Budget 2025: regulatory reforms and tax changes present new opportunities for financial advisers

Lizl Budhram

As South Africans braced for a heavier tax burden, the 2025 Budget Speech delivered a mix of relief and reality. While tax increases were lower than feared, financial advisers will soon need to navigate a complex landscape of regulatory reforms.

The Conduct of Financial Institutions (COFI) Bill, which marks a turning point in financial services regulation, is expected to be finalised in the near future.

“The financial services industry has been waiting with bated breath for the COFI Bill. The Budget confirmed that its finalisation and implementation are imminent,” says Lizl Budhram, Head of Advice at Old Mutual Personal Finance. “For financial advisers, this shift reinforces their role as essential financial partners for customers. Those who prioritise governance, trust, and customer education will set themselves apart in a more regulated environment.”

This progressive legislation aims to strengthen customer protection, build confidence in financial services, and improve governance. While the current FAIS legislation focuses on product licensing, the draft COFI Bill shifts the regulatory focus to the activities of financial advisers.

“COFI will streamline financial conduct laws and align with recent reforms, including the 2024 consolidation of banking, credit, long-term insurance, and short-term insurance ombuds into a single entity—making it easier for customers to resolve disputes,” says Budhram.

Two-Pot Retirement System: Customers Need Guidance as Withdrawals Surge

With COFI’s implementation, financial advisers will be held to a higher standard of customer care. This is especially relevant when guiding customers through complex decisions related to the Two-Pot Retirement System, where short-term financial relief must be weighed against long-term retirement security.

“The Two-Pot Retirement System has generated far greater tax revenue than anticipated, underscoring the importance of financial advice,” says Budhram. “Initially, the government expected to collect R5 billion in tax from Two-Pot Retirement System withdrawals. Instead, it collected R11.6 billion—more than double. This suggests that many customers either face greater financial pressure than expected or withdrew funds without fully understanding the tax implications.”

Since withdrawals are taxed as normal income, financial advisers must ensure that customers understand the impact and align their decisions with their long-term financial plans.

“There’s a big job for financial advisers in guiding customers to make better financial decisions. Many are tempted by immediate access to funds, but these choices will have lasting consequences on their financial security,” she explains.

VAT Increase and Fiscal Drag: Wealth Planning Becomes Critical

The Budget confirmed a 0.5% VAT increase from May 2025, with a possible further 0.5% hike in April 2026. Meanwhile, income tax brackets remain unchanged, meaning income earners will experience fiscal drag—where inflation pushes them into higher tax brackets without corresponding tax relief.

“For the second year in a row, there has been no adjustment to tax brackets, meaning all taxpayers and their families will see more of their disposable income eroded by fiscal drag. Treasury expects to raise an additional R28 billion in 2025/26 from this alone,” says Budhram.

With rising indirect taxes and increasing VAT, financial advisers have an opportunity to help customers navigate these changes, optimise tax strategies, and preserve wealth. “Now more than ever, financial advisers need to help customers prepare—whether it’s managing tax hikes, protecting retirement savings, or adjusting financial plans to cope with rising costs,” Budhram concludes.

“The financial regulatory landscape is changing rapidly, but these shifts present opportunities for financial advisers to provide expert guidance. By staying informed, leveraging compliance support, and proactively engaging with customers, financial advisers can reinforce their role as trusted partners in securing their customers’ financial well-being.”