sizes to prioritise now.

For advisers, the challenge is not whether AI should be used, but how it can be used in a way that remains defensible and consistent with existing professional obligations. Practices that treat AI governance as an extension of their broader compliance and client protection frameworks will be better positioned to capture the transformative benefits of the technology, while avoiding the governance failures regulators are increasingly worried about.

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References:
[1] https://download.asic.gov.au/media/mtllqjo0/rep-798-published-29-october-2024.pdf
[2] https://www.abc.net.au/news/2026-04-23/powerful-ai-tools-posing-cybersecurity-risks-australia-lagging/106584436
[3] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-092mr-asic-calls-for-urgent-cyber-uplift-as-ai-accelerates-cyber-threats/
[4] https://www.apra.gov.au/news-and-publications/apra-calls-for-a-step-change-ai-related-risk-management-and-governance
[5] https://www.adviserratings.com.au/news/the-ai-revolution-in-financial-advice-australian-practices-leading-global-adoption/
[6] Ibid
[7] https://www.professionalplanner.com.au/2025/05/meet-the-advisers-pioneering-the-professions-ai-adoption/
[8] https://www.afr.com/companies/financial-services/the-biggest-constraint-to-using-ai-for-financial-advisers-20260407-p5zltj
[9] Ibid
[10] https://download.asic.gov.au/media/mtllqjo0/rep-798-published-29-october-2024.pdf
[11] Ibid
[12] https://download.asic.gov.au/media/xhrf1w0e/26-092mr-open-letter-to-afs-licensees-and-market-participants.pdf
[13] https://www.apra.gov.au/apra-letter-to-industry-on-artificial-intelligence-ai

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Switching advice must be supported by a clear rationale, grounded in the client’s best interests and able to demonstrate a net benefit after fees.

Superannuation switching – so hot right now

Superannuation switching is arguably the hottest topic in financial advice right now.

It is at the centre of narratives around high-profile advice and product failures, changes to the Compensation Scheme of Last Resort (CSLR), the evolving landscape of competitive superannuation flows, and regulatory reform priorities. It is the subject of a very public battle between advocates for industry funds and retail providers, and it has fuelled widespread coverage through both trade and mainstream media.

The potential for consumer harm from inappropriate switching was already on ASIC’s radar following the release of Rep 781 in 2024^[1], and recently heightened regulatory and policymaker scrutiny has culminated in the April 2026 release of Treasury consultations^[2] on proposed reforms impacting super switching and lead generation.

This article examines the key dynamics within this issue, including the drivers of increased switching and the consumer risks identified by regulators. It also frames potential regulatory outcomes and suggests practical steps advisers can take to ensure their switching advice remains compliant and robust in the face of likely reforms.

Super switching is big business

To truly understand why superannuation switching is now receiving so much media attention and regulatory focus, it is necessary to appreciate the broader industry context around superannuation flows and retirement trends.

The compulsory nature of Australia’s superannuation system has underpinned its remarkable growth. As the superannuation savings pool has grown (it now exceeds $4.5 trillion^[3]), it has collided with our ageing population to create a ‘silver tsunami’ of Australians who are retiring with (1) higher superannuation balances than ever before, and (2) more need for advice to navigate an increasingly complex retirement income system.

The combination of these forces has in turn driven an increase in switching activity between funds. Some of this switching is self-directed, as members are forced out of funds failing the APRA performance test, or as they heed messages about fund consolidation to reduce fees. Other switching is driven by advisers seeking to place their clients in funds offering better performance, wider options, more responsive service and greater transparency.

In the case of advisers, many are finding the superannuation offerings of leading retail platforms to be superior to many large incumbent funds, powering a flow of funds away from legacy master trusts and industry funds. The 2026 State of Super report^[4] from the Conexus Institute, alongside various media reports, speaks to the scale of this trend, and provides a more precise view of how these flows are occurring.

The report estimates that around $40b of switching activity – or approximately 52% – involved a financial adviser, with a significant proportion of switches directed toward leading retail platforms including Hub24 and Netwealth. At the same time, several large industry funds, including Australian Super, ART, HESTA, and Rest, are experiencing competitive net outflows, as are for-profit master trusts including AMP Super, Insignia, and Mercer.

The potential for adverse switching outcomes was already on ASIC’s radar

As the size of the superannuation pool increases, so too does the number of businesses attracted to the sector and its revenue potential. Sadly, not all these businesses will be compliant and customer focused, a point which has been recognised by ASIC for some time, and which was reinforced by their review of superannuation trustee practices, published as Report 781^[5].

Released in May 2024, ASIC’s Report 781 identified a range of concerns, including in relation to advice fee deductions and harmful switching activities, particularly where member balances were eroded by inappropriate advice charges.

The report specifically highlighted the role of “high-pressure, cold calling for superannuation switching business models”, noting that these practices were associated with:

• unnecessary, generic or inappropriate advice
• switching into unsuitable superannuation products
•  poorer retirement outcomes for members.

ASIC identifies poor conduct by advisers and licensees as central to consumer harm. However, it also made clear that the way trustees oversee advice fee deductions can either mitigate or allow these risks to persist.

Such oversight could include

• proactive checks of advice documents
• the use of appropriate fee caps and
• consent controls and more active monitoring of advisers and licensees.

Recent high profile fund failures are the catalyst for even more scrutiny

Two recent high-profile fund failures^[6] have proved to be the catalyst for further heightened regulator and media scrutiny of superannuation switching practices.

A central feature of these failures was the role of lead generators in identifying and targeting prospective clients, often through cold-calling or digital acquisition strategies, and encouraging them to switch into higher-risk investment structures with the promise of superior returns. In many cases, these interactions formed part of a broader distribution chain involving marketing firms, referral partners and authorised representatives.

These third-party lead generation models typically attract consumer interest through offers such as a ‘free super health check’, retirement readiness tools or comparison-style calculators. While these gamified propositions can appear educational or informational in nature, they can in practice form part of a structured lead-harvesting process designed to direct consumers toward a particular advice provider or product.

In its March 2026 announcement^[7] of a formal review into the use of lead generation by advice licensees, ASIC made clear that its concerns extend beyond isolated instances of poor advice, to the broader ecosystem through which clients are acquired. This includes the role of follow-up engagement practices, including outbound calling and high-pressure sales tactics, which can move consumers rapidly from initial enquiry to switching decisions. When combined with inadequate advice processes, these models increase the risk that members are transferred into new superannuation arrangements without a clear and demonstrable benefit.

(The depths of ASIC’s concern about this sector were further highlighted when they simultaneously announced their intention to publish a register of advice licensees using lead generation services^[8].)

Switching and consumer protection becomes the regulatory priority

The understandable outrage caused by these fund failures, and the life-altering harm they caused to affected investors, has prompted a strong response from across the industry and among policymakers.

The Superannuation Members Council, for example, representing industry funds, has sought to highlight concerns in respect of superannuation switching more broadly^[9]. Their position – including analysis suggesting that switching among younger members may often be to their detriment – has been the subject of much discussion and debate across the industry^[10].

Regardless of the veracity of their claims, concerns around superannuation switching as a potential source of consumer harm have clearly gained traction among policymakers at the highest levels and are already influencing policy direction.

DBFO Tranche 2 put on the backburner

Perhaps the most visible example of this influence can be seen in the Federal Government’s recently revised financial services reform agenda.

In early 2026, Financial Services Minister Daniel Mulino indicated that his regulatory focus would shift toward addressing poor consumer outcomes linked to advice, lead generation and superannuation flows^[11]. While broadly welcomed at a community level, for advisers this shift has had a clear consequence, with the overdue Tranche 2 of the DBFO now a lower priority and delayed.

During a recent adviser webinar, FAAA CEO Sarah Abood commented on her dealings with the Minister, saying she didn’t believe the reforms are dead but that “DBFO appears to be further back in the queue”^[12].

This change in focus is already evident, with April 2026 seeing Treasury release two consultations for proposed legislation directly impacting switching activities:

• “Enhancing member protections in the superannuation system”^[13]
  Changes considered include limits on the deduction of fees from super when switches are involved, and the introduction of a cooling-off period for switches.
• “Curbing lead generation activity”^[14]
  Examining the role of third-party marketing firms, referral arrangements and client acquisition models in initiating switching activity.

(A third consultation was released at the same time, addressing changes to the CSLR).

Proposed switching advice reforms: the consultations in detail

The two Treasury consultations highlighted above make it clear that superannuation switching is now being treated as a system-level concern, spanning advice quality, distribution practices and trustee oversight. Each is explored in more detail below.

Consultation 1: advice fees to be prohibited where switching is involved?

Here Treasury proposes mechanisms to protect members from adverse switching outcomes, including a cooling-off period and prohibiting or limiting the deduction of fees from super where switching is involved.

Key reforms proposed include:

• Introduce a waiting period for inter-fund superannuation switching
  Require members to formally confirm their request to switch within a mandated waiting period (for example 5 days).
• Limit fee deductions for switching-related financial advice
  Options include total prohibition of fee deductions for switching related advice (requiring clients to pay out of pocket), targeted prohibition (for example based on age or balance thresholds), fee caps, or requiring trustees of the receiving fund to review fee deductions in line with members’ best financial interests.

Other proposals include strengthening platform governance, increasing penalties under the SIS Act, and a requirement for trustees to compensate members for eligible losses.

Consultation 2: Lead generation – scrutiny of client acquisition models

These proposals reflect a growing concern that poor consumer outcomes can originate well before advice is formally provided.

Key changes put forward include:

• Regulation of lead generation activity
  Options include bringing prescribed lead generation activities within the financial services regulatory framework or banning certain unlicensed communications to consumers about superannuation.
• Accountability of advisers and licensees
  Proposals include enhancing the accountability of licensees for the conduct of lead generators and clarifying how existing obligations apply where clients are referred through these arrangements.
• Extension of anti-hawking requirements
  Looks at options to strengthen anti-hawking protections, including conditions around consumer consent and limits on unsolicited contact.
• Remuneration structures linked to referrals
  Options include capturing lead generators under the conflicted remuneration framework or clarifying the scope of benefits that may incentivise poor conduct.
• Advertising and disclosure requirements
  Canvases additional measures to improve transparency, including requirements relating to financial advertising and earlier regulatory intervention.

Compliant switching advice – a refresher

ASIC Info Sheet 182^[15], first published in 2013, sets out how advisers should approach superannuation switching advice in practice, containing detailed guidance and practical tips.

Ahead of any of the abovementioned proposed reforms becoming law, advisers may find it useful to refresh their knowledge of ASIC’s expectations in this area of advice.

1. What is super switching advice?

Super switching advice refers to personal advice given to a retail client about:

• transferring an existing super balance (in whole or part) to another fund
• redirecting future contributions from one fund to another.

Advisers must consider the substance of the advice, including:

• verbal discussions
• Statements of Advice (SOAs)
• Financial Services Guides (FSGs)
• other written communications.

ASIC assesses the overall impression created by the advice.

Compliance tip

In ASIC’s surveillance, they will look closely at the files of advisers who seem to have a number of clients who only want advice about the ‘to’ fund, although they are still eligible to remain in their ‘from’ fund.

2. Satisfying the best interests duty

Super switching advice must satisfy all elements of the best interests duty.

This requires advisers to:

• Make reasonable inquiries into the client’s relevant circumstances, including:
  • age, dependants and retirement objectives
  • financial needs and goals
  • insurance requirements
  • existing super and investments
  • tax position
  • risk tolerance and financial literacy.
• Investigate and understand the subject matter of the advice, including:
  • both the existing (‘from’) fund and proposed (‘to’) fund
  • the consequences of switching.
• Provide advice that is in the client’s best interests.

ASIC states that switching advice will generally be inappropriate where:

• the overall benefits of the ‘to’ fund are likely to be lower than the ‘from’ fund, unless outweighed by cost savings
• the ‘to’ fund has higher costs without a clear basis that it better meets the client’s needs.

Compliance tip

Where advisers recommend switching, but there is no obvious overall advantage to the client in making the switch, ASIC is more likely to look closely at the disclosure given to the client about conflicts, fees and the basis for the advice.

3. Information about the ‘from’ fund

Advisers must obtain and consider relevant information about the client’s existing fund.

Sources may include:

• Product Disclosure Statements and product dashboards
• member statements and annual reports
• fund websites or direct contact with the trustee
• independent research.

If sufficient information cannot be obtained, the adviser should seek the information directly or decline to provide switching advice.

Compliance tip

Switching advice cannot be provided without sufficient information about the ‘from’ fund, and a lack of client-provided information does not remove this obligation.

4. Statement of Advice requirements

For all super switching advice, the SOA must clearly explain:

• the costs of the recommendation
• the benefits of the recommendation
• the significant consequences of acting on the advice.

This applies to both full balance transfers and the redirection of future contributions.

Examples of inadequate disclosure include:

• statements that fees are higher without quantifying the difference
• references to “better features” without explaining what they are and why they are relevant
• generic statements about potential loss of insurance without detail.

Compliance tip

It might be misleading to describe a feature of the ‘to’ fund as a benefit of making the switch unless that feature satisfies a client’s needs or objectives and is not already available in the ‘from’ fund.

5. Insurance considerations

Advisers must consider the impact of switching on insurance arrangements.

This includes:

• identifying existing cover in the “from” fund
• assessing whether equivalent cover is available in the “to” fund
• explaining any loss, reduction or change in cover

Compliance tip

Disclosure must go beyond stating that “if you have insurance, you will lose it if you switch”.

Advisers should explain:

• the level of cover
• cost implications
• impact on the client.

6. Advice involving SMSFs

Where switching involves establishing an SMSF, advisers must consider:

• the client’s ability to act as trustee
• financial literacy and understanding of obligations
• time and resources required to manage the fund
• ongoing costs
• availability and cost of insurance.

Clients must also understand that SMSFs do not have the same protections as APRA-regulated funds

Compliance tip

ASIC will look for instances where an adviser has:

• advised a client to establish an SMSF when their current super savings are insufficient and their circumstances do not otherwise support the advice; or
• failed to advise a client properly about ongoing costs (at least in very broad terms, based on average costs) and the time and skill needed to administer an SMSF.

7. Use of disclaimers

Disclaimers may be used to define the scope of advice in limited circumstances. However, disclaimers do not remove an adviser’s obligation to:

• make reasonable inquiries into the client’s circumstances
• investigate the subject matter of the advice
• ensure the advice is appropriate

Compliance tip

Even if a disclaimer says, ‘this is not advice about the ‘from’ fund’, this disclaimer will not let you limit your consideration to the ‘to’ fund if the substance of your advice is or includes a recommendation to switch.

Practical application of INFO 182

ASIC’s position is that switching advice must be supported by a clear, evidence-based rationale.

In practice, this requires advisers to demonstrate:

• a comparison of the ‘from’ and ‘to’ fund
• a clear explanation of costs and benefits
• consideration of insurance and other consequences
• a documented basis for concluding the client is better off.

Where these elements are not present, the advice is likely to be considered inappropriate.

Additional considerations in light of the proposed reforms

Although the proposed reforms to switching and lead generation are not yet law, they provide a clear indication of where regulatory scrutiny is likely to increase.

Lead generation

In anticipation of the proposed reforms, advisers should:

• be able to clearly explain how a client entered the advice process
• review whether any referral or lead generation arrangements are transparent in their commercial intent
• consider whether the client journey, from initial engagement through to advice, could be seen as influencing a decision to switch

Advice fees and switching

In anticipation of these reforms, advisers should:

• ensure that any switching recommendation can demonstrate a clear net benefit after fees
• consider how the method of fee deduction, particularly from superannuation at the point of switching, would be viewed by a regulator or trustee
• ensure the link between the advice provided and the fee charged is clearly articulated and documented

Conclusion

Recent high-profile fund failures have seen superannuation switching take centre stage as both a media issue and a regulatory priority. ASIC’s review activity and Treasury’s consultations make clear that scrutiny is increasing, not just on the quality of advice, but on how switching is initiated and paid for.

For advisers, their core obligations remain unchanged. Switching advice must be supported by a clear rationale, grounded in the client’s best interests and able to demonstrate a net benefit after fees.

As the level of scrutiny intensifies, advice processes must now stand up to closer examination across the full client journey, from acquisition through to implementation. Advisers who maintain strong documentation and clear client reasoning will be best placed to deliver compliant and defensible switching advice now and in the future.

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References:
[1] https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-781-review-of-superannuation-trustee-practices-protecting-members-from-harmful-advice-charges/
[3]https://www.superguide.com.au/super-booster/largest-super-funds#:~:text=Superannuation%20is%20now%20very%20much,Billion.
[4] https://theconexusinstitute.org.au/wp-content/uploads/2026/02/State-of-Super-2026-Final-updated-20260213.pdf
[5] https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-781-review-of-superannuation-trustee-practices-protecting-members-from-harmful-advice-charges/
[6] https://www.novigi.com.au/the-shield-and-first-guardian-failure-data-and-technology-lessons/
[7] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-029mr-asic-commences-new-review-of-advice-licensees-that-use-lead-generation-services/
[8] https://www.ifa.com.au/regulator-publishes-advice-lead-generation-list-and-launches-review/
[9] https://www.ifa.com.au/smc-doubles-down-on-super-switching-concerns/
[10] http://investmentmagazine.com.au/2026/03/super-switching-paranoia-drives-misinformation-campaign/
[11] https://www.investmentmagazine.com.au/2026/02/high-priority-mulino-ties-dbfo-to-consumer-protection
[12] https://www.ifa.com.au/ministers-dbfo-language-has-changed-as-wait-for-reforms-continues/
[13] https://storage.googleapis.com/files-au-treasury/treasury/p/prj3bbdc0dd212e233479128/page/c2026_756030.pdf
[14] https://storage.googleapis.com/files-au-treasury/treasury/p/prj3bc3bd170b62c39129f2e/page/c2026_756975.pdf
[15] https://www.asic.gov.au/regulatory-resources/superannuation-funds/superannuation-guidance-relief-and-legislative-instruments/super-switching-advice-complying-with-your-obligations-info-182/

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A wake-up call for advisers as ASIC modernises advertising rules, demanding timely, transparent communication in an increasingly digital, fast-moving advice landscape.

ASIC brings financial advertising into the 2020s

Comparing the financial advice profession with the advertising industry is a bit like comparing the Post Office with the Beatles – they are two vastly different worlds that very rarely intersect. However, as readers of AdNews^[1] may have noted, one such intersection point has indeed occurred recently, courtesy of ASIC’s decision to overhaul the regulation of financial services advertising.

In November 2025, ASIC announced^[2] a review of RG234, the primary regulatory instrument governing the advertising of financial services products (including credit). Initially flagged in 2024^[3], the review is an arguably long-overdue refresh of guidance first issued in 2012, before TikTok existed, before the word ‘finfluencer’ was first uttered, and of course before AI search became mainstream.

There are two reasons why this review is significant for financial advisers.

Firstly, this guidance is not just directed at product providers but broadly encompasses every individual or company that is promoting some sort of financial product or service (including financial advice).

Secondly, and critically for advisers, the term ‘advertising’ is not limited to paid placements in traditional or social channels, but more broadly applies to the way financial products and services are represented to consumers in order to influence their behaviour. This brings into scope channels and activities that advisers would consider a normal part of day-to-day business development or client education, including websites, promotional brochures, client seminars and social media posts.

The digitisation of advice continues unabated. According to figures released by Adviser Ratings in late 2025, one in four advice practices are now reliant on digital channels for new client attraction⁴ (up from 16%). And ASIC research released in March 2026 gives us a clear view of the future – finding 63% of Gen Z respondents (aged 18–28) use social media for financial information and guidance, while 30% use YouTube and 18% use AI platforms^[5]. Add to that the shifting landscape of the advice ecosystem – the massive growth in the use of ‘lead generation’ businesses for example – and it becomes clear that for financial regulation to fulfil its primary consumer protection role, it must reflect the ongoing evolution of consumer behaviours and industry structure.

While RG 234 does the heavy lifting in this space, it works in conjunction with other instruments policed by ASIC. In this article, we examine the broader regulatory framework governing financial advertising, summarise the key elements of ASIC’s proposed update to RG234, and consider how common advice-sector marketing practices can be impacted.

The regulatory framework governing financial advertising

Although Regulatory Guide 234 (RG 234) is the primary source of guidance on financial advertising, it sits within a broader framework of legislation and regulatory instruments that collectively govern how financial products and services can be promoted to consumers.

At the highest level, the legal foundation is provided by the Corporations Act 2001, which contains several provisions prohibiting misleading or deceptive conduct and false or misleading representations in relation to financial products and services. Importantly, their application is not confined to traditional forms of advertising. In practice this means that marketing materials, websites, social media posts, seminar presentations and other promotional communications may all fall within scope.

ASIC supplements these statutory provisions with other Regulatory Guides and Information Sheets that explain how the law applies in practice.

The individual components of the framework, and their specific roles, are described below.

• RG 234: Advertising financial products and services^[6]
  The central guide covering advertising and promotional conduct. RG 234 outlines ASIC’s expectation that advertising must be clear, balanced and not misleading, and provides examples of promotional practices that may create misleading impressions for consumers.
• RG 53: The use of past performance in promotional material^[7]
  Provides guidance on the presentation of historical investment performance in marketing materials. ASIC has proposed incorporating this guidance into RG 234 as part of the current consultation, which would consolidate advertising guidance into a single instrument.
• RG 244: Giving information, general advice and scaled advice^[8]
  Clarifies the distinction between factual information, general advice and personal advice. This distinction is particularly relevant where advisers use seminars, webinars or other educational events as part of their marketing activity.
• RG 175: AFS licensing: Financial product advisers – conduct and disclosure^[9]
  Sets out the conduct obligations that apply once advice is provided, including the best interests duty and disclosure requirements. While not an advertising guide, these obligations can become relevant where promotional material creates expectations about the nature or scope of advice services.
• INFO 269: Discussing financial products and services online^[10]
  Provides guidance on the discussion and promotion of financial products through online channels, including social media and the activities of finfluencers.
• INFO 271: How to avoid greenwashing^[11]
  Addresses environmental and sustainability claims made in promotional material and highlights the risk of misleading representations about ESG characteristics.

The multi-faceted nature of this framework reinforces how broadly the definition of advertising is interpreted. In practice, any communication – written, verbal, visible, or virtual – that promotes or influences the uptake of a financial product or service, including advice, may well be captured within its scope.

Changing RG234 to reflect the contemporary advice landscape

ASIC has proposed a number of changes to bring RG234 into the present and make it more adaptive to the future. These proposals were published for industry consultation at the end of 2025^[12].

Many of the changes are structural.  The guide’s title will be simplified, duplicated content removed, and some sections reorganised or condensed. In addition, content that previously appeared throughout the guide will be consolidated into appendices, including a quick reference guide summarising key advertising principles.

A substantive change is the proposal to incorporate guidance from RG 53 on the use of past performance in promotional material into the updated RG 234. If implemented, this change would result in RG 53 being withdrawn, with performance advertising guidance contained within a single consolidated guide.

The revised guide will also introduce several new examples drawn from relevant ASIC regulatory and enforcement actions. These examples relate to issues such as the presentation of returns, disclosure of risks, the use of disclaimers, comparisons between financial products and the calculation and presentation of past performance.

Finally, the proposed update recognises and offers guidance around contemporary marketing channels. References to digital promotion, social media and online advertising have been incorporated into the guide, and the growing finfluencer sector is also acknowledged.

Industry response

As expected, the proposed update has also prompted a strong response from industry stakeholders, including associations and product providers. A common theme in these submissions is the need for greater clarity around the application of existing advertising obligations in a digital environment.  ASFA’s submission^[13] for example pointed to the need for further guidance expressly around search engines, social media, streaming, podcasts, influencer-distributed content, comparison sites, and interactive tools.

The FSC^[14] called for the definition of ‘promoters’ to be extended to the growing cohort of lead generation businesses.

There have also been calls for more specific guidance on issues such as the use of past performance, the treatment of short-form content and how key disclosures should be presented where space is constrained.

Distilling ASIC’s guidance into core principles

While RG 234 and related guidance span multiple regulatory instruments, the underlying expectations can be distilled into a small number of core principles. Developing an understanding of these principles can be an important first line of defence for advisers seeking to ensure their marketing activities are compliant.

First, promotional material must not create a misleading overall impression. This is the central test applied by ASIC, and it extends beyond the accuracy of individual statements to the way information is framed and understood by the target audience.

Secondly, important information must be clear and prominent from the outset. Key risks, conditions or limitations should not be hidden in fine print, nor introduced via links to other materials, or later disclosures.

Finally, advertising should present a balanced view of benefits and risks. Messaging that highlights potential advantages without giving appropriate visibility to limitations may create unrealistic expectations for consumers.

A word about disclaimers

The nature of disclaimers, including their size and location, is clearly central to ASIC’s guidance, and indeed the existing version of RG 234 already provides clarification around the treatment of disclaimers in ‘audio and visual’ channels^[15]. While the nature of multimedia channels has evolved significantly, the spirit of that guidance remains clear and relevant in a digital world:

“[Disclaimers] should also have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing of the advertisement. Information is less likely to be noticed and understood if it is in fine print, contained within a dense block of text, only shown on television or a computer screen for a brief period, or placed where there is distracting content shown simultaneously.”

Guidelines in action: lead generation funnels

Digital lead generation has become one of the fastest growing client acquisition channels in the advice sector. Consumers are commonly drawn into these funnels through ‘clickbait’ advertising offering such services such as a ‘free super health check’, a lost super search or a retirement readiness quiz. In reality, these services are often little more than a façade for sophisticated lead-harvesting operations.

This business model has, unsurprisingly, attracted significant regulatory attention, and recent ASIC investigations have uncovered numerous examples of third-party marketing firms being paid substantial fees to generate leads through high-pressure online advertising (and follow-up cold calling). In response, in early 2026 ASIC publicly warned consumers^[16] about these tactics in relation to superannuation switching, at the same time announcing a review into – and publishing a list of – advice licensees that rely on lead generation services^[17].

While there remains debate about whether these firms are subject to RG234, they are still subject to the general misleading or deceptive conduct provisions of the Corporations Act, and ASIC’s main concern with the advertising used by these businesses is centred around a lack of transparency, and the overall impression their advertising creates. Messaging that appears to offer independent assistance or a neutral financial ‘health check’ may actually be the first step in a sales funnel designed to direct consumers toward a particular advice provider or financial product.

Even where the underlying claims in the advertisement are technically accurate, the promotional framing may still be misleading if the true commercial purpose of the interaction is not clear to consumers.

Guidelines in action: education as a marketing tactic

Educational marketing has become a common – and successful – business development strategy for many advice practices. Client seminars, webinars and downloadable eBooks allow advisers to help consumers understand complex financial issues such as superannuation or estate planning, while also building a targeted pipeline of prospects.

But as always, when it comes to promoting these resources or events, emphasis and context matter.

Consider the advertising of a webinar on Transition to Retirement (TTR) strategies. Promotional material for the event would likely highlight the potential tax advantages and cash flow benefits of implementing a TTR pension while continuing to work. For many pre-retirees, TTR can indeed be a very powerful and beneficial strategy.

But while these statements may be technically correct, they can be problematic if the benefits of the strategy receive far greater prominence than important qualifications. For example, a TTR strategy will not be appropriate for all clients, and its effectiveness is dependent on specific eligibility and contribution settings.

From a regulatory perspective, ASIC is likely to consider whether important information about risks, limitations or eligibility requirements is presented clearly in the promotion of the webinar. If these elements appear only briefly or are buried in fine print, the overall message may be considered misleading. Just as importantly, it doesn’t matter that processes to qualify prospects may exist further down the line (e.g. at the webinar itself) – ASIC will judge the advertising on its own merits.

As para 51 of RG 234 stipulates:

“If a qualification is required, it must be published at the same time as the original message. Subsequent qualifying disclosures will not be effective as the misleading impression will already have been created.”^[18]

Guidelines in action: social media

Social media has become an increasingly popular communication and marketing channel for advisers. Short-form content such as videos, posts or infographics – discussing financial markets, tax tips, and investment strategies – can be an effective way to engage audiences and build authority.

However, the short attention span of viewers, the cluttered online environment, and the tight size limitations of these channels, generally dictates that messaging be short and impactful. A social media post promoting SMSFs as a way to purchase property is already tapping into a powerful psychological force (our love of bricks and mortar) and so can easily be both brief and effective. But while that’s perfect for social channels, it runs the risk of giving insufficient focus to the considerable risks and limitations associated with this strategy, such as borrowing constraints, liquidity considerations and concentration risk.

Again, downstream disclosures or qualifying processes are irrelevant – ASIC will judge the initial promotion on its own merits, and the brevity dictated by social media formats will not be seen as an excuse to de-emphasise any risks and/or limitations.

Practical takeaways for advisers

While it may be understandable that some AFSLs see marketing activities as sitting outside the formal compliance framework applied to advice itself, the recent regulatory focus on financial advertising suggests that this separation is becoming increasingly difficult to justify. Readers of this article should familiarise themselves with the various guidelines and instruments listed earlier in this article, as well as noting the following key takeaways that can help ensure the broad suite of activities conducted under the marketing umbrella are done so in a compliant way:

1. Remember that the definition of ‘advertising’ is broad, and brings into scope websites, promotional brochures, client seminars and social media posts. As such, undertake a structured review of all such materials through the lens of RG 234.
2. Continually treat promotional material with the same discipline applied to advice documentation. Marketing messages should be reviewed with the same mindset used when assessing client communication and advice documents. The key question is not simply whether statements are technically accurate, but how the intended audience would interpret the statements on first sighting.
3. Ensure a balanced presentation of benefits and qualifications. Promotional material that emphasises the benefits of a strategy, such as tax advantages or investment returns, should ensure that important qualifications are presented clearly and in close proximity to those claims.
4. If using lead generation services or referral partners, review the way these partners present your services to prospects. Advisers should ensure the messaging used by those partners is accurate and meets the same standards expected of the practice itself.
5. Recognise that brevity is not a regulatory defence. Content on websites, or promoted through social media or digital advertising, may be short form through necessity, but the constraints of the channel do not reduce the obligation to present information in a compliant manner.

Conclusion

ASIC’s review of RG 234 does more than modernise a decade-old regulatory guide, it shines a spotlight on the full breadth of obligations that already apply to the way financial products and advice services are promoted. To the extent this framework captures activities traditionally viewed as ‘business development’ or ‘client education’ – rather than marketing – the review may serve as a timely wakeup call.

As ASIC moves towards implementing the revised standards later in 2026, advisers would be well served to treat marketing communication as a core compliance focus rather than a peripheral activity. Reviewing websites, seminar content, social media posts and third-party lead generation arrangements through the lens of RG 234 should not be a theoretical exercise, but rather a practical step in preparing for a regulatory environment where the first impression created by a promotional message will be subject to the same scrutiny as the advice that follows.

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References:
[1] https://www.adnews.com.au/news/asic-edges-closer-to-new-rules-for-financial-advertising
[2] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-proposes-updates-to-guidance-on-advertising-financial-products-and-services/
[3] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-update-on-maintenance-of-regulatory-guides/
[4] https://www.adviserratings.com.au/news/from-compliance-to-cool-how-smart-advisers-beat-finfluencers-at-their-own-game/
[5] https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-049mr-asic-urges-gen-z-to-sense-check-money-advice-as-social-media-fuels-riskier-financial-decisions/#:~:text=(26%2D049MR)-,ASIC%20urges%20Gen%20Z%20to%20’sense%2Dcheck’%20money%20advice,turn%20to%20family%20and%20friends.
[5] https://download.asic.gov.au/media/rkzj5nxb/rg234-published-15-november-2012-20211008.pdf
[6] https://download.asic.gov.au/media/1238984/rg53.pdf
[7] https://download.asic.gov.au/media/tkqi11il/rg244-published-13-december-2012-20211208.pdf
[8] https://download.asic.gov.au/media/pqpe0hwc/rg175-published-21-november-2024-20241219.pdf
[10] https://www.asic.gov.au/regulatory-resources/financial-services/giving-financial-product-advice/discussing-financial-products-and-services-online/
[11] https://www.asic.gov.au/regulatory-resources/financial-services/how-to-avoid-greenwashing-when-offering-or-promoting-sustainability-related-products/
[12] https://www.asic.gov.au/regulatory-resources/find-a-document/consultations/cs-37-proposed-update-to-asic-s-guidance-on-advertising-financial-products-and-services/
[13] https://financialnewswire.com.au/superannuation/super-funds-seek-standardised-10-year-past-performance/
[14] https://www.professionalplanner.com.au/2026/01/include-lead-generators-in-advertising-guidance-fsc/
[15] https://download.asic.gov.au/media/rkzj5nxb/rg234-published-15-november-2012-20211008.pdf
[16] https://www.abc.net.au/news/2026-02-18/asic-announces-review-into-lead-generators-superannuation/106353740
[17] https://www.moneymanagement.com.au/143800-2/
[18] https://download.asic.gov.au/media/rkzj5nxb/rg234-published-15-november-2012-20211008.pdf

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Advisers need to be able to explain the role of the FSCP and recognise conduct issues that led to disciplinary outcomes in 2025.

Giving complex advice laws practical meaning

Coming in somewhere north of 800,000 words^[1] (no one is really sure!), the Corporations Act – the overarching legal regime for financial advice – is unquestionably one of the longest, most complex pieces of legislation in Australia and frequently cited as an egregious example of bloated legislation.

A core (and challenging) role for ASIC is to distil all this legislation into more practical guidance for advisers, which it attempts to do through its various Regulatory Guides, Information Sheets, and other published resources.

Crucially, the approach taken by ASIC in providing this guidance is a principles-based one, designed to prioritise professional judgement over ultra-prescriptive rules.

Although well intentioned – helping ensure the adaptability and flexibility of the law in the face of a rapidly changing world (hello AI!) – advisers, licensees and professional bodies have all frequently expressed frustration when ASIC guidance does not clearly indicate how regulators will interpret those principles in real-world scenarios.

Against a backdrop of a fragmented licensee landscape increasingly comprised of small and self-licensed firms, this leaves advisers themselves relying on their own interpretation of ASIC guidance, which, as the FAAA recently noted^[2] “is often complex and appears to be pitched at compliance experts, many of whom are or were employed by the larger licensees.”

What advisers need is not more rules, but clearer, practical direction on how existing obligations will be enforced. And the clearest direction comes from the actual application of the law in real world scenarios. In that context, disciplinary outcomes published by the Financial Services and Credit Panel (FSCP) take on added significance. While formal guidance is principles-based, panel decisions provide concrete illustrations of how those principles are applied when advice conduct is scrutinised after the fact.

During 2025, the FSCP presided over 12 outcomes against advisers, which it published through its Outcomes Register^[3]. This article will examine those outcomes to identify the behaviours currently drawing regulatory attention, the compliance failures triggering disciplinary action, and the practical safeguards advisers can implement in response.

A single disciplinary body to oversee advice

The Financial Services and Credit Panel is the single disciplinary body responsible for oversight of individual financial advisers. Established in response to the 2018 Hayne Royal Commission, the current FSCP framework took effect with the Better Advice Act in January 2022^[4]. The reforms consolidated disciplinary oversight within ASIC, ending the Tax Practitioners Board’s role in regulating advisers and closing the Financial Adviser Standards and Ethics Authority (FASEA), with responsibility for the Code of Ethics transferred to Treasury.

How matters reach the FSCP

In practice, most matters do not originate with the panel itself but through regulatory and licensee processes. The primary pathway is breach reporting by Australian Financial Services licensees, who are required to report significant breaches and likely breaches of core obligations. Internal file reviews, compliance monitoring and remediation programs frequently identify issues before clients become aware of them, making licensee supervision the front line of disciplinary risk.

Complaints lodged with AFCA, ASIC or licensees may also trigger investigations, as can ASIC surveillance activity, thematic reviews, or intelligence, including whistleblower disclosures. Disciplinary exposure often arises from routine compliance processes rather than dramatic misconduct events.

The circumstances that can trigger FSCP involvement are many and varied, including where an adviser is no longer fit and proper to practise, has contravened financial services law or professional standards, provided advice while unregistered, failed to comply with a prior sanction, been involved in another person’s breach, or repeatedly failed to give effect to an AFCA determination. ASIC also retains discretion to convene a panel where it considers disciplinary action may be warranted.

The FSCP has a range of ways it can penalise adviser misconduct.

It can take administrative action against an adviser by issuing warnings or reprimands, it can direct an adviser to take specific training, it can order the suspension or cancellation of an adviser’s registration, issue infringement notices, and recommend to ASIC that it seek to apply to the court for a civil penalty.

Before action is taken, the adviser must be notified of the proposed findings and given an opportunity to respond. Consistent with the regime’s consumer protection focus, significant outcomes are publicised by ASIC and, in some cases, recorded on the Financial Advisers Register. Other outcomes may be published on the Outcomes Register using pseudonyms where identification is not required.

The 2025 FSCP outcomes reveal consistent themes

The 12 outcomes published by the Financial Services and Credit Panel during 2025 reveal a consistent pattern – disciplinary action was concentrated on failures in foundational professional obligations rather than ‘novel’ regulatory issues. These outcomes can be distilled down into 5 themes.

Theme 1: Professionalism and CPD compliance

The largest single category of outcomes (five cases) involved failures to meet continuing professional development (CPD) obligations. Four advisers received reprimands after failing to complete the required 40 hours of CPD across mandatory categories within their licensee’s CPD year^[5]. Panels found breaches of professional standards provisions, reinforcing that CPD is a condition of ongoing registration rather than an administrative exercise.

Commenting on the cases, ASIC specifically called out the practice of ‘cramming’ CPD at the end of the CPD year:

“Completion of CPD requirements should not be left to the last minute and should be spread throughout the CPD year, as good practice.”^[6]

In several cases, advisers completed the missing hours after the breach was identified, yet reprimands were still imposed to underscore the importance of maintaining professional competence while promoting public confidence in adviser standards. Only one of the five advisers avoided sanction due to mitigating circumstances and prompt rectification.

These outcomes reinforce that ASIC sees CPD compliance as a key consumer protection mechanism, “not merely a compliance obligation to tick off”^[7], playing a vital role in ensuring advisers remain technically capable of delivering appropriate advice.

Theme 2: Conflicts of interest

One of the most serious matters involved an adviser (‘Mr V’) recommending clients switch superannuation into a product he was associated with. The panel found the advice was inappropriate, conflicts were inadequately managed, and the adviser had prioritised personal interests over those of clients. Failures included inadequate disclosure, lack of informed consent to remuneration, and charging fees considered neither fair nor reasonable.

The sitting panel was also satisfied that the relevant provider contravened s921E(3) of the Corporations Act 2001 by failing to comply with the Code of Ethics. In particular, the relevant provider was found to have failed to comply with the Values of Trustworthiness and Fairness, and Standards 3, 7 and 9. Specifically, the panel found that Mr V did not obtain the clients ‘free, prior and informed consent’ to all relevant remuneration arrangements by failing to disclose the benefits that he and his associates would receive as a result of the clients investing in the recommended products. The panel also found the fees charged were not ‘fair and reasonable’, labelling them as ‘extraordinary^[8]’.

The panel imposed extensive remediation requirements on the adviser, including compliance reviews, pre-vetting of advice, ethics training and cessation of association with the product. The case demonstrates that disclosure alone does not neutralise conflicts – advisers must be able to demonstrate that their recommendations unequivocally put client interests first.

Theme 3:  Technical advice failures causing consumer harm

Another group of cases involved technically incorrect superannuation advice relating to non-concessional contribution caps and bring-forward arrangements. In these cases, advisers failed to correctly account for prior contributions or existing arrangements, leading to excess contributions and significant adverse tax consequences for clients.

In one case, failure to recognise a prior lump-sum contribution – recommended by the client’s previous adviser – resulted in the client exceeding the cap and being required to withdraw funds of over $157,000 and include associated earnings of over $17,000 in her tax return. In another, advice to contribute across two years ignored that the client was already in year two of a three year bring-forward arrangement, leading to the client making an excess non concessional contribution of over $109,000. She was then required by the ATO to withdraw over $312,000 from her fund and include $39,000 of associated earnings in her tax return^[9].

These cases illustrate how incorrect application of complex superannuation contribution rules can produce significant client harm, even where the advice process itself appears otherwise routine.

Theme 4: Failure to act in clients’ best interests

Unlike the contribution cap cases, which involved technical misapplication of superannuation rules, several outcomes arose from failures in the advice process itself, particularly inadequate investigation of the client’s existing arrangements.

Across multiple cases, panels found breaches of the Best Interests Duty and the requirement to provide appropriate advice. These breaches often stemmed from inadequate investigation of client circumstances, failure to consider existing arrangements, or insufficient analysis of alternatives.

Clear examples arose in retirement advice matters. In one case involving an account-based pension (ABP) strategy, the adviser failed to properly consider the client’s defined benefit entitlements when recommending additional contributions, resulting in the client exceeding concessional contribution caps. In another case, an adviser recommended commencing an ABP without verifying that the client had already established one, causing the client to exceed the transfer balance cap. In both matters, the panels cited a lack of diligence in assessing the client’s existing superannuation position and treated the failures as breaches of the Best Interests Duty and the Code of Ethics’ requirement for diligence.

In the first case mentioned, the sitting panel issued a written direction requiring the relevant provider to undertake at least five hours of continuing professional education covering retirement planning in the next 12 months. They stipulated that education “must be capable of being objectively verified by a competent source, not be provided by the relevant provider’s licensee, be in addition to the relevant provider’s existing continuing professional obligations and must be approved by ASIC before it is undertaken^[10]”

For practitioners, the message is that robust fact-finding and documented decision-making, particularly in retirement advice – where prior arrangements materially affect outcomes – are essential safeguards against compliance risk.

Theme 5: Escalation of sanctions for systemic misconduct

The most severe outcome handed down in 2025 involved a two-year registration prohibition order against a (publicly named) adviser whose conduct in recommending the establishment of self-managed superannuation funds was found to be “systemic and displayed a lack of care and a level of incompetence^[11]”. The panel concluded that the adviser had breached multiple statutory duties and professional standards, including providing misleading advice and failing to prioritise client interests.

This case illustrates the escalation pathway available where misconduct reflects ongoing deficiencies rather than isolated errors and demonstrates the panel’s willingness to remove advisers from practice where consumer protection concerns are significant.

What the outcomes collectively signal

The 12 outcomes handed down in 2025 almost universally involved failures in processes and compliance obligations that were both foundational and straightforward. These were not cases involving obscure case law, or overly challenging technical scenarios. They involved meeting CPD obligations, properly investigating client circumstances, doing basic arithmetic, and avoiding conflicts of interest so big they could be seen from space. Indeed, over 99% of advisers would say they involved “simply doing your job”.

Practical adviser lessons from the 2025 FSCP outcomes

Notwithstanding their sometimes-mundane nature, these decisions – published in full on the ASIC Outcomes Register – do provide valuable practical guidance on how adherence to ASIC’s ‘principles-based’ guidance will be judged in real-world scenarios.

The cases sanctioned during 2025 point to recurring weaknesses in governance, advice processes and documentation rather than non-compliance with obscure legal technicalities. For practitioners, the message is that strong process discipline remains the most effective protection against consumer harm and regulator action.

From a professionalism perspective, CPD compliance should be managed as an ongoing obligation rather than an annual task. Advisers should maintain real-time tracking of hours across mandatory categories, retain verifiable evidence of completion, and conduct periodic reviews (e.g., quarterly) well before the end of the CPD year. Aligning personal CPD plans with licensee requirements can also reduce the risk of inadvertent shortfalls in particular categories.

Several cases arose from incomplete fact finding or failure to verify key client information before making recommendations. Advisers should confirm contribution histories, existing superannuation arrangements, pension commencements and defined benefit entitlements before providing retirement advice. Where assumptions are unavoidable, they should be documented and explained to the client. Peer review or the internal sign-off of complex superannuation strategies can provide an additional safeguard.

Conflict management also requires diligence (and vigilance). Where advisers recommend products with which they have any association, they should be able to demonstrate why the recommendation remains appropriate after considering alternatives. Clear documentation of informed consent is essential. Disclosure alone is unlikely to be sufficient if the advice outcome appears to favour the adviser’s interests.

The cases also reinforce the processes underpinning the Best Interests Duty. Comprehensive file notes, documented inquiries and a clear rationale for recommendations are critical. Advisers should always assume that their files may later be reviewed by a regulator and ensure the reasoning behind each decision is evident from the files.

Finally, early engagement with licensee compliance teams can prevent issues from escalating. Where deficiencies are identified through audits or reviews, prompt remediation and openness with supervisors may reduce the likelihood of referral to the FSCP. In a principles-based regulatory environment, consistent adherence to disciplined processes is the most reliable way to demonstrate that advice is client focused and legally and ethically sound.

At a glance compliance checklist

Professionalism and CPD

• Track CPD hours continuously across all mandatory categories
• Retain evidence of completion
• Review progress quarterly and aim for an even distribution of learning
• Ensure alignment with licensee requirements

Advice processes and fact finding

• Identify and interrogate prior advice
• Verify contribution histories and confirm existing arrangements
• Be especially aware of defined benefit entitlements
• Allow for clients not fully understanding their existing arrangements
• If assumptions need to be made, document and explain to the client
• Seek peer review of complex super strategies

Conflict management

• Assess whether any recommended product involves an entity in which the adviser or related parties hold a financial or governance interest
• Demonstrate why recommendations remain appropriate even where an association/conflict exists
• Consider and document alternatives
• Obtain informed client consent
• Ensure fees are defensible and clearly linked to client benefits

Best Interests Duty

• Conduct comprehensive fact finding
• Verify client information
• Maintain detailed file notes
• Document rationale for decisions/recommendations
• Ensure file demonstrates a client-first approach

Escalation prevention

• Early and ongoing engagement with a compliance provider (internal or external)
• Address any audit findings and implement required remediation without delay
• Treat compliance processes as risk management tools rather than burdensome ‘red tape’.

Conclusion

In the principles-based regulatory environment underpinning financial advice, advisers are often required to exercise judgement in circumstances where the law (via ASIC) does not prescribe a single correct course of action. The FSCP outcomes provide valuable clarity about how that judgement will be assessed when decisions are scrutinised ‘after the fact’. They show that regulatory expectations are grounded less in technical perfection and more in diligent adherence to simple, client-first processes.

As the advice profession navigates a complex, ever-changing regulatory framework, disciplinary decisions offer a concrete guide to what compliant conduct looks like in practice, turning high level, legalistic ASIC guidance into real world lessons. Advisers who apply these lessons will be better positioned to manage their own risk and protect their clients from harm.

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———–

References:
[1] https://www.professionalplanner.com.au/2021/05/alrc-bombshell-chapter-7-removal-from-corps-act-on-the-table/
[2] https://www.professionalplanner.com.au/2025/10/advisers-relying-on-their-own-interpretation-of-reg-guides-faaa
[3] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/how-asic-regulates-financial-advice/financial-services-and-credit-panel-fscp/fscp-outcomes-register/
[4] https://www.asic.gov.au/about-asic/news-centre/news-items/better-advice-act-broadens-asic-s-regulatory-responsibilities/
[5] https://www.asic.gov.au/about-asic/news-centre/news-items/asic-acts-against-financial-advisers-for-failing-to-meet-continuing-professional-development-cpd-requirements
[6] https://www.ifa.com.au/asic-says-it-will-continue-to-act-on-adviser-cpd-non-compliance
[7] Ibid.
[8] https://www.moneymanagement.com.au/fscp-raps-adviser-over-extraordinary-fees-inappropriate-advice/
[9]
[10] https://www.professionalplanner.com.au/2025/05/fscp-cases-show-ato-portal-access-could-offer-safeguard/
[11] https://www.asic.gov.au/regulatory-resources/financial-services/financial-advice/how-asic-regulates-financial-advice/financial-services-and-credit-panel-fscp/fscp-outcomes-register/
[12] https://www.smsfadviser.com/adviser-banned-for-recommending-clients-establish-smsfs/

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ASIC’s findings across REP 575 and REP 824 highlight that the consumer protection risks associated with SMSFs are not theoretical.

Introduction

When considering the various sector reviews conducted by ASIC during 2025, one could be forgiven for recalling Taylor Swift’s sentiment from 2017 “This is why we can’t have nice things”.

Because true to their brief of revealing the (small number of) bad apples in advice, and hot on the heels of exposing red flags in both the private credit and managed account sectors, November 2025 saw ASIC turn its gaze to Self-Managed Super Funds (SMSFs), with the release of REP 824, a damning examination of the advice behind SMSF establishments.

The headline finding of this review was that more than 60% of the advice files reviewed failed the Best Interests Duty and were therefore non-compliant^[1]. The review also identified a consistent pattern of other advice failures, explored in more detail below.

ASIC’s scrutiny of SMSF establishments, and the advice behind them, comes at a time of record growth for the sector, which now comprises over 1.2 million members, holding over $1 trillion in assets in more than 650,000 funds^[2]. It also comes at a time when AFCA complaints about SMSF advice almost doubled over 12 months, to now represent a third of all advice complaints^[3].

For advisers, the sheer size and significance of the SMFS sector (it accounts for around one quarter of total superannuation savings^[4]), as well as ASIC’s heightened scrutiny, makes it imperative to understand the full compliance context for SMSF advice, including the consumer motivations behind SMSF establishment and the challenges in managing SMSFs.

As well as examining this context, this article will explore the reasons ASIC regard SMSF advice as high risk, explain the detailed findings and recommendations of REP 824^[5], and provide a practical framework for advisers to ensure their advice in this sector remains compliant and in the best interests of clients.

Consumer context: the myth of control and love of property drives SMSF growth

In order to appreciate the reasons for ASIC’s concerns, and their likely areas of focus, it is helpful to first understand the context for the popularity of SMSFs.

In their 2018 report into SMSF advice – REP 575 – ASIC found that the strongest single consumer motivation to establish an SMSF was a desire to have more ‘control’ – cited by 48% of trustees establishing SMSFs between 2015 and 2018^[6].

This control included financial control (for example, anticipated control over investment performance); and emotional control (for example, investing in an asset class that gives a greater feeling of security). Other motivations included the desire to purchase a property (22%), the desire to have more say in equity selection (29%), and the desire to pay lower fees (25%).

In the years since 2018, this context has evolved significantly. Downward pressure on fund manager and administration fees has been significant, undermining the ‘I can do it myself cheaper’ argument. And when it comes to control, consumers have far more avenues to be ‘hands -on’ with their investments, either through innovative retail offerings, or managed accounts. In other words, the strength of these particular motivations has diminished somewhat.

What has endured however is the desire to use SMSFs as a vehicle to purchase property.

While for older investors, this was often due to an inherent conservatism – manifesting as an overriding preference for bricks and mortar – in more recent times, investors in their mid-forties (the median age for new SMSFs is 46^[7]) are seeing SMSFs as a way to secure an investment property in an increasingly expensive market.

This nexus between property and SMSFs is plain for all to see when one examines ATO data on asset allocation. As seen in Table 1, property (residential and commercial) accounts for 22.2% of all SMSF assets.

SMSF ownership does not signal any degree of financial savvy, nor particularly high levels of wealth.

The stereotype of the SMSF as a ‘mum and dad fund’ is reasonably accurate, with around 68% of SMSFs comprising two members. While the median asset holding for all funds is $933,000, new funds are being established with median assets of just $345,000. Just over half of all SMSFs are in the accumulation phase^[9].

Despite their superior long term growth potential compared to domestic equities, overseas shares are not widely held, with ATO data showing they account for just 2.1% of assets for funds in accumulation phase (when growth should be prioritised) – another signal of an overall lack of sophistication.

Asset concentration, borrowing and retirement risk

Asset concentration within SMSFs has been a persistent concern for ASIC, evident across both REP 575 and REP 824, particularly where property and borrowing are involved.

While concentration risk can exist in any investment structure, ASIC has repeatedly observed that it is most acute in newly established SMSFs, and often insufficiently addressed in advice files.

ATO data shows that a material proportion of SMSFs hold extremely concentrated portfolios. Almost 30 per cent of SMSFs have 90 per cent or more of their assets invested in a single asset class, with around one-third of those funds concentrated in property^[10]. This level of concentration significantly increases exposure to liquidity risk, valuation risk and sequencing risk, particularly as members approach retirement.

Borrowing amplifies these risks at the point of establishment. REP 824 found that 50 per cent of the SMSF establishment advice files reviewed involved a limited recourse borrowing arrangement (LRBA), most commonly to facilitate direct property investment^[11]. ASIC observed that advisers frequently failed to adequately assess whether the SMSF could sustain loan repayments under adverse conditions, such as interest rate increases, rental vacancies or reduced contributions. Stress testing and downside analysis were often absent from client files.

Separate from servicing risk, ASIC also identified systemic liquidity weaknesses. Property-heavy SMSFs with LRBAs often had limited capacity to fund ongoing expenses or pension payments without relying on continued contributions or asset sales. ASIC noted that advisers frequently underestimated how illiquid assets constrain cash-flow flexibility over time, particularly once members transition into retirement, when contribution inflows cease and benefit payments commence.

ASIC also linked concentration and borrowing risk to poor insurance outcomes. In several high-risk files, advisers recommended establishing an SMSF and acquiring property without adequately considering the erosion of insurance cover previously held within APRA-regulated funds. Where insurance was retained, it was often reduced or poorly aligned to the fund’s increased financial risk profile.

High-risk SMSF business models and conflicts of interest

ASIC’s review also highlights that non-compliant SMSF advice is frequently associated with particular business models, rather than isolated adviser error. A recurring feature of higher-risk files reviewed for REP 824 was the presence of property-led SMSF establishment models. In these arrangements, the decision to establish an SMSF was often closely linked to a pre-determined property acquisition, sometimes supported by an LRBA. ASIC observed that where property outcomes effectively drove the advice, assessment of alternatives, diversification, liquidity and retirement outcomes was frequently subordinated or incomplete.

ASIC also identified risks arising from lead-generation and referral arrangements, particularly where advisers received clients from property promoters, accountants or marketing businesses with a commercial interest in SMSF establishment. Even where such arrangements were disclosed, ASIC questioned whether advisers had taken sufficient steps to ensure that the advice was free from undue influence and demonstrably prioritised client interests over third-party outcomes.

Vertical integration and related-party arrangements were another area of focus. ASIC found that in some cases, advisers recommended SMSF strategies that directed revenue toward related entities through property development fees, borrowing arrangements, administration services or ongoing advice fees. REP 824 reinforces that disclosure alone is not sufficient where conflicts are material. Advisers and licensees must be able to demonstrate that conflicts have been actively identified, managed and, where necessary, avoided.

Importantly, ASIC’s findings make clear that these risks are not mitigated by client consent or enthusiasm. Where advice outcomes align too neatly with commercial incentives, ASIC will look closely at whether the advice was shaped by professional judgement or by the underlying business model. In REP 824, files associated with conflicted or property-centric models were disproportionately represented among those assessed as posing a high risk of consumer detriment.

Where commercial structures increase the likelihood of bias, ASIC expects stronger governance, clearer separation of functions and more rigorous documentation to demonstrate that client interests have genuinely been prioritised.

Other risks faced by SMSFs

In addition to those risks driven by market context, trustees and members face a variety of other significant risks, including, but not limited to:

• Risks associated with the complexity of managing the administration and compliance obligations of SMSFs
• Underestimating the time and cost of managing an SMSF
• The costs of small balance funds
• Insurance cover risks (through inappropriate cancellation of existing cover or reduced access to group rates)
• Poor investment decisions made by unsophisticated investors
• Reduced access to dispute resolution bodies
• Lack of statutory compensation for theft or fraud
• Complexities and costs associated with fund structure, including
  • Winding up the fund in the event of death or relationship breakdown
  • Loss of capacity of a trustee
  • Fund value falling below a financially viable level
  • The treatment of death benefit nominations

These risks add an additional layer of complexity that advisers must be conscious of when providing SMSF advice.

REP 824 in detail: where SMSF advice fails

REP 824 concludes that the compliance issues identified in SMSF establishment advice are not isolated technical errors, but recurring failures in how advisers apply professional judgement. In conducting their review, ASIC reviewed 100 SMSF establishment advice files and found that 62 failed to demonstrate compliance with the Best Interests Duty (BID), with 27 raising significant concerns about potential client detriment. These failures occurred across a range of adviser and licensee business models, suggesting systemic rather than individual weaknesses.

A central failing was the treatment of SMSF advice as an execution exercise rather than a suitability assessment. ASIC found that in 58 of the reviewed files, advisers did not base their advice on the client’s relevant personal circumstances. In many cases, advisers acted on a client’s stated interest in establishing an SMSF without undertaking a reasonable investigation into whether that structure was appropriate. ASIC was explicit that reliance on client preference, autonomy or a desire for ‘control’ does not satisfy the BID.

Another recurring issue was the failure to properly assess and document alternatives. ASIC found that 53 of the advice files did not demonstrate that advisers had conducted a reasonable investigation into alternatives to an SMSF, including APRA-regulated superannuation funds. Where alternatives were mentioned, documentation often failed to explain why those options were unsuitable in the client’s circumstances, contributing to ASIC’s conclusion that advice lacked a reasonable basis.

Property-driven strategies featured prominently in non-compliant advice. Of the files reviewed, 57 involved direct property investment, and as mentioned previously, 50 involved limited recourse borrowing arrangements. ASIC observed that in many of these cases advisers failed to adequately consider concentration risk, liquidity constraints, cash-flow sustainability or downside scenarios, particularly in retirement. These omissions were a significant factor in files assessed as posing a high risk of client detriment.

ASIC also identified widespread shortcomings in the treatment of insurance and trustee capability. In 16 of the 27 high-detriment files, advisers failed to properly consider insurance needs following SMSF establishment. In addition, ASIC frequently found insufficient assessment of whether clients had the skills, time and capacity to meet their ongoing trustee obligations.

In summary, REP 824 signals that SMSF advice most commonly fails where advisers prioritise client intent, structural preference or commercial convenience over evidence-based suitability analysis.

The legal test ASIC applies to SMSF advice

While REP 824 documents how SMSF advice fails in practice, it also shows how ASIC assesses those failures against the legal framework governing personal advice. ASIC’s analysis is anchored in the BID, the appropriateness obligation, and the requirement that advisers base their advice on a reasonable investigation of relevant alternatives, as set out in the Corporations Act and reinforced through ASIC guidance.

Through INFO 274^[12] (‘Tips for giving self-managed superannuation fund advice’) ASIC sets out an expectation that SMSF advice requires advisers to apply heightened professional judgement. Advisers must assess not only the client’s objectives and preferences, but also their financial position, risk tolerance, experience, capability and capacity to meet the ongoing governance obligations of running an SMSF. INFO 274 explicitly warns that an SMSF will not be appropriate for all clients, and that perceived benefits such as control or flexibility must be weighed against costs, risks and complexity.

REP 824 demonstrates how ASIC applies this guidance in practice. Under BID, ASIC rejected advice rationales that relied on client intent, autonomy or a desire for control without evidence that an SMSF delivered a net benefit relative to alternatives. ASIC emphasised that professional judgement cannot be displaced by client request or informed consent.

ASIC also assessed whether advisers could demonstrate that an SMSF recommendation was appropriate in light of the client’s circumstances, including cost-effectiveness, trustee capability and long-term retirement outcomes. Where advisers failed to meaningfully compare SMSFs with APRA regulated superannuation funds, ASIC concluded that the advice lacked a reasonable basis.

Taken together – REPs 575 and 824 and INFO 274 – clarify that SMSF advice is subject to a higher evidentiary threshold than many other superannuation recommendations. Advisers must be able to demonstrate, on file, not only why a client wanted an SMSF, but why establishing one was legally appropriate and in the client’s best interests.

SMSF governance essentials: investment, insurance, and trustee capability

The appropriateness of an SMSF does not turn solely on the decision to establish the fund, but on the quality of its ongoing governance. INFO 274 places particular emphasis on investment governance, insurance considerations and trustee capability, and REP 824 demonstrates how failures in these areas continue to underpin non-compliant advice.

Investment governance and diversification

INFO 274 requires advisers to consider whether clients are capable of implementing and maintaining an appropriate investment strategy within an SMSF, including managing diversification, liquidity and risk over time. ASIC expects advisers to assess not only the proposed asset mix at establishment, but whether the strategy remains sustainable as circumstances change. REP 824 found that advisers frequently failed to articulate an investment rationale beyond facilitating a specific asset purchase, most commonly property, with limited consideration of diversification or downside risk. Where investment strategies were highly concentrated, ASIC expected stronger justification and clearer evidence that risks had been understood and accepted in an informed way.

Cash flow, liquidity and retirement outcomes

ASIC guidance also requires advisers to consider how an SMSF will meet ongoing cash-flow needs, including expenses, loan repayments and pension payments. INFO 274 warns that illiquid or leveraged strategies may be unsuitable where they compromise flexibility or increase the risk of adverse retirement outcomes. REP 824 found that many advice files lacked evidence of stress testing or scenario analysis, particularly where borrowing was involved, undermining the appropriateness of the recommended strategy.

Insurance considerations

Insurance is a recurring governance weakness in SMSF advice. INFO 274 explicitly requires advisers to consider whether clients will have appropriate insurance cover after establishing an SMSF, and whether cover previously held in an APRA-regulated fund will be lost, reduced or become more expensive. REP 824 identified multiple files where insurance was either not considered at all or was addressed superficially, despite the increased financial risk associated with concentrated or leveraged strategies.

Trustee capability and ongoing oversight

INFO 274 emphasises that advisers must assess whether clients have the time, skills and capacity to meet their ongoing trustee obligations. REP 824 shows that advisers often underestimated the operational and compliance burden of SMSFs, particularly for clients with limited experience managing complex investment arrangements. ASIC expects advisers to consider not only initial capability, but how trustee competence will be supported over time. 

Practical compliance checklist: what ASIC expects to see in SMSF advice

For advisers and licensees, ASIC’s expectations are easily distilled into a practical checklist:

Before recommending an SMSF

• Clear articulation of why an SMSF is being considered
• Documented comparison with APRA-regulated alternatives
• Assessment of trustee capability, time and experience
• Explicit consideration of costs and scale 

Where property or borrowing is involved

• Analysis of concentration risk and diversification
• Cash-flow modelling and stress testing
• Consideration of downside and exit scenarios
• Documentation of why borrowing is appropriate

Investment and insurance governance

• An articulated investment rationale, not just an asset outcome
• Consideration of liquidity and retirement phase needs
• Documented insurance assessment and replacement strategy

Conflicts and oversight

• Identification of any referral, related-party or commercial conflicts
• Evidence of how conflicts were managed, not just disclosed
• Licensee oversight where higher-risk models are used

ASIC’s consistent position is that SMSF advice will be judged on evidence rather than adviser intent.

Conclusion

ASIC’s findings across REP 575 and REP 824 highlight that the consumer protection risks associated with SMSFs are not theoretical. They arise where proactive client demand, asset preference or perceived control displaces disciplined suitability analysis, and where advisers fail to adequately test whether an SMSF structure can support sustainable retirement outcomes over time. The persistence of these issues, despite years of regulatory guidance, suggests that structural risks in SMSF advice remain poorly understood or insufficiently challenged in practice.

Importantly, ASIC’s scrutiny is not confined to whether an SMSF was legally established, but to whether the advice process properly addressed alternatives, risks, governance and trustee capability in a way that was specific to the client’s circumstances. Where advice relies on assumptions of favourable markets, continued contributions or client confidence alone, it is unlikely to meet regulatory expectations. This is particularly so where advice involves borrowing, concentrated investments or the loss of default insurance protections.

SMSF advice demands a higher standard of investigation, documentation and ongoing oversight than many other forms of personal advice. Those who approach SMSFs as a product outcome rather than a governance framework expose clients, and themselves, to unnecessary risk. By contrast, advisers who apply rigorous suitability analysis, clearly evidence their reasoning and maintain disciplined review processes are far better placed to deliver compliant advice and protect long-term client outcomes.

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References:
[1] https://www.afr.com/companies/financial-services/most-smsf-advice-not-complying-with-best-interest-test-asic-says-20251106-p5n86t
[2] https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/latest-annual-statistics-for-smsfs
[3] https://www.professionalplanner.com.au/2025/07/afca-complaints-show-tale-of-two-sectors/
[4] https://data.gov.au/data/dataset/2fd970ec-984e-4593-bbad-2e69a5fa7a89/resource/7a50c5c8-5c0e-4a4b-a11e-feaad39f2bd0/download/smsf-annual-overview-2023-24.xlsx
[5] https://download.asic.gov.au/media/g2jloagp/rep824-published-6-november-2025.pdf
[6] https://download.asic.gov.au/media/4779820/rep-575-published-28-june-2018.pdf
[7] https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/latest-annual-statistics-for-smsfs
[8] https://data.gov.au/data/dataset/2fd970ec-984e-4593-bbad-2e69a5fa7a89/resource/7a50c5c8-5c0e-4a4b-a11e-feaad39f2bd0/download/smsf-annual-overview-2023-24.xlsx
[9] https://data.gov.au/data/dataset/2fd970ec-984e-4593-bbad-2e69a5fa7a89/resource/7a50c5c8-5c0e-4a4b-a11e-feaad39f2bd0/download/smsf-annual-overview-2023-24.xlsx
[10] https://data.gov.au/data/dataset/2fd970ec-984e-4593-bbad-2e69a5fa7a89/resource/7a50c5c8-5c0e-4a4b-a11e-feaad39f2bd0/download/smsf-annual-overview-2023-24.xlsx
[11] https://download.asic.gov.au/media/g2jloagp/rep824-published-6-november-2025.pdf
[12] https://www.asic.gov.au/regulatory-resources/financial-services/giving-financial-product-advice/tips-for-giving-self-managed-superannuation-fund-advice/

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Identify the key regulatory and consumer protection risks associated with managed accounts, including conflicts of interest, fee opacity and governance failures.

Introduction

The spectacular growth of managed accounts is arguably one of the most notable trends within financial advice over the last decade. Offering efficiency, consistency, and professional investment management at scale, managed accounts are essentially a form of outsourcing, allowing advisers to devote more time to client strategy and engagement. Little wonder then that almost 60 per cent of advisers now use managed accounts^[1], with an additional 16 per cent likely to use them in the future. In 2025, advisers directed an estimated 50% of new client inflows to separately managed accounts^[2], up from 41% in 2024, and reflecting their growing prominence as a primary investment structure.

But as the adoption of managed accounts has accelerated, so too has the concentration of risk. When thousands of clients are placed into centrally managed models, small design flaws, conflicts, or governance failures can be amplified across an entire client base, and – unsurprisingly – the managed account sector has attracted the attention of the corporate regulator.

Among the strategic priorities listed in ASIC’s 25/26 Corporate Plan^[3] is the surveillance of AFSLs offering managed accounts to retail clients. Focusing specifically on governance frameworks, management of conflicts of interest, and outcomes for consumers, ASIC commenced this surveillance in late 2025, issuing ‘please explain’ notices to licensees and separately managed account (SMA) providers, seeking information about any sales and revenue targets, inducements and benefits to offer SMAs to retail clients^[4].

For advisers, it is worth remembering that while outsourcing, delegating and automating investment management can deliver substantial benefits to both advisers and their clients, advisers cannot outsource their legal and ethical obligations, and ultimately remain personally responsible for their recommendations and associated outcomes.

This article examines how best-interest obligations, conflicts management, fee transparency, governance and client communication in the managed account environment are being scrutinised by ASIC, and what advisers must do to meet the regulator’s expectations while protecting client outcomes and their own compliance position.

Managed accounts explainer

A managed account is an investment structure where a client’s portfolio is managed to a defined investment strategy by a professional portfolio manager, rather than being constructed security-by-security by the adviser. Unlike a traditional managed fund, the client retains beneficial ownership of the underlying assets, meaning tax impacts are felt at an individual investor level. Day-to-day portfolio construction and rebalancing are handled centrally.

Within the broad managed account category, the two most common types are Separately Managed Accounts (SMAs) and Managed Discretionary Accounts (MDAs).

An off-the-shelf SMA applies a model portfolio to each client, with trades implemented automatically, in line with the pre-defined strategy. For clients with more to invest, tailored SMAs allow more bespoke portfolios. SMAs are offered by a wide range of providers, including fund managers, asset consultants, researchers, and licensees.

Whereas SMAs are financial products, a Managed Discretionary Account (MDA), is classed as a financial service. With MDAs, the adviser or portfolio manager has discretion to make investment decisions and execute trades on the client’s behalf without seeking approval for each transaction, subject to an agreed mandate. Advisers require separate licensing to be able to offer MDAs.

SMAs are the largest and fastest growing type of managed account, accounting for almost three times the Funds Under Management of MDAs and growing twice as fast^[5].

Why ASIC is worried about managed accounts – the spectre of vertical integration

Funds held in managed accounts have expanded at an annual average rate of around 24 per cent since 2019, swelling to more than $256 billion^[6] by mid-2025, more than three times the balance just five years earlier. Much of that growth has been driven by SMAs, with other managed account offerings – including MDAs and other services – also recording positive, but more muted, growth.

At the same time, the market has become increasingly fragmented, with more than 100 SMA providers and investment consultants operating in the space and the top five providers controlling only around 15 – 20 per cent of assets^[7]. That fragmentation, combined with rapid inflows, creates fertile ground for poor practices and conflicts of interest to emerge and persist and create widespread consumer harm.

A particular concern for ASIC is that many of these fragmented providers are also research houses, investment consultants, platform providers or advice groups, firms for whom independence and objectivity are foundational.

Vertical integration, house models and revenue-linked distribution arrangements all heighten the risk that commercial incentives – rather than client interests – drive portfolio recommendations. It is therefore telling that the first phase of ASICs surveillance, implemented in late 2025, involved data gathering around such targets and inducements.

And poor transparency

Poor transparency, around both fees and performance, is another ASIC concern.

The bespoke nature of some managed account portfolios has led some fund managers to claim that specific portfolio holdings represent intellectual property, and they are thus unwilling to disclose these details. This lack of publicly available standardised performance and look-through data for SMAs often leaves clients with no meaningful performance context for their advisers’ recommendations.

As a result, transparency, comparability and adviser accountability are all weakened, and advisers may be unable to demonstrate they’ve met their Best Interests Duty (BID) or to benchmark SMA outcomes against alternatives that might be available.

Fee opacity is also a major problem.

The managed account value chain can involve several parties, from the adviser and their licensee, through to asset consultants, fund managers, and platform providers. As a result, there are often layers of fees, some of which may be opaque to the end investor, and which further hamper comparability and assessments of value.

When fee structures are fragmented across platforms, model managers and advisers, even savvy clients can struggle to understand what they are paying and whether it represents fair value, undermining genuinely informed consent.

Industry bodies themselves have acknowledged this problem, and in early 2025, Adviser Ratings led the launch of the SMA Reporting Standard committee^[8], with the aim of bringing “unity and clarity” to fee reporting across the sector.

MDAs: when discretion changes the risk equation

Managed Discretionary Accounts (MDAs) introduce an additional layer of compliance and consumer-protection risk because they give advisers or portfolio managers the authority to transact on a client’s behalf without seeking approval for each trade. While this can improve efficiency and responsiveness, it also removes an important safeguard: the client’s ability to review and consent to individual investment decisions.

In an MDA, the client’s mandate becomes the primary control. If that mandate is too broad, poorly aligned to the client’s objectives, or not regularly reviewed, trades can be executed that are technically permitted but practically inappropriate. This increases the risk of best-interest breaches, particularly where market conditions change or client circumstances evolve.

The discretionary nature of MDAs also heightens conflict and governance risks.

Portfolio turnover, asset substitutions or shifts toward related-party investments can occur without immediate client visibility, making robust conflict controls, monitoring and audit trails essential. For ASIC, MDAs are therefore not simply another type of managed account, they are a structure that demands stronger oversight and more rigorous compliance discipline. (ASIC’s Regulatory Guide 179^[9] is dedicated entirely to MDAs).

The importance of conflicts-of- interest management

We described earlier the heightened scope for conflicts of interest across managed account providers, a scope which has clearly influenced the initial focus of ASIC’s surveillance. One of their first priorities will be to shine a spotlight on fees earned for administering managed accounts – legally a grey area – which they will do by examining all arrangements between licensees and third parties collaborating on SMA products. Recipients of the letters sent to SMA providers by ASIC in late 2025 told Professional Planner that the regulator has demanded to see all “contracts and correspondence” between them and SMA investment partners^[10].

ASIC expects licensees and advisers to maintain robust conflict-of-interest frameworks that go well beyond generic policy statements.  At a minimum, this should include a current and detailed conflict register that captures all relevant commercial, ownership and revenue-sharing relationships across the managed account value chain. It also requires documented controls that specify how those conflicts are to be managed, such as restrictions on house-product bias, independent investment committee oversight, and separation between research, product manufacturing and distribution functions.

Coincidentally, late 2025 saw ASIC issue an updated edition^[11] of its Regulatory Guide 181, (AFS Licensing: Managing Conflicts of Interest).

Key updates to RG 181 included:

• how the law applies to conflicts of interest, including the scope of the conflicts management obligation and links to other related obligations
• the types of conflicts AFS licensees should identify and manage
• the need for robust, tailored arrangements to manage conflicts
• practical steps for effective conflict management, and
• a non-exhaustive ‘catalogue’ of related legal obligations and information.

As detailed in RG 181, effective management of conflicts usually requires both disclosure AND control mechanisms. Simply disclosing to a client that a model is a ‘house’ product or that a platform receives a fee is not sufficient. ASIC expects to see evidence that advisers and licensees have assessed whether the conflict could influence the advice given and taken steps to ensure that the client’s interests remain paramount.

For advisers, this translates into a practical evidentiary burden. They must be able to demonstrate not only that conflicts were disclosed, but that they were considered when selecting a managed account for a client. This includes documenting why a particular model was chosen over alternatives, how related-party products were evaluated, and how the adviser satisfied themselves that the recommendation was not driven by commercial incentives. In the context of ASIC’s current surveillance, it is this trail of governance, control and independent judgement that will determine whether managed account advice stands up to regulatory scrutiny.

The BID challenge when using managed accounts

Even where portfolio construction and implementation are delegated to an SMA provider, the adviser remains responsible for ensuring that their advice is appropriate, and in the client’s best interests. In the same way ASIC has made it clear (especially via RG 175)^[12] that research ratings or APL inclusion are not a proxy for an adviser’s own due diligence, nor is the use of a widely offered model portfolio (in an SMA structure) a proxy for suitability or compliance with BID.

This creates a particular challenge in a managed account context. Because most off-the-shelf SMAs are designed for broad client segments rather than tailored to individual circumstances, there is an inherent risk that advisers will default to a broad-based solution without sufficiently interrogating whether the portfolio genuinely aligns with a specific client’s objectives, financial situation and needs.

In practice, this means advisers must be able to articulate and document why a particular managed account was selected for a particular client. That analysis should go beyond high-level risk profiling and include consideration of time horizon, income requirements, tax position, liquidity needs and any relevant client preferences. For example, a growth-oriented SMA that may be appropriate for a younger accumulator could be demonstrably unsuitable for a retiree drawing down income, even if both clients are categorised as ‘balanced’ under a risk-profiling tool.

Tax outcomes are another often-overlooked dimension. Because clients in SMAs retain beneficial ownership of the underlying assets, rebalancing and portfolio turnover can generate capital gains or losses at the individual level. Advisers therefore need to consider whether a particular model’s turnover, asset mix and rebalancing approach are consistent with a client’s tax position and broader financial strategy, rather than assuming those impacts are neutral.

Adviser accountability and governance

Adviser accountability for client outcomes means they cannot treat SMAs as ‘set and forget’ investment solutions. If a model drifts from its stated risk profile, if underlying holdings change materially, or if performance or volatility moves outside reasonable expectations, the adviser must be able to identify that shift and assess whether the portfolio remains suitable for the client. That obligation exists regardless of whether the change originated with a platform, model manager or investment committee.

For ASIC, the key question is not who made a change, but how it was governed. In a file review, the regulator will likely look for evidence that the adviser was aware of model changes, understood their impact, and considered whether the portfolio remained appropriate. Statements such as ‘the model provider did it’ will not be sufficient. What will be important is whether the adviser and licensee had systems in place to detect changes, assess their relevance for the client, and act when necessary.

What ASIC will expect to see: a practical compliance framework for advisers

Much of their appeal of managed accounts lies in their efficiency benefits, and indeed 2025 research suggests that advisers can save up to 24 hours per week by using them with their clients^[13].

Managed accounts offer risk management benefits also – centralised portfolio management allows all clients to be treated equally, and outsourcing to professional investment managers increases the likelihood of better client outcomes, including performance and reduced volatility.

But as already explained, this does not mean managed accounts are risk free from an adviser perspective.

ASIC will seek to test whether advisers and licensees have the systems, documentation and governance in place to demonstrate that managed account recommendations are made and maintained in clients’ best interests.

Evidence they will likely look for includes the monitoring of material changes to asset allocation, underlying investments, risk profile, performance relative to benchmarks, and total costs. They will also expect advisers to demonstrate they are tracking events such as rebalancing, portfolio turnover and substitutions that may have tax or risk implications for individual clients.

Certain events should trigger an adviser review rather than being left to run automatically. These include sustained underperformance, significant changes to the model strategy, increases in fees, shifts in volatility, or changes in a client’s personal circumstances. ASIC is unlikely to be satisfied if a client remains in a model for years without any documented reassessment of whether it remains appropriate.

Red flags that will invite ASIC scrutiny:

• Use of house models by default, without documented comparison to alternatives
• Related-party products dominating the portfolio
• Fee increases or layering that are not clearly explained
• Model changes not reflected in client files
• High portfolio turnover without analysis of tax implications
• Persistent underperformance without action
• Inconsistent or missing performance data
• No independent oversight of model governance

When assessing a model provider, advisers should understand:

• Who owns and controls the model?
• What conflicts exist and how are they managed?
• How often is the model reviewed and by whom?
• How are performance and fees reported?
• What happens when the model changes?

Client files should contain evidence of:

• Why this model was selected for this client
• How alternatives were considered
• How conflicts were assessed
• How fees and risks were explained
• How ongoing suitability is monitored

In the current environment, it is this combination of monitoring, documentation and independent judgement that will determine whether managed account advice meets regulatory expectations.

Conclusion

Managed accounts have become one of the most powerful tools in modern advice, delivering scale, efficiency and access to professional portfolio management. But as their use has grown, so too have the risks that arise when investment decisions are centralised, commercial incentives are layered, and clients are increasingly removed from day-to-day portfolio activity. ASIC’s inclusion of sector surveillance among its strategic priorities makes clear that managed accounts are no longer being treated as a low-risk implementation choice, but as complex structures that demands strong governance, rigorous conflict management and ongoing client-level oversight.

For advisers, the message is clear. The automation and delegation benefits of managed accounts do not reduce accountability – they heighten it. Those who can demonstrate disciplined monitoring, independent judgement and clear client communication will continue to reap the benefits of managed accounts, even in the face of amplified regulatory and consumer risks.

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References:
[1] https://www.ifa.com.au/democratisation-of-wealth-nearly-3-in-5-advisers-utilising-managed-accounts
[2] https://financialnewswire.com.au/funds-management/3-in-5-australian-advisers-now-using-managed-accounts/
[3] https://download.asic.gov.au/media/xbtjrb4m/asic-corporate-plan-2025-26-published-27-august-2025.pdf
[4] https://www.professionalplanner.com.au/2025/11/asic-kicks-off-probe-into-sma-conflicts-of-interest
[5] https://www.afr.com/companies/financial-services/conflicts-poor-transparency-riddle-the-256b-managed-account-market-20260102-p5nr6a
[6] Ibid.
[7] Ibid.
[8] https://www.ifa.com.au/adviser-ratings-leads-launch-of-sma-reporting-standard-framework/
[9] https://www.asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-179-managed-discretionary-accounts/
[10] https://www.professionalplanner.com.au/2025/11/asic-kicks-off-probe-into-sma-conflicts-of-interest
[11] https://download.asic.gov.au/media/ebykrtdj/rg181-published-16-december-2025.pdf
[12] https://download.asic.gov.au/media/pqpe0hwc/rg175-published-21-november-2024-20241219.pdf
[13] https://www.ssga.com/au/en_gb/intermediary/insights/investment-trends-managed-account-report

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What is the practical guidance on due diligence, communication, and client protection when advising on private credit offerings?

Private credit is booming, and advisers are playing a big part in its growth.

A sector that was valued at around $133 billion^[1] in size in 2021 had grown to $224 billion^[2] in assets under management by 2025, an increase of almost 70 per cent in four years, catalysed by a lending pull back by banks, more generous credit underwriting, and investor appetite for income solutions with higher potential returns than traditional vehicles.

Investors can gain access to private credit exposure through various direct and indirect channels, with major investors including superannuation funds, and domestic and international asset managers. Some SMSFs and family offices have also accessed the sector directly.

Financial advisers are a major driver of this growth too, with around a third of advisers regularly allocating to the asset class, and a further 27 per cent having done so on an ‘opportunistic basis’^[3].

But for all the buzz about private credit, black clouds loom on the horizon, with ASIC flagging major concerns about governance and disclosure failures it has observed among private credit providers. Their concern levels, articulated via two recently released reports – and underscored by a recent high-profile action against a provider of ‘term deposit style’ cash accounts – proved significant enough for them to announce private credit as one of their enforcement priorities^[4] for 2026.

The sector is characterised by a wide variety of business models and structures, spanning credit contracts through to managed investment schemes. This in turn means the overarching compliance and disclosure framework can be a patchwork quilt of different acts and codes, making it harder for ASIC to regulate the sector and for participants to know what rules apply and when.

While private credit is far from an unregulated ‘wild west’, there is no doubt that a question mark hangs over the sector, with the failings of a few tainting the many. And whenever ASIC decides to take a look, extra vigilance on the part of advisers is advisable.

In this article, we will explore the world of private credit, examine the findings of ASICs surveillance of the sector, summarise the relevant obligations for advisers, and provide practical guidance for advisers to navigate the sector more confidently and compliantly.

What is private credit and how does it work?

Private credit refers to loans and debt investments made by non-bank institutions, often directly to businesses, property developers, or projects that fall outside traditional lending channels. These loans are typically originated and held by private credit managers. For borrowers they can allow access to funding that be hard to secure through banks. For investors they can offer access to yields that are usually higher than traditional fixed income products.

Unlike public bonds, private credit arrangements are often bespoke, involving direct negotiations between borrower and lender. Investment structures in the sector vary widely and can include:

• Pooled managed investment schemes (MIS)
• Listed or unlisted credit trusts
• Wholesale-only offerings available to sophisticated investors
• Retail credit funds, sometimes accessed through wealth platforms

Underlying loans might be secured or unsecured, and may relate to commercial real estate, small-to-medium enterprise (SME) lending, or asset-backed lending.

Many private credit offerings present themselves with features familiar to clients, for example ‘monthly income,’ ‘fixed term,’ or ‘secured’, but which can mask significant variations in liquidity, valuation practices, and credit risk.

For advisers, this means not all private credit products are created equal. Different offerings carry different fee structures, redemption mechanics, default handling procedures, and governance controls. Moreover, because the sector is not under a unified regulatory framework, disclosure obligations, trustee oversight, and reporting vary markedly across products.

The sector’s growing popularity, combined with patchy transparency and inconsistent disclosure, is precisely what has drawn the regulator’s focus. Advisers must therefore not only understand how private credit works but also ensure their clients do too, in language that makes the risks and trade-offs clear.

What ASIC ‘s observations of the private credit sector revealed

In the latter part of 2025, ASIC released two major reports into the growing private credit sector: a market review^[5] (Report 814) and surveillance findings^[6] (Report 820).

These investigations uncovered systemic issues in governance, transparency, and investor protection, highlighting that key segments of the market, especially those targeting retail and wholesale investors, present substantial enough regulatory concerns to warrant elevated scrutiny.

One core observation relates to conflicts of interest and misaligned remuneration.

In Rep 814, ASIC flagged widespread practices where managers retain borrower-paid fees (e.g. upfront, arrangement, or default fees) while also charging management fees to investors. In some instances, these borrower fees were not disclosed at all or were understated, raising concerns about true manager remuneration. These practices potentially create a conflict between investor’s best interests and manager incentives.

Valuation practices were another key area of concern. Many funds, especially those exposed to real estate construction and development, lacked independent quarterly valuations. Some used outdated valuations, or valuations generated internally or by related parties, undermining objectivity. Methodological inconsistencies were also uncovered:

“There is lack of clarity on whether LVR is based on cost, current value or forecast completion value. Some development sites purchased in 2021–22 are now lower in value due to building cost inflation of more than 20%. If funds are still using a 2021–22 valuation or original LVR, that value could be misleading.” ASIC Rep 814.

Across the two reports, ASIC also drew attention to portfolio opacity, finding some funds did not provide adequate disclosure about non-performing loans, credit concentration, or whether income distributions were being funded from borrower repayments, interest, or capital drawdowns. In some instances, distributions appeared unnaturally smooth given the underlying asset risk, suggestive of possible return engineering.

Terminology misuse further compounded investor misunderstanding. ASIC warned that this could give retail investors a false sense of safety, as demonstrated by the poorly understood distinction between a ‘term deposit’ and a ‘term account’. The similarity of labelling would lead many to conclude – reasonably – that they were the same, characterised by rock solid security and a government guarantee. But that is only true of term deposits. Many term accounts – including some popular with advisers – are far less secure and have underlying assets that are a mix of cash, residential mortgage-backed securities and asset-backed securities. As one analyst observed:

“[The conflation of the phrases is a deliberate marketing ploy.] The audience is not sufficiently literate to understand the risk-reward trade-off.” Ben Walsh, JP Morgan^[7].

Just as ASIC has previously cautioned advisers about relying too heavily on research ratings, an emerging theme – also echoed in the Shield and First Guardian cases – is that advisers cannot rely on the ability to access an offering via a platform as indicative of suitability or endorsement.

Similarly, advisers shouldn’t rely on TMD documents as a substitute for their own due diligence. In a recent high-profile ASIC Stop Order, the provider’s description of the target market and investment timeframe was found to be problematic, as it did not reflect the risks associated with the underlying investment.

These findings underscore the need for financial advisers to exercise heightened vigilance when recommending private credit, especially to retail clients. Transparency, clear communication, and discussion about risks and trade-offs take on extra importance, as does doing their own thorough investigations about suitability.

Risks and regulatory considerations for advisers

The disparate regulatory landscape in private credit can be challenging to navigate. Sometimes the easiest approach is to go back to basics and revisit the foundational legal and ethical obligations applying to financial advisers, regardless of the product solution.

At the centre of course is the best interest duty, articulated in s961B of the Corporations Act, and requiring advisers to actively investigate and recommend only those products that are appropriate to the client’s needs, financial objectives, and risk tolerance. This includes considering product structure, liquidity, concentration risk, and valuation practices – areas where ASIC has found considerable variation among private credit funds.

Staying with the Corporations Act, and s961G, requires advice to be based on reasonable grounds, supported by due diligence that goes beyond high-level product summaries or ratings. ASIC has specifically cautioned advisers against over-reliance on external research houses, noting in REP 779:

“[Advisers] should be careful not to over-rely on advice licensee product approvals or external research ratings.” ASIC Report 779^[8].

The assumption that platform-listed private credit products are vetted or low-risk has effectively been debunked by ASIC. When it comes to assessing product suitability, access and research ratings must not replace adviser due diligence and judgement.

Unfortunately, whereas many retail investment and risk offerings are homogeneous, allowing a degree of efficiency when advisers are comparing options, private credit offerings are characterised by much more variability in structure, complexity, and liquidity. Due diligence around such products is therefore likely to be a far more demanding task, where a wider range of disclosures and documents needs to be scrutinised.

The Adviser Code of Ethics^[9] also reinforces these expectations. Several standards seem particularly relevant when it comes to private credit:

• Standard 2: requires advisers to act with integrity and in the best interests of each client – which demands a genuine understanding of the product, not just reliance on platform status or external ratings.
• Standard 5: compels advisers to ensure clients understand the advice and its consequences. Given ASIC’s concerns around investor confusion, especially with terms like ‘term investment’ or ‘secured’, this requires clear and proactive risk explanation.
• Standard 6: directs advisers to consider the client’s broader long-term interests and circumstances. Given the appeal of cash and income products to older, more risk intolerant investors, helping them understand how illiquid or opaque private credit exposures may affect liquidity, income reliability, and risk, seems especially critical.
• Standard 7: mandates that any remuneration or benefits received by the adviser or licensee must not compromise the client’s best interest. This is important given ASIC observations about opaque fee structures on private credit funds, which may act to incentivise product recommendations inconsistent with client objectives.

Ultimately, ASIC’s position is clear: regulatory attention is intensifying, and advisers who engage with private credit must not only understand these products in detail, but also explain them clearly, recommend them judiciously, and document their advice process thoroughly.

Wholesale v retail – the misclassification traps

Some private credit offerings are only available on a wholesale basis and herein lies another trap for advisers – the misclassification of investors as wholesale instead of retail. Classifying a client as wholesale just to access certain products, without assessing whether this aligns with their understanding, needs, and risk profile, may breach best interests’ duty. ASIC commentary in relation to the wholesale investor test, including their 2024 submission to treasury^[10], reinforces the idea that meeting the test does not automatically mean the product or service is appropriate for that client and licensees must still ensure suitability and capacity.

Practical adviser guidance: due diligence client protection

As ASIC scrutiny intensifies around private credit, financial advisers must ensure robust due diligence and demonstrate alignment with client best interests. The diversity and complexity of these products mean that generic filters or assumptions such as platform access or model portfolio inclusion are not defensible demonstrations of professional analysis and judgement. Here is a simplified checklist of steps for advisers to navigate the complex landscape of private credit in a compliant, client focused way:

Product investigation and analysis

Before recommending a private credit fund, advisers should probe for specifics around:

• Asset types: Are loans secured? What sectors or geographies are being financed?
• Borrower screening: How are borrowers assessed for creditworthiness and covenant strength?
• Impairment policies: How are late payments or defaults reported and managed?
• Liquidity terms: Are redemptions gated, delayed, or subject to notice periods?
• Valuation processes: Are valuations independent, current, and transparent?
• Fees and expenses: Are there performance fees, withdrawal penalties, or hidden layers?

ASIC’s findings in REP 814 and REP 820 revealed provider performance in these areas to be variable and deserving of extra attention.

Assessing client fit

Private credit offerings can be complex and are often wrongly assumed to share the same risk and liquidity characteristics of traditional cash and income products. This means advisers must pay particular attention to assessing:

• Risk tolerance: Are clients prepared for potential delays, volatility, or capital loss?
• Time horizon: Does the investment suit clients who may need liquidity?
• Income expectations: Is the return steady, variable, or contingent on performance?
• Experience: Does the client understand credit products and how they differ from deposits?

Special caution is needed for SMSF holders and retirees, who may overestimate capital security based on familiar terminology like ‘term investment.’

Documentation and client communication

ASIC expects advisers to:

• Record analysis showing why the product suits the client’s profile and goals
• Evidence informed consent, including communication around risks, illiquidity, and volatility
• Avoid opaque language or excessive reliance on PDS extracts; use plain English and visual aids where appropriate

AFCA will not hesitate to examine whether the client truly understood the nature of the investment, even in wholesale contexts.

Ongoing monitoring

Beyond initial implementation, advisers should continue to monitor:

• Redemption delays, limits, or suspension (gate notices)
• Portfolio concentration drift
• Changes in fund governance or valuation methods
• Emerging liquidity or performance risks
• Client life events that may shift investment suitability

Red flags to watch out for

ASIC Reports 814, 820, along with their recent enforcement activities and media commentary, can also be distilled into a handy table of red flags and implications, giving advisers directional guidance around what to look out for when assessing private credit products:

Conclusion

Private credit is no longer a niche category, it has moved into the mainstream, with platforms, model portfolios, and advisory recommendations helping drive a multi-billion-dollar sector. But that growth has shone a light on the sector’s complexity and opacity, resulting in increased regulator concern. ASIC’s reports and enforcement actions make clear that advisers cannot assume product integrity based on platform access or research ratings alone. In an environment where fund structures, risk disclosures, and liquidity mechanisms vary widely, advisers must pay extra attention to their due diligence, communication, and documentation around private credit recommendations.

This is not to say the sector should be avoided: on the contrary there are many quality providers giving clients the opportunity to access income products that work harder than traditional vehicles (albeit with higher risk).

And for every risk highlighted in ASIC’s reviews, there is a practical adviser response, in terms of questions to ask, red flags to recognise, and conversations to have with clients.

With private credit now firmly on the regulator’s radar, this is a moment for advisers to assess their approach and arm themselves with the tools that can help reinforce their professionalism and expertise and deliver better outcomes for their clients.

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Legislated CPD Area: Regulatory Compliance & Consumer Protection (0.5 hrs)

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References:
[1] https://axis.ausiex.com.au/articles/increased-interest-in-private-credit-as-inflation-takes-off/
[2] https://www.investordaily.com.au/markets/58101-private-credit-surges-past-224bn
[3] https://www.moneymanagement.com.au/news/funds-management/how-high-advisers-private-credit-usage-amid-asic-concerns
[4] https://www.moneymanagement.com.au/news/financial-planning/asic-flags-private-credit-misconduct-among-2026-enforcement-priorities
[5] https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-814-private-credit-in-australia/
[6] https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-820-private-credit-surveillance-report-retail-and-wholesale-surveillance/
[7] https://www.afr.com/wealth/investing/why-one-word-really-matters-when-it-comes-to-private-credit-20250922-p5mwx2
[8] https://download.asic.gov.au/media/dmifq31x/rep779-published-21-february-2024.pdf
[9] https://www.legislation.gov.au/F2019L00117/latest/text
[10] https://download.asic.gov.au/media/hxrizoei/202405-submission-no-62-wholesale-investor-and-wholesale-client-tests.pdf

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