The Best Interest Duty is the centrepiece of the professional obligations introduced by the Future of Financial Advice reforms and reinforced by the Financial Services Reform Act. It sits in section 961B of the Corporations Act 2001 and it does one thing: it requires an Australian financial services licensee or their representative to act in the best interests of the client when providing personal advice.

In practice, satisfying the duty requires demonstrating — in writing, in your Statement of Advice — that a series of specific steps were taken. ASIC's enforcement record shows that most advice failures are documentation failures: advisers who gave appropriate advice but couldn't prove it.

The checklist below maps directly to the safe harbour steps in s961B(2). It is not legal advice. It is a working tool — the kind of checklist a prudent adviser uses before releasing an SoA to a client.

The best interest duty safe harbour — step by step

Step 1: Identify the objectives, financial situation, and needs of the client

  • ☐ Have you completed a thorough fact find covering the client's current financial position?
  • ☐ Have you documented the client's stated goals — both immediate and long-term?
  • ☐ Have you identified needs the client may not have explicitly raised but that are relevant to the advice (e.g. estate planning gaps, underinsurance)?
  • ☐ Is the fact find dated and signed (or electronically acknowledged) by the client?

Step 2: Make reasonable inquiries about the client's relevant circumstances

  • ☐ Have you asked about existing financial products the client holds?
  • ☐ Have you documented the client's risk tolerance using a methodology you can defend?
  • ☐ Have you recorded relevant personal circumstances — health, dependants, employment stability, anticipated life events?
  • ☐ Where the client declined to provide information, is that refusal documented?

Step 3: Assess whether you have the expertise to advise on the subject matter

  • ☐ Does the advice fall within your authorisation on your AFSL?
  • ☐ If the advice touches a specialist area (e.g. SMSFs, aged care, business succession), do you hold the relevant accreditation or have you referred that component to a specialist?
  • ☐ Is the referral (if made) documented in the SoA or a separate file note?

Step 4: Where it is reasonably apparent the client has a particular objective or need, take that into account

  • ☐ Have you cross-referenced the strategies recommended against every identified client objective?
  • ☐ Where a strategy does not address an identified objective, have you explained why it is outside scope or why it was deprioritised?
  • ☐ Have you considered whether any identified needs require urgent action (e.g. insurance gap in a client with dependants)?

Step 5: If recommending a financial product, conduct a reasonable investigation of the products in the relevant category

  • ☐ Did you consider products from across your licensee's Approved Product List before making a recommendation?
  • ☐ Is the basis for selecting the recommended product documented — including why alternatives were not chosen?
  • ☐ Where you recommended a product that is not on the APL, have you followed your licensee's exception process and documented it?

Step 6: Base all judgements on the client's relevant circumstances

  • ☐ Is the strategy rationale written in terms of this client's situation — not a generic explanation of how the strategy works?
  • ☐ Have you avoided templated rationale that could apply to any client?
  • ☐ Does the SoA explain the connection between the client's specific circumstances and the specific recommendation?

Step 7: Take any other steps that are reasonably required

  • ☐ Where modelling was used, is the methodology and its assumptions documented?
  • ☐ Have you disclosed all fees, commissions, and conflicts of interest relevant to the advice?
  • ☐ If a product switch is recommended, has the Product Replacement Record been completed and included?
  • ☐ Has the SoA been reviewed by your compliance process before release?

The additional questions ASIC actually asks

Beyond the safe harbour steps, ASIC's review guidance and enforceable undertakings reveal a second layer of questions that reviewers ask when assessing an SoA file:

  • Is the scope of advice appropriate? Narrowing the scope of advice to avoid complex issues is not, by itself, a breach — but it becomes one if the issue you excluded was reasonably apparent and material to the client's situation.
  • Does the advice address the client's vulnerable circumstances? ASIC has specific guidance on advice to clients who are experiencing financial hardship, cognitive decline, or domestic and family violence. If any of these apply, additional care obligations are triggered.
  • Is the fee proportionate to the advice? A $5,000 ongoing advice fee attached to a strategy that saves the client $800 per year is a red flag regardless of the technical quality of the SoA.
  • Is the advice consistent across time? If a client's circumstances haven't materially changed but the recommendation has, the SoA needs to explain why.

Using this checklist in practice

Print this checklist and run through it before every SoA is released. Better still, build it into your practice's QA process so that compliance review and BID verification happen in parallel with drafting — not as a separate step after the document is finished.

The goal is not to make the SoA longer. ASIC has been explicit that length is not a proxy for quality. The goal is to ensure that every element of the best interest analysis is visible, traceable, and tied to the specific client in front of you.

An adviser who can point to exactly where in the SoA each safe harbour step is addressed — and explain it in plain language — is an adviser who can walk out of a compliance review with confidence.