The prudential fence: why Mulino revived the new class of adviser, and then locked most of the industry out

For eighteen months the new class of adviser was the reform that would not die and would not arrive. It was pulled from the second tranche of Delivering Better Financial Outcomes in March 2025, when Stephen Jones released the pared-back exposure draft in his final act as Financial Services Minister. It was promised as supplementary legislation. It was then swallowed by the collapse of the Shield and First Guardian master funds, which consumed Treasury's advice policy capacity for the better part of a year.

On 19 August, at the National Press Club, Daniel Mulino brought it back. He also narrowed it to the point where most of the financial services industry cannot use it.

The new class will be available only to APRA-regulated superannuation funds and life insurers. Advice licensees are barred. So are banks, which have argued for something like this since the Quality of Advice Review reported. Commissions, bonuses and volume-based payments are prohibited outright. The regime will be reviewed after three years.

What changed the Minister's mind

The restriction is not incidental to the decision. It is the reason the decision could be made at all.

Speaking at the Conexus 2026 Retirement Leaders Summit on the same day, Mulino said his thinking on the new class had been reshaped by Shield and First Guardian. The additional consumer protections that come with a prudential regulator sitting over the entity were, on his account, what allowed him to proceed.

That is a coherent position, and it is worth stating plainly rather than treating as political cover. The advice component of the Shield and First Guardian failures ran through AFSL-licensed advice businesses. Around 12,000 investors lost more than $1 billion. ASIC alleges that two authorised representative groups operating under a single licensee advised roughly 6,843 clients to move about $677 million into the two funds. Whatever else that episode demonstrated, it did not demonstrate that the AFSL regime is a reliable containment mechanism for a lower-qualified adviser class selling into superannuation.

An entity regulated by APRA carries capital requirements, prudential standards, a supervisory relationship and, under the same August package, a proposed obligation to compensate members for full capital losses where trustee obligations have been breached. Mulino has also flagged new APRA powers to impose capital requirements on trustees offering higher-risk investment options. A new class of adviser operating inside that perimeter is a materially different proposition to one operating inside an AFSL with professional indemnity cover and a Compensation Scheme of Last Resort backstop.

The original design contemplated something broader. Under the version Jones described, any AFSL could employ a new class adviser, with the advice confined to APRA-regulated products and no fee or commission permitted. That version is gone.

The objection from the profession

The Financial Advice Association Australia said it was disappointed the new class will be limited to select large institutions. Chief executive Sarah Abood argued that consumers need choice in how they access simpler, lower-cost advice, and that advice practices should be able to use the model to help more Australians. The association also signalled it will hold the government to its commitment that the new class does not encroach on the work of professional advisers.

The commercial logic of that objection is straightforward. A small practice fielding a call from an existing client's adult child about a first salary sacrifice arrangement has no economic way to service it. The compliance cost of a simple recommendation is not proportionate to the complexity of the question. A new class adviser sitting inside that practice, on a lower qualification standard and a narrow product perimeter, would have been the mechanism to answer it. Under the announced design, the practice refers the client to their super fund instead.

Herbert Smith Freehills Kramer superannuation partner Andrew Bradley has questioned the logic of confining the role to super funds. The Council of Australian Life Insurers welcomed the model, with chief executive Christine Cupitt describing it as complementary to professional advisers, while pressing for a clear legislative timetable. UniSuper chief advice officer Andrew Gregory offered qualified support, conditional on training, supervision and consumer protections being built in.

The Super Members Council, which has argued the best interests duty should not be weakened, welcomed the broader advice expansion. Association of Superannuation Funds of Australia chief executive Mary Delahunty framed the package as enabling funds to answer questions they currently cannot, while accepting that simple advice through super will not substitute for comprehensive planning.

What the three-year review is actually testing

The review clause is the part of this announcement that will matter most and has been discussed least.

Three years is long enough for the new class to become structurally embedded and short enough that the terms of the review will be contested from the day the legislation passes. The obvious question it will be asked to answer is whether the model can be extended beyond APRA-regulated entities. The more useful question is whether the safeguards did any work.

There are three testable propositions. Whether the prohibition on commissions, bonuses and volume-based payments actually prevented the sales culture that the qualification restrictions invite. Whether the advice perimeter held, or whether new class advisers drifted from simple topics into territory that requires a relevant provider. And whether complaint and remediation data from funds using the model diverged from the advice sector's own.

Those are measurable. Whether anyone commits to measuring them before the regime commences is a different matter, and the profession's most productive intervention now is to argue for the metrics rather than relitigate the perimeter.

The gap between a speech and an Act

Nothing has been introduced to Parliament. No timetable was attached to the new class, the best interests duty reform, the client advice record, or the anti-hawking changes announced alongside them.

That caveat carries more weight than usual here. Mulino told the 2025 Retirement Leaders Summit that he was aiming for draft legislation on the contentious DBFO elements, the new class included, by the end of that calendar year. It did not appear. Australian Retirement Trust and AustralianSuper, in a joint statement after the Press Club address, asked for draft legislation so the sector could have confidence in the path forward. That is a reasonable request from funds now being asked to build capability against an announcement.

For advisers, the near-term implication is one of positioning rather than compliance. If the new class arrives as described, the entities building simple advice capacity at scale will be super funds and life insurers, and the capacity they build will sit outside the Financial Adviser Register entirely. Whether that closes the advice gap or simply relocates it is the argument the profession should be having while the drafting is still open.