Best Interests Duty: Guide for Advisers & Brokers

Updated 12 Mar 2026Content was accurate at the time of publication

What is the Best Interests Duty?

The Best Interests Duty is a statutory obligation that requires anyone providing personal financial advice to place their client's interests ahead of their own. Rooted in Corporations Act s961B, the duty applies whenever a retail client receives personalised advice. In practical terms, when you give personal advice you must:

identify the client's objectives, financial situation and needs
consider relevant alternatives and act in the client's best interests
take reasonable steps to ensure the advice is appropriate and documented

The duty applies to financial advisers, mortgage brokers, credit intermediaries and their licensees. It is triggered when advice is personalised — when you consider one or more elements of the client's objectives, financial situation or needs. It does not apply to general information, market commentary or product disclosure statements intended as general advice.

Who does the Best Interests Duty apply to?

The duty applies to providers of personal financial product advice to retail clients, typically including:

financial advisers and planners
mortgage brokers and other credit intermediaries giving tailored mortgage or loan advice
authorised representatives and their licensees (AFSL holders) responsible for supervision

The duty is triggered when advice is personalised — that is, when you consider one or more elements of the client's objectives, financial situation or needs. It does not apply to general information, market commentary or product disclosure statements intended as general advice. For the statutory distinction, see relevant guidance on personal versus general advice.

Specialist product manufacturers have related obligations (product design and disclosure).

Where the duty comes from (legal framework)

The core source is Corporations Act s961B. ASIC issues guidance and sector-specific regulatory guides (for example, RG 273 for mortgage brokers) that explain how the duty applies in practice and what constitutes reasonable steps.

Essential reading:

Licensees must embed the duty into compliance frameworks, training, supervision and record-keeping. Related regulator updates and guidance are published by ASIC regularly.

Key obligations and the "reasonable steps" test

Breaking down the duty into practical obligations clarifies what you must do whenever you provide personal advice.

Adviser obligations:

Prioritise the client: place the client's interests ahead of your own or your firm's
Avoid or manage conflicts of interest: identify incentives, commissions or arrangements that may bias advice
Provide appropriate advice: ensure recommendations suit the client's objectives, financial position and needs
Take reasonable steps: actively undertake actions that a reasonable person in your role would do to comply

What "reasonable steps" typically involves:

Fact-find thoroughly. Use a documented client fact-find and verify material facts (income, liabilities, assets).
Consider a suitable range of options. ASIC guidance and RG 273 expect advisers and brokers to consider multiple alternatives — typically at least two to three suitable options, depending on the market and client.
Document your analysis. Maintain a comparison matrix showing pros and cons, costs, risks and the reason the recommended option is preferred.
Explain the recommendation simply. Provide a short client-facing summary explaining why you recommended the product.
Address conflicts beyond disclosure. Where a conflict cannot be eliminated, actively manage or mitigate it (e.g., independent benchmarking, review gates).

Practical examples:

Mortgage brokers: comparing three lenders, documenting rate, fees and features and explaining why a particular loan suits the client aligns with RG 273 expectations.
Portfolio advice: building and documenting a risk profile, comparing model portfolios and recording expected outcomes demonstrates reasonable steps.

Related topics: conflict of interest management and financing structures relevant to advice.

Common compliance issues and conflicts of interest

Typical pitfalls:

Incentive distortion: commissions or volume bonuses that steer recommendations
Limited product lists: narrow panels used without documenting why excluded options were unsuitable
Poor fact-finds: missing or unverified income, liabilities or future plans
Insufficient comparison: recommending a product without evidence alternatives were considered
Over-reliance on disclosure: telling a client about a conflict but not mitigating it operationally

How to manage conflicts:

Eliminate where possible: avoid pay structures that create direct incentives to recommend particular products
Manage and document: use independent reviews, approval gates or supervised decision points
Supplement disclosure with action: documentation and process changes are needed if a conflict could influence decisions

Check your policies against related internal guidance on mortgage broker obligations and financial advice compliance.

Practical compliance checklist (for advisers and brokers)

Use this step-by-step checklist to evidence you took reasonable steps. Items in bold are critical. Keep client-facing language short in your files.

Client fact-finding:

Complete a written fact-find capturing objectives, risk tolerance, income, debts, assets, timeframes and capacity to repay
Verify key facts with documents (pay slips, tax returns, bank statements) and note verification dates

Analysis and comparison:

Prepare a comparison matrix of at least 2–3 viable options (include costs, features, risks)
Include quantitative comparisons (fees, interest, ongoing costs) and qualitative factors (flexibility, break costs)

Recommendation rationale:

Write a short recommendation memo (1–3 paragraphs) explaining why the chosen option is in the client's best interests
Use the sample wording below for client files and communications

Sample one-paragraph client summary (copy/paste):

"Based on your objectives to reduce monthly repayments and repay your loan within 10 years, and after comparing three lenders in our panel for rate, fees and repayment flexibility, we recommend Loan X. Loan X offers the lowest ongoing cost and the required redraw facilities with acceptable break costs, meaning it best balances cost and flexibility for your situation."

Disclosures and consent:

Disclose remuneration, referral arrangements and conflicts in writing before or at the time of advice
Obtain client consent where relevant and document how the client confirmed they understood the disclosure

Record-keeping and review:

Save fact-find, comparison matrix, recommendation memo and disclosure in the client file
Note the date you performed the analysis and the date of the recommendation
Review at least annually or whenever the client's circumstances change; document the review

Related topics include conflict of interest management in financial advice.

ASIC guidance and enforcement — what to expect

ASIC's expectations are set out in its general guidance and sector-specific RG 273 for mortgage brokers. Key points from RG 273 and ASIC commentary:

Brokers must take reasonable steps to act in a consumer's best interests; ASIC lists fact-finding and comparison examples
Aggregator arrangements, lender incentives and panel management are scrutinised; firms must show systems that mitigate conflicts
Robust record-keeping demonstrating the adviser's process is essential

Common enforcement tools:

Inquiries and information notices to gather evidence
Infringement notices for lower-level breaches
Civil penalty proceedings and disqualification for serious breaches
Public enforcement actions and media releases that signal regulator priorities

Remedies can include fines, compensation orders, injunctions, banning orders and enforceable undertakings. Recent ASIC actions show poor documentation and failure to consider alternatives are frequent causes of enforcement.

Relevant regulator resources:

Notable case studies and examples

These anonymised examples illustrate common failure modes and compliant conduct.

Example 1 — inadequate comparison (breach): A broker recommended one lender without comparing costs or features. ASIC found the broker failed to take reasonable steps and the client paid higher fees. Outcome: civil enforcement and client remediation.

Example 2 — conflict mismanaged (breach): An aggregator paid volume bonuses to brokers who sent the most business to a lender. A broker continued recommending that lender without independent benchmarking. ASIC action focused on inadequate conflict management; penalties and remediation followed.

Example 3 — good practice (compliant): An adviser documented a three-option analysis, used independent market data and prepared a two-paragraph client summary explaining why Recommendation A was preferred. The licensee review clearly demonstrated reasonable steps; no enforcement action resulted.

These examples underline the need for documented comparisons, active conflict management and clear client communication.

How this affects consumers

As a consumer you should expect:

A clear, written one-paragraph explanation of why the adviser recommended a product
Disclosure of fees, commissions and any conflicts before or at the time of advice
Evidence that the adviser considered alternatives and assessed your objectives, finances and risk tolerance

Questions to ask your adviser:

"Can you show how you compared my options?"
"What other products did you consider and why were they unsuitable?"
"How are you paid for this recommendation?"

If you think your adviser didn't act in your best interests:

Raise the issue with the adviser and their licensee
Lodge a complaint with the Australian Financial Complaints Authority (AFCA)
Consider reporting to ASIC

Further resources and templates

Primary sources:

Quick templates (copy/paste):

Client recommendation paragraph: "Based on your objectives to reduce monthly repayments and repay your loan within 10 years, and after comparing three lenders in our panel for rate, fees and repayment flexibility, we recommend Loan X. Loan X offers the lowest ongoing cost and the required redraw facilities with acceptable break costs, meaning it best balances cost and flexibility for your situation."

Disclosure header (one line): "I/we receive commission and/or volume payments from lenders X and Y. I/we manage this by [describe steps]."

Review advice files, policies and training every 6 months or when ASIC updates guidance.

Related internal resources: financial advice compliance, mortgage broker obligations, and the distinction between personal and general advice.

For business lending needs, see Business loans.

A-to-Z internal links for related background reading:

FAQ

What triggers the Best Interests Duty?

The duty is triggered when you give personal financial product advice that considers one or more elements of the client's objectives, financial situation or needs. General information does not trigger the duty.

Who is covered by the duty?

Advisers, brokers and authorised representatives giving personal advice to retail clients fall within the duty; licensees also have supervisory obligations.

Is disclosure of conflicts enough?

Often not. Disclosure is necessary but may be insufficient. You must eliminate or actively manage conflicts and document mitigation steps.

How do I demonstrate I took "reasonable steps"?

Documented fact-finds, a comparison matrix (2–3 options), a written recommendation memo and client sign-off demonstrate reasonable steps.

Does the duty apply to product manufacturers?

Product manufacturers have separate duties (design, disclosure). The Best Interests Duty specifically regulates adviser conduct when giving personal advice.

What happens if an adviser breaches the duty?

ASIC can investigate and use infringement notices, civil proceedings, compensation orders or disqualification. Remedies depend on seriousness and client harm.

How can a consumer complain if they think their adviser didn't act in their best interests?

Start with the adviser and licensee internal dispute process; if unresolved, escalate to AFCA or report to ASIC.

Do record-keeping obligations change because of this duty?

The duty increases the practical need for robust records: fact-finds, comparisons, recommendation rationales and disclosure evidence are essential.

Key takeaways

The Best Interests Duty requires advisers to place clients' interests ahead of their own when giving personal advice. Taking reasonable steps means thorough, documented fact-finding, comparing multiple options and recording the rationale for recommendations. Disclosure alone is not sufficient to manage conflicts; firms must eliminate or actively manage incentives and document mitigation. ASIC guidance, notably RG 273 for brokers, emphasises comparators and record-keeping; enforcement focuses on poor documentation and unmanaged conflicts.