Are these ten costs eating into your advice firm's profitability?

Revenue in the Australian advice profession is rising and so are costs. For many firms, costs are rising far more quicky than anticipated.

The profession has made real progress on profitability in recent years, but that progress sits against a backdrop of structural cost pressures that show no sign of easing. Understanding where margin is being lost is the first step to defending it.

AFSL operating costs represent the heaviest burden for advice practices, ranging from $20,000 to $50,000 or higher per adviser each year, with all-in annual costs ranging from $36,896 per adviser on the lower end to $83,877 on the higher end for those paying greater licensee fees and insurance premiums.

Here are the ten biggest margin squeeze points facing advice firms right now.

1. Regulatory levies with no ceiling

The ASIC industry funding levy and the Compensation Scheme of Last Resort levy have become a growing line item for every practice in Australia.

ASIC levies for one ASDAA member firm nearly doubled from $11,616 in 2021-22 to $22,265 in 2024-25, while CSLR advice sub-sector levies surged from $4.8 million in 2023-24 to a projected $126.9 million in FY2026-27, equating to $8,300 to $9,300 per adviser.

These costs are non-negotiable. They land every year, regardless of firm performance.

2. Professional indemnity insurance

PI insurance is one of the most unpredictable cost lines in any advice firm’s budget. Premiums for one firm rose 409 per cent nominally from $9,571 in 2007 to $48,762 in 2026, far outpacing inflation.

The market has shown some improvement with new entrants, but premiums remain sensitive to claims history, APL complexity, and the broader insurance cycle.

3. Licensee and AFSL operating costs

Whether a firm operates under its own AFSL or as an authorised representative, AFSL operating costs are substantial and rising.

The ASIC levy charges a minimum of $1,500 plus $2,691 per adviser, while PI insurance averages $8,321 when bundled into licensee costs. For firms that self-license, the overhead of maintaining compliant infrastructure keeps growing as regulatory expectations tighten.

4. Compliance labour

Compliance is no longer a part-time job for a senior adviser. Firms of any meaningful size need dedicated compliance capability, whether internal or outsourced. That capability has risen in cost alongside both regulatory complexity and the scarcity of experienced compliance professionals.

Understaffing compliance to save money is a false economy. The cost of a breach almost always exceeds the cost of the staff who could have prevented it.

5. Technology investment

Technology is both a cost pressure and a margin enabler, but the investment arrives before the efficiency gains do.

Firms upgrading their CRM, advice software, client portals, and compliance monitoring face real upfront costs that can take years to recoup. The gap between investment and realised benefit is where margin is quietly lost.

6. Cybersecurity

Security should be an integral part of an advice firm. It’s no longer optional. Firms that underinvest face regulatory risk and the potentially practice-ending cost of a data breach.

Leading practices invest in cybersecurity solutions including technological safeguards, staff training, policy updates, and regular audits. There is a direct correlation between this investment and higher revenue and profit margins.

7. Adviser and staff salaries

Qualified advisers are scarce, and that scarcity has direct consequences for wages. A compressed adviser workforce, rising client demand, and higher qualification requirements have pushed salary expectations upward.

Practices competing to retain talent are absorbing real salary increases that are not always matched by proportional revenue growth.

8. Paraplanning and support costs

Paraplanning has followed a similar trajectory. Experienced paraplanners are in demand and priced accordingly. Firms moving to outsourced or offshore models have partially offset this, but the transition carries its own costs and governance obligations, including compliance scrutiny from ASIC.

9. The cost of implementing regulatory change

Every reform cycle generates an implementation cost that falls on the firm. The Delivering Better Financial Outcomes reforms require firms to update documentation, retrain staff, revise supervision frameworks, and update client consent processes.

The DBFO changes are expected to reduce ongoing burden eventually, but the transition carries real cost in time, legal advice, and operational disruption.

10. The hidden cost of unscalable processes

This one rarely appears on a cost report, but it is one of the most corrosive pressures in the profession. Firms that have grown without systematising their operations pay for every piece of advice twice: once to deliver it, and again to manage the inefficiencies that follow.

The cost shows up in adviser time, rework, compliance risk, and inconsistent client service. It does not appear as a single line item, which is precisely why it persists.

The firms holding their margins in this environment treat cost management with the same discipline they bring to client management. Rising revenue helps. It does not, by itself, solve the problem.