Fixing the economics of risk advice without weakening consumer safeguards

The irony isn’t lost on anyone. The people who help Australians prepare for life’s worst shocks are themselves battling to survive.

Between rising levies, endless paperwork, and fewer peers to share the load, many risk advisers are wondering if the profession they’ve built their lives around still has a future.

And that matters – because when life throws its worst at people, through illness, injury, or loss of income, good advice can be the difference between resilience and ruin. The FAAA Value of Advice Index 2025^[1] proves it: 96% of advised Australians felt more confident through turbulent times thanks to their adviser.

That’s why, despite the pressure, there still lies a chance to rebuild – to design a system that rewards integrity, supports sustainability and still protects the clients who rely on advice when life goes sideways. Because, without a strong, sustainable risk-advice profession, that consumer safety net frays. The challenge, and opportunity, is to rebalance the system, so advisers can run viable businesses and keep doing what they do best – ensuring Australians are supported when life doesn’t go to plan.

Getting the balance right on regulation

Reform has done a lot to rebuild trust in financial advice – and rightly so. But for many risk advisers, the economic fallout of that progress hasn’t been shared evenly.

Smaller, risk-focused practices often face the same levies as large, diversified firms. A one-size-fits-all approach sounds simple on paper but drives up costs, squeezes margins, and makes advice less accessible for clients who need it most, while forcing already-stretched businesses to absorb the impact.

The two key levies – ASIC and the Compensation Scheme of Last Resort (CSLR) – illustrate the challenge. The ASIC levy has more than doubled^[2] from around $900 to $2,300 per adviser. The new CSLR levy has grown from $20 million in its first year to $67 million this year^[3], with further increases projected as investment-related claims rise. These costs are shared across all advisers, even though most compensation claims stem from investment products rather than life-insurance advice.

The intent behind both levies is sound: maintain consumer confidence and protect clients from misconduct. The opportunity now is to make them more proportionate. Tailored levies and streamlined compliance could support a fairer model, recognising the lower risk profile of pure risk advisers. That kind of fine-tuning would help preserve diversity in advice businesses without diluting consumer safeguards.

And for advisers, contributing to discussions about how levies could be better calibrated for their specialisations, is an opportunity to help shape reform in a way that directly impacts their businesses.

Revitalising the talent pipeline

While regulation remains one of the biggest hurdles for the advice profession, an equally urgent challenge is attracting and retaining the next generation of advisers. Adviser numbers have fallen from 26,000 to about 15,000 nationwide,^[4] with few new entrants choosing risk advice as a career.

Education reform has boosted professional credibility but created practical barriers. The professional-year model is costly for small firms, which invest in training only to see new advisers leave for higher-paying roles. Meanwhile, degree requirements have prompted many experienced and strategically skilled risk advisers – often in their 50s and 60s – to exit the industry.

That exodus has taken more than numbers with it. It’s stripped the profession of lived experience – the mentors who once guided new entrants through the real human side of advice. Risk advice isn’t just about products or premiums; it’s about empathy and judgement – understanding family needs and knowing when to have the right conversations. It’s a profession that requires the kind of wisdom that comes only from sitting across the table from clients in tough moments, not in lecture halls.

To rebuild the pipeline, we need education pathways that reflect industry realities – practical, risk-specific training supported by structured mentoring. A dedicated diploma-level qualification, with hands-on learning, would attract new talent and give experienced advisers a meaningful way to pass on their craft. The Government’s Delivering Better Financial Outcomes (DBFO) legislation provides a clear opportunity to act. If the Government can create a new class of adviser under the DBFO reforms, it should equally recognise risk insurance specialists as a distinct and essential professional category.

Supporting commercial sustainability

Sustainability isn’t just about people or policy; it’s about economics.

Rising compliance costs, shrinking commissions, and heavier review obligations have made it harder for many advisers to run profitable businesses. Annual reviews, often triggered by premium adjustments and regulatory expectations, now consume as much time as writing new business.

These trends underline the need to rebalance the economics of quality advice.

Reviewing commission structures, streamlining clawback rules, and leveraging smarter technology could free advisers to focus on clients. Insurers and licensees can help by sharing data, improving claims efficiency and collaborating on practical solutions that make advice delivery smoother and more sustainable.

For advisers, focusing on operational efficiency – adopting digital systems, automating review workflows, and collaborating more closely with product partners – offers tangible ways to strengthen profitability without compromising service.

An industry-led initiative to reframe risk advice

After years of headlines focused on misconduct, reform and red tape, it’s time for the conversation about advice to change. For too long, media coverage has focused on the failures of a few rather than the value delivered by the many. The industry has spent a decade rebuilding trust – but restoring perception requires just as much attention.

As an industry, we’ve never collectively told our story. In 2024 alone, life insurers paid out more than $2.2 billion^[5] in mental-health claims, with total and permanent disability (TPD) claims accounting for nearly one-third of all payouts – yet few Australians know it.

And that’s just one category.

Across all types of life insurance, billions more are paid out each year to help families stay in their homes, keep small businesses afloat and prevent financial hardship when tragedy strikes. Without that support, the burden would inevitably fall on government safety nets – a point often lost in public debate about regulation and reform.

Life insurance remains misunderstood, too often seen as discretionary rather than essential. Other sectors have successfully reshaped public sentiment through coordinated messaging – the pork industry’s “Put some pork on your fork” campaign turned a discretionary product into an everyday staple. The same thinking could transform how Australians view risk advice.

A national, industry-led advertising campaign – uniting advisers, licensees, insurers and associations – could reframe life insurance as a core part of every household’s financial safety net. It would balance years of negative coverage with a message of purpose and impact, showing that professional advice isn’t a sales function but a safeguard that keeps families financially secure when life goes wrong.

A profession worth recognising

Despite the challenges, this remains a profession defined by purpose, resilience and an enduring commitment to clients – one that deserves recognition. Celebrating those who serve under pressure, through initiatives such as industry awards and adviser storytelling, helps keep the profession visible, inspire confidence, and attract new talent.

But recognition must go hand in hand with reframing. The same campaign that rebuilds public trust can also restore professional pride – showing advisers that their work is not just regulated, but respected; not just necessary but valued.

For advisers, the opportunity is to shape a profession that protects Australians and sustains meaningful careers. With fairer levies, practical education pathways and smarter compliance, advisers can focus less on red tape and more on what truly counts – helping people through life’s hardest moments.

Together, regulators, insurers, licensees and advisers can build a profession that stands as a cornerstone of national financial resilience.

By Sue Laing, Technical Director at The Risk Store Consulting and Steve Murray, Managing Director at Catalyst Compliance