The regulator has drawn a line. ASIC signalled it will scrutinise any move by major banks to re-enter retail wealth advice, even as two of the big four test the water. The timing matters because Labor is reviving reforms that would further separate banking from advice, and property investors who rely on integrated mortgage and investment planning could find themselves in the gap.
The backdrop: banks exited wealth advice after the Royal Commission exposed conflicts of interest, selling off advice arms or shutting them entirely. Now some want back in, but under a watchful eye and tighter rules.
Why this matters for property investors
Most property investors don’t sit down with a financial planner before buying their second or third property. They talk to their broker, check serviceability with their bank, maybe run the numbers past an accountant. That informal loop works because the broker and lender already know the client’s debt position, income and risk appetite.
If banks re-enter advice under strict separation rules, that loop could break. A bank adviser might not be allowed to discuss your mortgage alongside your investment strategy, or vice versa. You’d need two conversations, two sets of compliance, two fees, or you’d skip the advice step entirely and wing it.
The risk is not theoretical. Self-directed property investors already navigate a fragmented system: mortgage broker (not authorised to advise on tax or structuring), accountant (not licensed for investment advice), buyer’s agent (focused on acquisition, not portfolio strategy). Adding another silo makes the whole thing harder, not easier.
The mechanic behind the split
Wealth advice regulation in Australia rests on a principle: the person recommending an investment shouldn’t profit from selling it. That’s why banks had to exit advice when their planners were pushing in-house products. The proposed reforms would harden that wall, making it difficult for a bank to offer both credit and strategic advice under one roof even if the advice is genuinely independent.
The trade-off: fewer conflicts, but also fewer touchpoints. For a first-home buyer stretching serviceability, that might be fine, the decision is mostly about the loan. For an investor building a portfolio across multiple properties, super and trusts, losing access to someone who can see the whole picture is a material loss.
Industry groups argue the reforms will push advice out of reach for middle-income clients. Banks counter that separation protects consumers. Both are right, and property investors sit in the crossfire.
Pressure points and unknowns
Serviceability is already tight. Borrowing capacity is down around $70,000 as prices fall, and lenders are adding buffers on top of the standard 3 per cent assessment rate. Investors who need to restructure debt, cross-collateralise or use equity from one property to fund another rely on brokers and lenders who understand the strategy, not just the transaction.
If advice and lending are forcibly separated, expect:
- Longer approval timelines as investors shuttle between advisers and lenders
- Higher advice fees, because planners can’t cross-subsidise with lending commissions
- More DIY decisions, because paying separately for advice and execution feels like double-dipping
- Greater risk of mismatched strategies, where the advice assumes a loan structure the lender won’t approve
The upside scenario: if banks do it right, separation could produce genuinely independent advice that prioritises the client’s goal over the product. That would be a win for investors who currently get no advice at all because the conflicted model made it untrustworthy.
The downside: advice becomes another compliance exercise, expensive and disconnected from the actual financing decision. Investors revert to online calculators and property spruikers.
The catch
- ASIC’s warning doesn’t ban banks from advice, it signals heightened scrutiny and expectation of strict separation
- Labor’s reform timeline is unclear; it could take 12-24 months to legislate, longer to implement
- Existing clients with integrated bank advice are likely grandfathered, but new clients will face the split from day one
- The gap hits hardest for investors in the $500k-$2m portfolio range, too complex for DIY, not wealthy enough for private banking
What changes next
If you’re planning a property purchase in the next 12 months, the current system still applies. Brokers can discuss strategy informally, lenders can offer general guidance, and the lines are blurry enough to get things done.
Beyond that, expect advice to cost more and cover less of the decision. You’ll need to be clearer about what you want before you walk into a lender’s office, because they won’t be allowed to help you figure it out.
For investors using structures, trusts, SMSF, cross-collateralisation, the planning step becomes non-negotiable. You can’t rely on your broker to connect the dots if the broker is prohibited from giving strategic input. Budget for a licenced adviser upfront, and make sure your lender understands the structure before you commit to a contract.
The timeline and what could stall it
Labor needs parliamentary time to revive the reforms, and the politics are messy. Banks will lobby hard, arguing that separation reduces access and increases costs without improving outcomes. Consumer groups will push back, pointing to Royal Commission findings that conflicts led to billions in poor advice.
The likely compromise: separation with carve-outs for simple advice (e.g., salary sacrifice, first-home buyer basics) and a transition period for existing clients. That keeps the headline reform intact while softening the impact on volume lending.
Watch for:
- Draft legislation in the next federal budget cycle
- Industry submissions arguing for a “safe harbour” test where banks can prove independence without full separation
- ASIC enforcement actions against any bank that jumps back into advice before the rules are clear
- Broker groups lobbying to expand their own advice permissions as an alternative to bank planners
If you’re making a call this year
Get your structure and strategy sorted now, while the system is still flexible. If you’re planning a multi-property portfolio or a complex refinance, lock in advice and pre-approval before the rules harden.
If you’re a first-timer or single-property upgrader, the changes won’t hit you as hard, your decision is mostly about the loan, not portfolio strategy.
For investors who’ve been putting off a review of their debt structure, cross-collateralisation or tax setup: this is the window. Once separation takes effect, coordinating advice and execution gets harder and more expensive.
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General info, not financial advice.
