The best interests duty and the safe harbour steps.

The best interests duty is the obligation, in section 961B of the Corporations Act, for a financial adviser giving personal advice to a retail client to act in the client’s best interests. The safe harbour in section 961B(2) lists seven steps; an adviser who can show all seven is taken to have met the duty.

The duty applies to personal advice, not general advice, and sits on the individual who gives it. Their licensee must take reasonable steps to ensure compliance (s961L). Breaches are civil penalty provisions (s961K, s961Q), and a client or ASIC can sue for loss (s961M). The sections are in Part 7.7A, Division 2 of the Corporations Act 2001.

ASIC’s guidance is Regulatory Guide 175 (RG 175), issued 21 November 2024. Its view: a reasonable adviser should believe the client is likely to be better off if they follow the advice (RG 175.163–175.170). It came in with the Future of Financial Advice (FoFA) reforms, so older articles call it the FoFA duty.

Not the mortgage broker duty. Mortgage brokers have a separate duty under section 158LA of the National Consumer Credit Protection Act, with ASIC guidance in RG 273. This guide covers only the financial advice duty in the Corporations Act.

An adviser who can prove they took each step below is taken to have met the duty. The wording follows ASIC’s summary at RG 175.186.

• One way, not the only way. The safe harbour is one way to meet the duty (RG 175.178), but ASIC expects the steps, or steps giving at least the same standard of advice, every time (RG 175.179).
• All or nothing. If you cannot show every step, you cannot rely on the safe harbour (RG 175.188).
• Not every product. A reasonable investigation need not cover every product (s961D), but it must cover any product the client asks about (RG 175.242) and, for switching advice, the existing product (RG 175.257).
• Step (g) in practice. ASIC’s examples: explain what the advice does and does not cover, say when to review it, and offer help on other key issues within the subject matter (RG 175.275).

For some basic banking and general insurance advice, a modified duty needs only steps (a) to (c) (s961B(3)–(4)). Scaled advice is allowed: see RG 244.

The duty is one of four separate obligations that apply every time personal advice is given (RG 175.155).

• Appropriate advice (s961G). Advise only if it is reasonable to conclude the advice is appropriate, assuming the duty was met. Advice that fails the duty is unlikely to be appropriate (RG 175.281).
• Warning about incomplete information (s961H). If, after reasonable inquiries, it is reasonably apparent the information is incomplete or inaccurate, warn the client and tell them to consider the advice’s appropriateness before acting. A warning does not replace inquiries (RG 175.306).
• Conflicts priority rule (s961J). Where you know, or reasonably ought to know, of a conflict with your interests or those of your licensee, authorised representative or associates, put the client first. Disclosure or consent alone is not enough (RG 175.311).

Standard 2 of the Financial Planners and Advisers Code of Ethics 2019 also requires advisers to act with integrity and in each client’s best interests.

Not yet. As at 21 October 2026, section 961B(2) still contains all seven steps, and RG 175 still applies. The government has announced a change, but it needs legislation, and we found no bill or exposure draft when this guide was reviewed.

The fact sheet does not name the paragraph. Industry commentary reads it as the catch-all, step (g). Confirm when draft law is released.

Older terms: “tranche 2” is the second DBFO package, still in development. The “good advice duty” was a Quality of Advice Review proposal, not law. “Removing the safe harbour” was the 2023–24 plan that the August 2026 announcement replaced. Either way, s961B(1), s961G, s961H and s961J would remain.

Recording is a legal requirement. Under notional section 912G (inserted by ASIC Instrument 2024/508), licensees must ensure records are kept of:

• the information relied on and action taken that show the adviser acted in the client’s best interests (or met each safe harbour step);
• the advice, and why it is reasonable to conclude it is appropriate; and
• where there is a conflict, how the client was put first (RG 175.341).

Keep them for at least seven years after the advice is given (RG 175.342). They can be file notes, correspondence, working papers, fact-finding documents or audio recordings as well as the advice document (RG 175.337). Some rules differ where no SoA is required (RG 175.347).

File notes carry much of this weight: see our guide to file notes for financial advisers. For where each record is made in the client journey, see the financial advice process, stage by stage.

A recent ASIC file review is Report 824, Review of SMSF establishment advice, released 6 November 2025. ASIC reviewed 100 files from 27 advisers at 12 licensees, chosen on risk, so the results do not represent the whole industry.

In 62 files the adviser did not show compliance with the duty and related obligations. The main reasons were the adviser not:

• basing all judgements on the client’s relevant circumstances, step (f): 58 files;
• conducting a reasonable investigation and assessment of products, step (e): 53 files;
• identifying the client’s objectives, financial situation and needs relevant to the advice, step (b): 50 files; and
• making reasonable inquiries where information was incomplete or inaccurate, step (c): 48 files.

In addition, 57 files did not show appropriate advice (s961G) and 51 did not show the client was put first (s961J). Of 98 files replacing an existing product, 47 had inadequate replacement information. Pre-vetting did not fix this: 33 of 47 pre-vetted files still fell short.

The failures cluster in steps (b), (c), (e) and (f), and in showing the reasoning. ASIC’s action points include recording the factors weighed in the adviser’s professional judgement.

Sam and Jo Example are fictional clients of a fictional adviser, Alex Example. Sam is 59, Jo is 57, and they have a mortgage. This is what a reviewer would find.

A reviewer can follow this file without asking Alex anything. Even the gap in step (c) is chased, recorded and carried into the warning.

This guide is general information, not legal or compliance advice. Confirm how these obligations apply to your firm with your licensee or compliance adviser.

Bunya AI builds Bunya Command Centre, the practice operating system for Australian financial advice firms. It runs inside your firm’s own Microsoft 365 and helps your team prepare and keep this evidence as the work happens: file notes drafted for the adviser to verify, fact-find gaps flagged for a person to resolve, an SoA request pack with sources linked, and a record of who approved what, and when.

Bunya does not decide whether advice is in a client’s best interests, or whether a file meets the safe harbour. That judgement stays with the adviser and the licensee.

• Compliance and evidence: the evidence kept with the client record.
• SoA preparation: from meeting notes to a checked SoA request.
• Bunya Voice: an optional add-on for meetings and file notes.