Advisers will be required to act in the best interest of their retail clients and place their clients’ interests ahead of their own and those of the licensee and employer when developing and providing personal advice.

1. FoFA Conversation Series
Best Interest Duty & Safe Harbour
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2. Best Interest Duty and Safe Harbour
Advisers will be required to act in the best interest of their retail clients and place their clients‟ interests
ahead of their own and those of the licensee and employer when developing and providing personal
advice.
There are four basic obligations when providing advice that MUST be adhered to. Two of these
remain unchanged. The two that have been introduced focus on Best Interest and the four obligations
together have replaced „Reasonable basis for advice‟.
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3. Best Interest Duty and Safe Harbour
Changes
The introduction of the Best Interest Duty has been introduced along with a number of other changes
and further clarification of obligations. It is important that we understand some of these other changes
so that we can understand where Best Interest fits in our new world.
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Summary of changes OLD – Appropriate Advice NEW – Best Interest
Who the obligations apply to The „providing entity‟ - the AFS
licensee and /or authorised
representative that provides the
personal advice.
The „advice provider‟ is generally the
individual who provides the personal
advice – the adviser.
What are the obligations To provide appropriate advice
(s945A).
To warn the client if advice is based
on incomplete or inaccurate
information (s945B).
To act in the best interests of the
client: best interest duty (s961B).
To provide appropriate advice
(s961G).
To warn the client if advice is based
on incomplete or inaccurate
information (s961H).
To prioritise the interests of the client
(s961J).

4. Best Interest Duty and Safe Harbour
Changes (cont.)
The introduction of the Best Interest Duty has been introduced along with a number of other changes
and further clarification of obligations. It is important that we understand some of these other changes
so that we can understand where Best Interest fits in our new world.
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Summary of changes OLD – Appropriate Advice NEW – Best Interest
Compliance Failure to comply is a criminal
offence. Burden of proof is “beyond
reasonable doubt”.
Failure to comply may result in a
civil penalty. Burden of proof is “on
the balance of probabilities”
Having a sound process is key to
being able to meet these obligations,
then an adviser only needs to prove
they have followed the process.

5. Best Interest Duty (BID)
ASIC has acknowledged that there is more than one way in which this can be achieved, however
legislation has proscribed a process or series of steps which, if followed, can be expected to be likely
to leave the client in a better position. These steps together are known as Safe Harbour.
If an adviser chooses to undertake a different approach they will need to prove that advice was
provided in the best interest of the client. We believe that by adopting the steps set out under Safe
Harbour, we will all have some certainty that the advice will be deemed to have met that test.
In addition, ASIC have provided us with a reasonableness test which we can apply as well. This is:
Would a “reasonable adviser” have determined that the client would be better off if they followed the
advice? Sounds simple, and for the most part it reflects much of what we currently do today.
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6. Best Interest Duty (BID)
Conflicts Priority Rule
The second new obligation is the requirement for an adviser to prioritise the interests of the client if the
adviser knows, or reasonably ought to know, when they give the advice that there is a conflict between
the interests of the client and the interests of the adviser, the Corporate Authorised Representative,
the AFS licensee and any of their associates.
Depending on the advice, this could include referrals to associated entities even if no money changes
hands e.g. accounting or mortgage broking businesses, etc. It is not enough to simply disclosure the
conflict. The adviser must also actively consider what a reasonable adviser without that conflict of
interest would do.
The more material the conflict of interest between the client and the adviser or their related party, the
more the adviser will need to do to prioritise the client‟s interests.
At no time should the adviser act to further their interests or those of one of their related parties over
those of the client when giving the client advice.
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7. Best Interest Duty (BID)
Conflicts Priority Rule
ASIC will consider what a reasonable adviser would believe likely to have put the client in a better
position if they were to follow the advice. This would include a review of the following factors:
• the position the client would have been in if they did not follow the advice, which is to be assessed
at the time the advice is provided;
• the facts at the time the advice was provided that the adviser had, or should have had, if they
followed their obligations. In particular, ASIC will not examine investment performance
retrospectively;
• the subject matter of the advice sought by the client;
• the client‟s objectives, financial situation and needs. Many clients seek advice with the objective
of improving their financial position. However, a client‟s objectives, financial situation and needs
may also encompass other things, such as:
o improving their understanding of their financial position;
o aligning their financial position with their appetite for risk;
o reassurance that they do not need to change their strategy or
product holdings as a result of a review; or
o increasing their confidence to spend or donate their money;
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8. Best Interest Duty (BID)
Conflicts Priority Rule
ASIC will consider what a reasonable adviser would believe likely to have put the client in a better
position if they were to follow the advice. This would include a review of the following factors:
• where relevant, product features that the client particularly values, provided that the client
understands the cost of, and is prepared to pay for, those features. For example, a client may
particularly value online access to information about their investment holdings as well as
understanding and being prepared to pay for the cost of this feature; and
• that the client receives a benefit that is more than trivial.
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9. Best Interest Duty (BID)
To comply with the best interest duty requirements, you will need to:
• Act in the best interest of your clients, which you demonstrate by following the seven process
steps. These are an elaboration of the old „know your client, know your product‟ rules, with more
emphasis on considering alternative strategies;
• Give advice that is appropriate for your client, and that is likely to leave them better off;
• Take further action if you think the information you have received from your client is incomplete or
inaccurate;
• Ensure that if there is a conflict of interest, you put your client‟s interest first (conflicts priority rule).
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10. Best Interest Duty (BID)
Seven Process Steps
The adviser satisfies the Best Interest Duty (subsection 1) if they can demonstrate that they have
done each of the following:
1. Identified the objectives, financial situation and needs of the client, that were disclosed to the
adviser by the client;
2. Identified the subject matter of the advice that has been sought by the client (whether explicitly or
implicitly) and the objectives, financial situation and needs of the client that would reasonably be
considered as being relevant to the advice sought on the subject matter (the client‟s relevant
circumstances);
3. Where it was reasonably apparent that the information relating to the client‟s relevant
circumstances was incomplete or inaccurate, made reasonable inquiries to obtain complete and
accurate information;
4. Assessed whether they have the expertise required to provide the client with advice on the
subject matter sought and, if not, declined to provide the advice;
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11. Best Interest Duty (BID)
Seven Process Steps
The adviser satisfies the Best Interest Duty (subsection 1) if they can demonstrate that they have
done each of the following:
5. If, in considering the subject matter of the advice sought, it would be reasonable to consider
recommending a financial product;
o Conducted a reasonable investigation into the financial products that might achieve the objectives
and meet the needs of the client, that would reasonably be considered as relevant to providing
advice on the subject matter, and
o Assessed the information gathered in the investigation;
6. Based all judgements in advising the client on the client‟s relevant circumstances; and
7. Taken any other step that at the time the advice is provided, would reasonably be regarded as
being in the best interest of the client, given the client‟s relevant circumstances
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12. Best Interest Duty (BID)
Meeting Best Interest is simply about ensuring that your advice meets the requirements of a
“reasonable adviser” being able to determine that the client, having acted on your advice at the time
the advice was given, would have been better off.
This concludes our FoFA Conversation Series.
We look forward to seeing you at the FoFA Workshops.
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