Best Interests Duty
The statutory obligation on Australian financial advisers to act in the best interests of their client when providing personal advice, codified in the Corporations Act.
The Best Interests Duty (BID) is a set of obligations on financial advisers introduced by the Future of Financial Advice (FOFA) reforms and codified in sections 961B–961J of the Corporations Act 2001 (Cth). Section 961B sets out a “safe harbour” — a seven-step checklist that, if followed, satisfies the BID.
The seven safe-harbour steps include identifying the client’s objectives, financial situation, and needs; identifying the subject matter of the advice; making reasonable inquiries; assessing the client’s relevant circumstances; basing the recommendation on those circumstances; conducting a reasonable investigation; and basing all judgements on the client’s relevant circumstances.
BID is the standard ASIC applies when assessing whether a Statement of Advice was appropriate. A SoA that demonstrably follows the seven safe-harbour steps is significantly harder to challenge than one that does not. The operational implication is that the workflow has to capture the evidence at each step — fact-find inputs, the basis-for-recommendation reasoning, the alternative options considered — as it goes, not retroactively reconstruct it from memory.