Green Paper on Modernising the Financial Advice Licensing Framework

The FSC has released a Green Paper exploring opportunities to modernise Australia's financial advice licensing framework, with the aim of strengthening consumer protection, supporting a diverse and professional advice sector, and ensuring the regulatory model remains fit for purpose in a changing environment.

Informed by research from CoreData, The Value and Future of Advice Licensing, the paper invites a broad, forward-looking discussion on how the licensing regime should evolve to meet current and emerging challenges.

A central theme is the growing concern that risk within the system is not being appropriately allocated or managed across different industry participants.

The Green Paper examines how a range of structural and regulatory factors are contributing to increased systemic risk, including:

• Industry fragmentation and the growth of smaller licensee models
• Variability in financial requirements and professional indemnity insurance coverage
• The introduction of the Compensation Scheme of Last Resort (CSLR)
• Constraints on regulatory resourcing

While overall adviser numbers have declined, more than 450 new micro Australian Financial Services (AFS) licensees—firms with fewer than 10 advisers—have entered the market since 2020.

The paper recognises the important role of firms of varying scale in supporting adviser choice and innovation. At the same time, it highlights the need for a regulatory framework that enables effective supervision of an increasingly diverse market, while maintaining strong standards of governance and consumer protection across all licensees.

The Green Paper sought feedback on a range of proposals aimed at:

• Creating a more responsive and proportionate licensing framework that reflects firm diversity
• Establishing clearer and more balanced accountability between licensees and individual advisers
• Strengthening financial and operational requirements to better protect consumers

Industry and public feedback has informed the forthcoming FSC White Paper on the Future of Advice Licensing, to be released in 2026.