Riding the Regulatory Tailwinds: Why Financial Services Remains Ripe for Private Equity Deals

The Australian regulatory landscape continues to be a minefield for financial services businesses.  In 2025 we saw ASIC:

• secure a penalty of $250 million against a major bank for misconduct and systemic risk failures affecting 65,000 customers, the largest penalty ASIC has ever secured against a single entity;
• increase the number of civil penalty proceedings it filed by 53%,  and the number of criminal convictions secured by 31%;
• take action against financial advisers, ratings agencies, responsible entities and in particular superannuation trustees in connection with the collapses of the Shield and First Guardian managed investment schemes, resulting in settlements returning approximately $420 million to affected investors and several pending court cases; 
• take action and secure a penalty of $23.5 million against one of Australia’s largest profit-to-member superannuation fund trustees for failures in processing members’ death benefits and insurance claims; and
• conduct surveillance in relation to 28 private credit funds, and put the private credit industry on notice that governance and transparency standards need to rise in 2026.

Against this backdrop of unprecedented regulatory scrutiny, financial services businesses are trying to:

•  improve member services, all the while reducing the cost to serve;
• scale up their defences against cybersecurity threats;
• fend off disruptors and deliver innovative products and services to customers;
• manage the workplace disruption that is occurring as a result of the AI revolution; and
• keep pace with the consolidation and globalisation of the industry.

Notwithstanding these existential challenges, there is tremendous opportunity across all segments of the market. 

In the financial advice space, the number of registered advisers has plummeted from 26,581 in 2018 to around 15,000 today, and is expected to fall further.  That amounts to approximately one advisor for every 1,695 Australians.  Meanwhile, the demand for advice is growing with:

• 750,000 Australians expected to retire over the next five years;
• an ageing population, with people aged 65 and over comprising over 17% of the Australian population as of 2022, and projected to exceed 22% by the end of 2026;
• 12.4 million Australians reporting as having unmet advice needs; and 
• 91% of Australian adults reporting that they have concerns about their finances.  

The advice industry, once largely owned by major banks and wealth companies, is now fragmented and predominantly independent.  The balance of power has shifted, and that shift is resulting in significant consolidation and M&A activity.  With educational standards continuing to rise and pending reforms to enhance access to digital advice, the advice industry is ripe for disruption and transformation.

Similarly, the superannuation sector is emerging from a period of rapid consolidation.  In 2015, there were approximately 2,000 APRA-regulated superannuation funds in the market.  As at March 2026, there are less than 70 public-offer superannuation funds left in the market, with that number likely to further contract.  All the while, the total size of the market has grown from approximately A$3.0 trillion to A$4.5 trillion over the past 5 years, and is projected to grow to A$9.0 trillion over the next 15 years.

The retail ‘for profit’ segment of the market, traditionally regarded as more expensive and lower performing than the ‘profit-to-members’ segment, has all but caught up on both metrics.  For the first time, we are seeing competitive flows to ‘for profit’ retail funds eclipse the flows to the largest ‘profit-to-member’ funds.  All the while, super funds are under pressure to invest more heavily and, at the same time, reduce costs.

Private credit funds are also in the early stages of disruption.  Australia’s private credit market has rapidly expanded over the past 18 months or so, is now estimated at A$200 billion in assets under management and continues to grow.  ASIC has put the industry on notice that participants need to take swift action to improve transparency and fund governance and enhance valuation and liquidity management practices.  

The same can be said to varying degrees to all other segments of the market from insurers, banks, non-bank lenders and payment providers, wealth managers and distributors.

Grappling with all of these issues requires one thing – investment.  For private equity firms and other investors looking at financial services businesses, here are our observations on how to best assess the opportunities ahead in financial services:

• Look forward, not just backward: Traditionally, the focus in due diligence on financial services businesses has been to identify historical problems in a business and try to quantify their impact.  However, the pace of change in financial services and the anticipated growth in the sector means that emerging risks are, in many cases, likely to be far more impactful to the bottom line than legacy issues.  Investors should look to partner with advisers who deeply understand the relevant sector or sectors of the industry who can spot emerging risks and assist you to quantify their potential impact, rather than just focusing on what’s ‘on the page’ in a due diligence exercise.
• Identify opportunities to leverage data to deliver enhanced customer experiences:  Financial services businesses, by their nature, hold a tremendous amount of data about their customers and about the market.  As with many other industries, identifying how to leverage that data to enhance customer experiences and drive engagement is critical to fully unlocking the value in the business.  The focus on data needs to move from being aspirational in nature to being a core consideration in every deal. 
• Engage early with regulators and have a plan: Transactions involving financial services businesses in Australia can require a myriad of regulatory approvals, particularly where the transaction involves foreign investment or consolidation which has a potential impact on competition in the market.  Sometimes, transactions can be structured to lessen the regulatory burden and shorten time to completion.  Navigating these issues requires skill and expertise that should be brought into the tent sooner rather than later to avoid regulatory approvals being a roadblock to an opportunity.
• Think two steps ahead:  Critically assess capability gaps in the target ahead of time and consider how those gaps might be filled through strategic acquisitions, partnerships or through business process outsourcing and technology solutions.  

There is fierce competition in the Australian market, with financial services businesses feeling confident in their balance sheets and in the growth opportunities in the sector.  Access to capital will be a critical driver to success over the next 10 years as the industry transforms.  Do not assume that ‘the right opportunity will come along’ – be strategic and plan the next acquisition before you complete the first one. 

Our market-leading financial services experts are here to help.