The intersection of ethical practice and the best interests duty underpins client-focused financial advice.

In financial advice, acting in a client’s best interest isn’t just a regulatory rule, it’s the foundation of a trusting, successful partnership. This article, proudly sponsored by GSFM, examines the strong links between your clients’ best interests and running an ethical advice practice.

Navigating complex financial choices can be daunting, which is why people turn to professional advisers to help secure their short- and long-term lifestyle goals. Clients place immense faith in an adviser’s expertise and integrity, expecting tailored strategies that mirror their personal values and unique circumstances. By consistently prioritising the client’s best interests, advisers do more than just build trust – they cultivate enduring relationships and solidify their own professional reputation. Ultimately, putting clients first isn’t simply an ethical duty; it is the bedrock of client satisfaction and long-term business growth.

As defined by the Australian Corporations Act 2001 (the Act), the best interests duty requires financial advisers to act in the best interests of their clients when providing personal financial advice. This duty is enshrined in Section 961B of the Act and requires advisers to take reasonable steps to ensure that the advice they provide is appropriate to the client’s individual circumstances, including their financial situation, needs and objectives.

The best interests duty is designed to ensure that financial advisers provide advice that is objective, unbiased and is tailored to the client’s needs. This fosters trust and confidence in the financial advisory industry and is of critical importance in the regulatory framework that governs the delivery of financial advice.

Best interests obligations

ASIC describes the best interests duty and related obligations as:

“…designed to ensure that retail clients receive advice that meets their objectives, financial situation and needs, and that you act in the best interests of your clients when providing advice.”

Financial planning, at its core, demands that practitioners always act in their clients’ best interests: with competence, honesty, integrity and fairness. Put simply, it’s the standard of care any of us would expect from a trusted professional.

The Quality of Advice Review (QAR) recommendations seek to modernise the best interests duty by abolishing the process-driven ‘safe harbour’ steps, replacing them with a principles-based, outcomes-focused fiduciary duty. However, as that has yet to find its way into law, the following steps as outlined in Section 961B of the Corporations Act 2001 (as amended) remain the benchmark requirement to satisfy the ‘best interests’ duty:

1. To identify the client’s financial situation, objectives and needs; these should be provided to the adviser by the client.
2. To identify the subject matter of the advice sought by the client (whether explicitly or implicitly).
3. To identify the client’s relevant circumstances – the objectives, financial situation and needs that would reasonably be considered as relevant to the advice sought on the identified subject matter (i.e. the client’s relevant circumstances).
4. To ensure this information is complete and correct and make reasonable enquiries should be made if gaps or inconsistencies are apparent.
5. To assess whether you have the expertise required to provide the client advice on the subject matter sought and, if not, decline to provide the advice.
6. When considering the advice sought, whether it would be reasonable to consider recommending a financial product. If a financial product is deemed relevant, a recommendation should only be made after thoroughly investigating the most appropriate products relevant to the client’s circumstances.
7. When advising the client, the financial adviser must base all judgements on the client’s relevant circumstances.
8. Take any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client’s relevant circumstances.

Number eight is a last catch-all statement that encapsulates the spirit of the legislation; regardless of the client’s requirements, the advice must be underpinned by knowledge of the client and their circumstances. While the best interests duty applies to retail clients, a similar fiduciary duty is required for dealings with wholesale clients. To meet obligations under section 961B of the Corporations Act 2001, is indisputably to act ethically in all dealings with clients.

A failure to act in a client’s best interests would not only breach section 961B of the Corporations Act 2001, it would also breach several standards in the Financial Planners and Advisers Code of Ethics (Code) notably:

Best interests and the ethical practice

Most professionals enter their field with good intentions and a genuine commitment to ethical practice. And while ethics can sometimes occupy a grey area, putting the client first is rarely one of them.

For financial advisers, this obligation has a name – the best interests duty – and it carries real weight. Enshrined in the Code of Ethics (figure one), it requires advisers to place their clients’ needs above their own, those of their practice, or their licensee. In practice, this means delivering advice that is appropriate, personalised to each client’s financial situation and goals, and free from conflicts of interest.

Figure one: Code of Ethics – Standards

Ethical behaviour

Client care

Quality process

Professional commitment

Acting in clients’ best interests is the foundation of ethical financial advice. Because financial decisions can shape lives for decades, clients place enormous trust in their advisers. They trust that your guidance is genuine, considered and focused squarely on their wellbeing.

This duty also serves as a critical safeguard. By requiring that recommendations are based solely on what is right for the client, it protects against conflicts of interest and the potential for exploitation. That protection matters beyond the individual – it builds confidence in the advice profession and empowers clients to make informed decisions, knowing the guidance they receive is free from bias.

The benefits extend further still. When advisers consistently prioritise their clients, misconduct decreases, professional reputations strengthen and the industry as a whole moves closer to the regulatory ideals of fairness, transparency and consumer protection.

In practice, meeting this standard means being transparent, honest and diligent in every client interaction. These are also some of the values on which the Code of Ethics is based. It means taking the time to genuinely understand each client’s circumstances, and recommending strategies – and where appropriate, financial products – that truly serve their interests. It also means that advisers commit to ongoing education and stay current and competent, so the advice provided to clients continues to meet both professional and regulatory benchmarks.

While enshrined in law and in the Code of Ethics, there are actions all advisers can take to support practice-wide ethical behaviour, maintain a strong ethical business culture and ensure client’s best interests always come first. These include:

1. Establish a practice-wide code of conduct

One which encapsulates your business’s values and aligns with the Code of Ethics. A well-crafted code sets clear expectations for how your people behave in carrying out their duties, with client-first thinking at its heart.

Critically, this isn’t a document to file and forget. Every member of your team should have a thorough understanding of all twelve standards within the Code of Ethics, not just in general terms, but in ways that are relevant to their specific role. When staff can draw a direct line between each standard and their day-to-day responsibilities, putting clients’ interests first becomes less a compliance exercise and more an embedded part of how your practice operates.

2. Lead by example

Employees will look to the key individuals in the practice to understand what conduct is and isn’t acceptable. Senior advisers and personnel set the tone for ethics in the practice; accordingly, they need to demonstrate your business’s code of conduct in all they say and do. When the team sees you putting your clients’ best interests first, they are more likely to do the same.

3. Invest in workplace training

Workplace training is a positive way to ensure all staff understand both the practice’s values and the obligations of the Code of Ethics. Provide regular training sessions on ethical behaviour, regulatory compliance, conflict of interest and integrity. Training should cover both theoretical aspects and practical, real-world scenarios.

Case studies are a powerful way to bring your code of conduct to life. Walking your team through scenarios where a client’s best interests could be compromised helps reinforce expected standards and draws a clear distinction between what does and doesn’t align with your practice’s values.

Workshops and role-playing exercises take this a step further, placing staff in realistic situations where ethical dilemmas might arise and guiding them through how to respond in line with the Code of Ethics. Weaving this kind of training into regular team meetings, drawing on case studies that reflect common challenges across the financial planning industry, keeps ethical practice front of mind and ensures it remains an ongoing conversation rather than a one-off tick-box exercise.

The AFCA website is a good source of cases and decisions made by AFCA to form the basis of discussion. You can search specifically for decisions related to failing to act in a client’s best interests, as well as other issues not aligned with ethical behaviour.

It’s important that ethics training is not a one off; ideally, training should teach team members to make good decisions that are compliant with the law and consistent with your practice’s values.

4. Make ethical behaviour a KPI

Ethical behaviour should be a key performance indicator (KPI); by reinforcing and potentially rewarding staff for embodying your values, adhering to your practice’s code of conduct and behaving in a way that makes ethical behaviour central to their work will create an ethical practice. Although a values-driven KPI can be harder to quantify than one with specific and measurable outcomes, it will highlight to staff the importance of values and ethics to your business.

5. Ensure clear communication channels

Ensure clear communication channels within your practice. Encourage open dialogue to create a culture of transparency where employees can discuss ethical concerns without fear of retaliation. Create regular feedback loops, whereby employees provide honest feedback about the processes, conversations and client interactions to ensure you are aware of all issues as they arise. Surprises can potentially compromise your business.

Bringing your peers on the ethical journey is important. The licensee and adviser will carry the responsibility of any breach of the Code, but implementing strategies such as those outlined above can help mitigate the risk of breaching ethical standards.

Consider enforcing a zero-tolerance policy for ethical violations to make clear that breaches are taken seriously. Define relevant disciplinary actions for unethical behaviour and apply them consistently across all levels of the practice. Consistency is key; without it, credibility and fairness are quickly undermined.

When integrity, education, transparency and accountability are genuinely embedded in your culture, something important follows. Colleagues align around a shared set of ethical standards, trust builds from the inside out, and the practice becomes one where putting every client’s interests first is simply the way things are done.

Case studies

The following case studies are based on real events; however, the names of people and organisations have been changed, and some details altered. The case studies have been drawn from ASIC or AFCA. For each, potential breaches of the Code of Ethics are identified. These case studies represent examples of those that would be of value for the business to discuss as part of its workplace training.

Case study one: Failure to act in clients’ best interests #1

The complainants are corporate trustees of a self-managed superannuation fund (SMSF), directors Linda and Terry. The couple sought and received personal advice from the financial firm ACME Super Advice. They were a client of ACME Super Advice from March 2011 to January 2024, during which time the couple received an investment strategy and investment advice in relation to their SMSF investments.

Linda and Terry claimed that ACME Super Advice provided inappropriate advice because the financial firm was conflicted in making investment recommendations. As a result, the couple claimed their SMSF suffered significant losses.

An AFCA investigation found that ACME Super Advice did not provide appropriate advice, nor did it act in the complainants’ best interests. It was found that ACME Super Advice:

• failed to provide advice within the risk parameters it set
• failed to diversify the portfolio’s ‘growth’ assets, instead recommending a portfolio heavily weighted towards residential property
• recommended an overly high proportion of related entity residential property investments without justification.

ACME Super Advice failed to establish that it prioritised the complainants’ interests over its own. The proportion of related entity investments compared to non-related entity investments was found to be excessive. The related entity investments recommended by the financial firm carried significantly more risk than Linda and Terry understood to be the case and were not aligned with the couple’s risk profile. Finally, the investigation found the fees to be excessive when compared to alternative investment products.

The determination noted that ACME Super Advice failed to act in the best interests of their clients and breached the following sections of the Corporations Act 2001 – 961B(1) best interests duty; 961B(2) failure to demonstrate best interests by following ‘safe harbour’ steps; 961G it would be reasonable to conclude that the advice is appropriate to the client had the provider satisfied the best interests duty.

AFCA found that the financial firm’s failure to provide appropriate advice and act in the complainants’ best interests resulted in Linda and Terry’s SMSF being $885,545 worse off. Accordingly, the final determination was that ACME Super Advice was required to compensate the complainants for losses incurred.

The adviser and ACME Super Advice potentially breached the following standards in the Code of Ethics:

Case study two: Failure to act in clients’ best interests #2

Simon was a financial planner and the sole director of ACME Wealth Services, an advice practice holding both an Australian Financial Services Licence and an Australian Credit Licence. Simon had operated within the financial services industry for a number of years, having previously been an authorised representative of a large dealer group, during which time he was also the sole director of ACME Financial Services Pty Ltd, a corporate authorised representative of that dealer group.

An ASIC investigation uncovered that, on three occasions, Simon relied on service agreements that included client signatures that ASIC determined had not been provided by the clients themselves. In addition, ASIC found that Simon had created, or caused to be created, file notes that did not accurately reflect actual client interactions. The purpose of both courses of conduct was the same: to justify the charging of ongoing service fees. Clients were being charged for services that could not be legitimately substantiated, and the documentation used to support those charges had been fabricated or altered.

ASIC determined that, having regard to this conduct, Simon did not meet the statutory requirements to be a fit and proper person to participate in the credit and financial services industries.

In this case, Simon was potentially in breach of the following ethical standards:

Case study three: Inappropriate advice #1

The complainants, Judy and David, were 72 and 75 at the time of seeing adviser Carolyn, an authorised representative of financial firm ACME Advice.

Carolyn recommended that Judy and David invest in a Capital Protected Fund (the A Fund). At the time David had $450,000 and Judy had $345,000 to invest.

Judy and David were classified by Carolyn as ‘Assertive – Balanced’ investors. This risk profile resulted in a recommended asset allocation of 30% defensive assets and 70% growth assets. The complainants say they understood from Carolyn that the A Fund was capital protected, and that they would get the highest return for the year locked in for the remainder of the period.

They later found out that they would only get the return available at the anniversary of the product. They claimed had they known this was the way the product worked, they would not have invested because returns were significantly lower than they had been led to expect. Judy and David also claimed that Carolyn charged higher fees than initially declared.

An investigation by AFCA determined that Carolyn failed to adequately explain how the A Fund worked. Had the complainants properly understood the level of uncertainty associated with the product, they would not have invested.

The determination also noted that Carolyn failed the best interests duty by not providing appropriate risk profiling and advice to her clients. Finally, AFCA accepted that the complainants would have been conservatively invested if appropriately advised, which resulted in a total loss of $97,495.

AFCA’s determination found in favour of the complainants; total compensation equating to the couple’s loss, plus 1.5% interest per annum compounding annually from the determination to the date of payment, was ordered.

By inadequately describing how the product worked and failing to provide appropriate risk profiling and advice to her clients, Carolyn potentially breached the following standards in the Code of Ethics:

Case study four: Inappropriate advice #2

Tanya was an experienced financial adviser with ACME Financial Planning. She was subject to a series of client complaints and an investigation by ASIC. The investigation revealed a pattern of misconduct, which resulted in severe consequences for Tanya’s career and her reputation within the financial services industry.

ASIC identified the following issues:

• Inappropriate recommendations – Tanya demonstrated a strong tendency to make recommendations not aligned with her clients’ risk profiles. ASIC noted concerns about the subsequent suitability of the investment strategies she proposed, potentially exposing clients to excessive risk.
• Non-compliant Statements of Advice – ASIC’s investigation discovered that Tanya had provided some clients with non-compliant SoAs, which can hinder clients’ ability to make informed decisions about their finances.
• Inadequate record keeping – there were repeated instances of Tanya’s failure to maintain adequate records. Proper record-keeping is essential in the financial services industry to ensure transparency, accountability and regulatory compliance. The lack of proper documentation raised concerns about the integrity of Tanya’s practices.
• Failure to act in her clients’ best interests – Tanya breached this most fundamental obligation on several occasions.

As a result of ASIC’s investigation, Tanya was banned from providing financial services for a period of five years.

According to the information provided, Tanya potentially breached the following standards:

Acting in every client’s best interests is the cornerstone of any ethical financial advice practice. It fosters trust, builds long-lasting relationships and safeguards the integrity of the profession. When clients feel confident that their adviser is genuinely in their corner, they are better placed to make informed financial decisions – and that empowerment leads to sustainable outcomes for both the client and the business.

The Code of Ethics exists not as a burden, but as a framework that supports advisers in doing what most entered the profession to do in the first place: make a meaningful difference in their clients’ financial lives. Its twelve standards provide clear guidance on what ethical practice looks like in action, and when embraced wholeheartedly rather than treated as a compliance obligation, they become a genuine competitive advantage.

In an industry where trust is everything, the advisers who consistently place their clients first are the ones who stand apart. They attract clients who value integrity, retain them through the strength of the relationship, and build practices with reputations that speak for themselves. Referrals follow. Loyalty follows. Longevity follows.

Ultimately, ethical practice is not a constraint on success. It is the foundation of it. For financial advisers, the best interests duty and the Code of Ethics are more than regulatory requirements. They are a professional standard worth upholding, a commitment to clients worth keeping and a standard of care the industry should be proud to deliver.

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As Australia’s population ages, the demand for aged care advice will inevitably surge.

Data from the Australian Institute of Health and Welfare (AIHW) shows that Australia’s population aged 65 and over is projected to reach 22% – or 8.8 million people – by 2057, reinforcing the need for specialist aged care advice. This article, proudly sponsored by GSFM, explores some of the issues around ethics and providing financial advice to ageing Australians.

Australia is an ageing nation. One in five Australians are aged 65 and over^[1]. That does not include the tail end of the ‘baby boomers’, nor Gen X snapping on their heels. The percentage of the population aged 65 and over has increased from 12% at 30 June 1994 to 17% 30 June 2024^[2].

Driven by improved nutrition, medical advancements and healthier lifestyles, Australian life expectancy now extends well into the 80s, underscoring a critical need for structured aged care advice. However, while post-retirement financial planning traditionally prioritises wealth decumulation and immediate lifestyle funding, long-term aged care strategies remain significantly underemphasised.

The aged care system is a complex web of providers, agencies and changing regulations that often overwhelms families during a period of high vulnerability. This makes access to accurate, conflict-free professional advice vital to safeguarding the best interests of older Australians.

The inherent complexity of the Australian aged care system has been amplified by the introduction of the Aged Care Act 2024 and its funding reforms that came into effect on 1 November 2025. In the wake of these reforms, Australians will increasingly rely on personalised guidance to make informed decisions tailored to their unique family circumstances. Professional support will be essential in helping Australians navigate their aged care funding options effectively.^[3]

Aged care in Australia

While the aged care system is designed to support older Australians, it remains riddled with complexities and is challenging for families to navigate. These complexities make it difficult to both access the required support and understand the financial intricacies of that support.

There are two main pathways in the system, at-home support and residential aged care, funded by a mix of government support and personal contributions. However, it’s not as simple as making an application – the federal government’s own report, released the same day as the federal budget, revealed that it takes, on average, 12 months to get a spot in an aged care home or secure at-home support^[4].

Further, senate estimates figures show that in December 2025, there were more than 230,000 Australians currently on the wait list for aged care, either for an assessment or a package at their approved level.

Care in the home – designed to help older Australians stay independent for longer, the Support at Home program (formerly In-Home Care program) provides a coordinated care plan tailored to meet the recipient’s specific needs. While it sounds great in theory, the application process is onerous and there’s a substantial waiting list for both assessment and allocation of a package.

Care in a residential aged care facility – this provides accommodation, daily care and lifestyle services within an aged care home. This can be a permanent move or a short-term stay (respite care). Permanent care is intended for those who can no longer live at home due to increased care needs.

As most aged care advice focuses on access to and funding residential aged care, in-home support services are not discussed further in this article.

A major reason people access aged care advice is the complexity of the fee structures associated with residential aged care. The following provides a brief overview of the fee structure, which – like many government programs – is subject to regular review and change. Major changes were implemented as part of the Aged Care Act 2024. The same fee structure is applicable whether the aged care facility is run by local or state government, a charitable organisation or corporate.

Aged care fees and the Aged Care Act 2024

The overhaul of residential aged care fees in the Aged Care Act 2024 represented a significant structural shift. The rationale for these changes stems directly from the recommendations of the Royal Commission into Aged Care Quality and Safety and the findings of the Aged Care Taskforce. The core objective was to create a dual-benefit solution: protecting the financial dignity of older Australians while ensuring the entire aged care sector does not collapse under escalating costs^[5].

The major change to aged care fees introduced by the 2024 Act is drawing a line between what the government should pay for and what the individual should pay for.

The Act established that health and clinical care is a universal right. Therefore, the government funds 100 percent of clinical care, which includes nursing, medical management and allied health.

However, everyday living and accommodation costs are co-contributed; the rationale is that whether you live in your own home or a residential facility, you still have to pay for food, laundry, utilities and rent.

So, under the new act, the former ‘Means Tested Care Fee’ has been split into two distinct, means-tested categories:

• The hotelling contribution – a co-contribution to daily lifestyle and facility operational costs, capped at $22.15 per day
• The non-clinical care contribution – this covers personal care, such as showering, dressing and leisure activities, capped at $107.32 per day.

A significant change is the introduction of measures to inject capital directly into the infrastructure of aged care homes:

• RAD retention – aged care providers are now permitted to retain a small portion of a resident’s Refundable Accommodation Deposit (RAD). Providers can retain two percent per year for up to five years, a total maximum of 10 percent of the RAD. Given many RADs are over one million dollars, this can represent a sizable amount. This only applies to people entering aged care from 1 November 2025.
• Increased price caps – the maximum room price cap was raised from $550,000 to approximately $750,000 and indexed to inflation. This is the maximum price a provider can charge without seeking approval from the Pricing Authority.

The Act also introduced the ‘no worse off’ principle; anyone who was already in residential care prior to 12 September 2024 is strictly grandfathered. Their contribution arrangements stay exactly the same. As with any change, there are a lot of caveats around the new payments, and which payment applies to what person – this only adds to the already complex structures.

What are the costs?

The following is a summary of the primary aged care fees – specifically, the cost of the room. The reality involves far more complexity and will vary from client to client. This illustrates the importance of personal finance advice when it comes to accessing aged care services.

Prior to moving into a residential aged care home, the resident must agree on a room price with the provider. It’s important to note that prices will vary from one provider to the next. Whether an individual qualifies for government assistance to cover these accommodation costs, in full or in part, is determined by a formal means assessment.

There are three options for payment.

A refundable lump sum (RAD or RAC)

There are 2 types of lump sum, depending on the outcome of your client’s means assessment:

• Refundable accommodation deposit (RAD): This is when your client pays the full amount and is the accommodation price agreed with the provider.
• Refundable accommodation contribution (RAC): This is when the government helps with the costs and is worked out by the provider based on the daily accommodation contribution (DAC).

It is important to know that a refundable lump sum is counted as an asset in the aged care means assessment, even in the event it is paid by a family member. This means that paying a lump sum can affect overall fees charged by the provider.

A daily payment (DAP or DAC)

There are two types of daily payments, depending on the outcome of the client’s means assessment:

• Daily accommodation payment (DAP): this is when your client pays the full amount themselves and is the accommodation price agreed with your provider. Daily accommodation payments are indexed on 20 March and 20 September each year.
• Daily accommodation contribution (DAC): this is when the government helps with the costs; the amount is determined by Services Australia based on the client’s means assessment.

Daily payments are akin to rent payments and are not refunded when your client leaves care.

A combination of refundable lump sum and daily payments

This is when your client combines the two types of payments to meet their costs. The split of the combination can be made in the way that works best for the client’s financial situation.

The financial commitment of residential aged care extends beyond the initial room price. Once a resident moves in, they face ongoing daily fees for accommodation, care and hospitality services. Under the reforms that rolled out from 1 November 2025, the government restructured these fees to increase transparency. At the same time, a stronger user-pays model was introduced, one that scales based on an individual’s personal wealth.

The government’s website My Aged Care provides more information about aged care costs and how they are calculated.

Aged care advice

Access to quality aged care financial advice is incredibly important when it comes to making well-informed aged care decisions. Clients – and often, their families – need to understand the complexities of fees and costs and how to best structure finances to afford the required care.

However, there’s an ongoing problem with aged care advice, one beyond the inherent complexities in accessing and paying for care.

It’s an issue for the broader advice industry as well as extremely challenging for the clients and their families. The issue is this: a substantial amount of ‘aged care advice’ is provided by individuals who are unlicensed, not authorised, not on ASIC’s Financial Adviser Register. It’s provided by a range of people, professionals such as lawyers or accountants, individuals working in the aged care sector or with ancillary services. In some cases, aged care advice is provided by former (i.e. deregistered) financial advisers.

It can be difficult for families to source the right help and to understand the differences in the advice on offer. Are they receiving information only, general advice or comprehensive personal advice?

 Information versus advice

In many cases, the ‘client’ is the family of the person entering aged care and the move is often event driven. As the event is often negative – an illness, a fall, the death of a partner – emotions and stress levels can run high.

It is not unusual that the seekers of advice often don’t have the luxury of time or the emotional clarity to check the credentials of someone offering aged care advice, let alone ensure the guidance provided is in their loved one’s best interests.

Of course, there’s a lot of information that can be imparted without crossing the line into advice. This includes:

• explaining aged care fees (including calculations for an individual’s fee scenario)
• explaining Centrelink entitlements
• sourcing appropriate temporary or permanent accommodation.

If the professional in question is simply providing information without affecting any decision making, it’s not advice.

However, once the provider of aged care information influences an action, this likely crosses the line into personal advice. This might include:

• discussing options about how the client could pay for the aged care fees, or
• making recommendations about payment options.

However, even where a recommendation isn’t made, simply influencing the client to decide about a specific option, product or product class falls into the realm of personal product advice. The Corporations Act 2001 outlines two steps to determine whether a person is providing personal product advice:

1. The person providing the information or advice knows personal information about the client
2. There is a suggestion or inference to make a change in respect to assets or products, or a class of products, and influencing the client’s decision about those assets.

Finding and funding accommodation is usually only the first step in holistic personal financial advice; there is often financial, tax, social security and estate planning considerations. These should be the purview of a registered financial adviser providing aged care advice.

For many consumers, the difference between information and advice is not clear. Decisions can be made in haste when those making them are emotional or vulnerable. Given the expenses associated with aged care, decisions about the advice may be driven by cost without understanding the implications of following a recommended course of action.

Unregistered advisers may be cheaper because:

• they don’t have applicable professional indemnity insurance
• they aren’t members of AFCA, thereby denying their clients an opportunity for redress
• they aren’t required to have memberships of professional associations
• they avoid ongoing educational requirements.

Importantly, an unregistered adviser is not bound by the Financial Planners and Advisers Code of Ethics (Code of Ethics).

Ethics and aged care advice

A registered financial adviser offering aged care advice is obliged to adhere to the Financial Planners and Advisers Code of Ethics (figure two).

The Code of Ethics was introduced to provide a layer of consumer protection and engender trust in the financial advice profession. The Code of Ethics requires financial advisers to meet their obligations in the law in respect of the advice provided to each client, including:

• The best interests duty
• The appropriateness of advice
• Prioritisation of client’s interests
• Additional requirements for product replacement recommendations
• Australian Taxation laws.

Further, licensed financial advisers are required to:

• Know your client
• Work out their situation, objectives, needs and their financial literacy level
• Have a reasonable basis for advice
• Know your product and the consequences of your advice, and ensure the advice is appropriate for the client
• Comply with statement of advice (SOA) requirements.

Those individuals who provide aged care advice (not just information) and are not registered advisers operate outside of this Code and the requirements outlined above. This has negative implications for consumers.

At best, unlicensed aged care advice can have mediocre client outcomes. At its worst, it can lead to elder abuse, in particular financial elder abuse. This is defined by the World Health Organisation as “The illegal or improper exploitation or use of funds or other resources of the older person” and is the subject of an earlier article in this year’s Ethics Series, Ethical financial advice for vulnerable clients – part two.

Registered financial advisers who provide aged care advice are licensed and regulated under the Corporations Act. Among other protections, their clients can take complaints to the Australian Financial Complaints Authority (AFCA).

Unregistered aged care advice is both a consumer protection and ethical issue for the industry. Although some clients receive personal product advice, they are not eligible for the protections available to clients of registered financial advisers, including access to AFCA.

Although not beholden to the Code of Ethics, unregistered advisers providing aged care advice fail to deliver important outcomes for clients that can be unpacked in reference to the Code and its standards, as follows:

The lack of mandatory registration for aged care advisers raises significant consumer protection concerns, as it leaves the sector without a formal mechanism to verify qualifications and expertise. This regulatory void exposes vulnerable families to advisers who may lack the necessary training to navigate complex aged care needs. Consequently, consumers face an increased risk of receiving inadequate financial planning and securing unsuitable care arrangements.

Furthermore, exempting these advisers from the Code of Ethics removes critical safeguards that mandate transparency, conflict management and acting in the client’s best interests. Without these binding ethical standards, accountability is severely diminished, creating an environment where advisers might prioritise personal or institutional gains over client welfare. This absence of oversight significantly heightens the risk of biased, misleading or self-serving financial advice.

Finally, the intricate and constantly changing nature of the aged care system demands highly specialised knowledge, particularly regarding its interplay with financial planning. Without robust regulatory and ethical frameworks, consumers are uniquely vulnerable to outdated or inaccurate advice that fails to address their specific needs. Ultimately, this lack of oversight undermines public confidence and can lead to severe, long-lasting financial and emotional repercussions for families.

Case studies

The following case studies highlight the benefits of obtaining aged care advice from registered financial advisers through the lens of the standards comprising the Code of Ethics.

Case study one: Moving into aged care

Barry and Maureen, a couple in their early 80s, needed to arrange residential aged care for Barry due to his deteriorating cognition. Following a formal dementia diagnosis, Maureen and their children realised he needed professional care. Seeking guidance, they turned to an aged care adviser recommended by their neighbour. They were unaware that the recommended adviser was not a registered financial adviser.

The adviser, Nigel, provided Maureen with a detailed costing of the aged care options for Barry and suggested they sell the couple’s residence to pay for the Refundable Accommodation Deposit. They could then use the remainder of the sale proceeds plus their savings to buy a small unit for Maureen. While advice about buying or selling property, including the family home, is exempt from AFS provisions, the advice pertaining to the use of the couple’s savings is not.

However, Maureen was unhappy with the advice. She didn’t want to move; the couple had already downsized from their farm and moved into town – where else could she go? She was close to two of her three children, comfortable in her community and president of the local CWA. The downsized home was selected for its garden, and she didn’t want to have to give that up.

Encouraged by their children, Maureen and Barry sought a second opinion, this time from a registered financial adviser from ACME Aged Care Advice. Their new adviser, Jackie, explained that as clients of a registered financial adviser, they had a range of protections – and she had training and education related to the aged care sector. Further, she regularly undertook professional development to ensure she was familiar with current legislation and other changes to the sector.

Jackie helped the family understand the intricacies of the aged care fees they would incur and explain how they had changed post 1 November 2025. While the family had some understanding, what they understood to be the likely fees had changed. Jackie developed a strategy to ensure the family home would be retained, so Maureen could continue to enjoy her home, garden and community. Importantly, it ensured she had somewhere to live once Barry moved into aged care.

Jackie was able to recommend several strategies to rearrange the couple’s investments. She presented two funding options to determine which worked best for them. With tailored advice and support, the couple was able to fund Barry’s aged care needs and implement a financial plan that both prioritised their long-term wellbeing and considered all elements of their financial situation, including Centrelink entitlements and estate planning.

As a registered financial adviser, Jackie is bound by the Code of Ethics. Her conduct in this case study saw her meet her requirements under the Code, specifically in relation to the following standards:

Case study two: Meeting aged care needs

Evelyn, a 79-year-old widow living alone, suffered a severe stroke that left her with permanent mobility challenges. Following an extended stay in an acute stroke unit, her multidisciplinary medical team advised her two sons that returning home independently was no longer safe, recommending a transition into permanent residential aged care instead.

Evelyn’s sons, who acted as her joint Powers of Attorney – one managing her medical decisions and the other overseeing her financial affairs – promptly scheduled a meeting with David, Evelyn’s long-standing financial adviser. Recognising that aged care involves highly complex, specialised regulatory frameworks, David immediately brought his colleague Sarah into the consultation. While both operated under the same financial services licensee, Sarah had completed advanced postgraduate certifications in aged care financial strategies to navigate the intricacies of means testing, payment options and the impact on Centrelink benefits.

Working collaboratively, Sarah and David modelled several funding scenarios for the brothers. A core constraint was Evelyn’s deep sentimental attachment to her family home; she refused to sell it, and her sons noted the property required significant deferred maintenance before it could fetch an acceptable market price anyway.

To solve this, Sarah proposed funding the transition via a Daily Accommodation Payment (DAP) instead of a lump-sum Refundable Accommodation Deposit (RAD). David then restructured Evelyn’s existing investment portfolio to generate a predictable, tax-effective monthly income stream dedicated entirely to covering the DAP and ongoing care fees. Ultimately, the coordinated approach ensured the brothers fully understood the financial commitments, fee structures and cash flow mechanics required to secure their mother’s quality of care without selling her home.

Working together, Sarah and David were able to provide Evelyn and her sons with positive outcomes, which ensured Evelyn’s care needs were met and her financial security assured. Their conduct in this case study saw the advisers meet Evelyn’s requirements under the Code of Ethics, specifically in relation to the following standards:

As Australia’s population ages, the demand for aged care advice will inevitably surge. Navigating this system often requires rapid decision-making during a highly stressful family crisis, making access to reliable, expert guidance more critical than ever.

However, the current regulatory ‘grey area’ allows unregistered, unregulated individuals to provide aged care advice while remaining exempt from the Code of Ethics. This lack of oversight poses severe risks to consumers, leaving them vulnerable to unqualified operators and biased recommendations that can jeopardise both their financial security and peace of mind. To safeguard vulnerable families, policymakers and industry stakeholders must close these loopholes and mandate that aged care advice be delivered exclusively by registered financial advisers.

Partnering with a specialist aged care financial adviser, either through a trusted external referral network or as an embedded specialist within the practice, can protect and enhance an advice firm’s client base as the wealth transition accelerates.

By integrating this specialised expertise, practices can seamlessly guide multi-generational families through highly stressful care transitions, preventing costly financial mistakes and securing the broader family’s loyalty. Ultimately, a proactive approach transforms a looming operational challenge into a powerful retention tool, positioning the practice as a holistic, indispensable partner for ageing clients and their beneficiaries.

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Notes:
[1] National Ageing Research Institute demographic briefing
[2] https://www.aihw.gov.au/reports/australias-welfare/profile-of-australias-population
[3] The Risk of Unregulated Aged Care Advice: Protecting Older Australians and Ensuring Quality Advice, Aged Care Steps, January 2026
[4] Aged Care Act 2024 Wait Times Report: Residential care and Support at Home 1 November 2025 – 31 March 2026, published 12 May 2026
[5] https://www.agedcarequality.gov.au/providers/reform-changes-providers/about-new-aged-care-act-and-key-changes-providers

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Fiduciary duty is more than a regulatory hurdle; it is the moral and professional backbone of a sustainable financial advice practice.

Today’s financial adviser stands as a true professional partner; a fiduciary whose primary purpose is to empower clients to achieve their life goals and financial objectives. This article, proudly sponsored by GSFM, examines the importance of fiduciary duty and ethics in the Australian financial advice practice.

Ethical financial advice is an essential aspect of ensuring the wellbeing and financial success of both individuals and businesses. Within this, fiduciary duty plays a crucial role in establishing trust, integrity and client-focused decision making.

As defined by the United Nations Principles of Responsible Investment (UN PRI), fiduciary duty exists to ensure that those who manage other people’s money act in the interests of beneficiaries, rather than serving their own interests. For financial professionals, fiduciary duty serves as a guiding principle that compels them to put their clients’ best interests first.

At its core, a fiduciary duty is a powerful commitment to partnership. It is the gold standard of professional relationships, ensuring that every recommendation, strategy and conversation is filtered through a single lens: the client’s best interest. This isn’t just about avoiding conflicts; it’s about the proactive pursuit of the best possible outcomes for those who entrust you with their futures.

Fiduciary duty defined

A fiduciary duty is a fundamental legal and ethical responsibility that financial advisers, investment professionals and others in the financial services industry owe to their clients – it’s a promise to put their clients first. For financial advisers, this means moving beyond basic compliance to act with absolute loyalty and transparency. It is a legal and ethical mandate to prioritise clients’ financial well-being above their own personal gain or profits for the practice or licensee.

To honour this duty, an adviser must:

• Apply expert judgment and due diligence to ensure every recommendation aligns with each client’s specific objectives, goals and risk tolerance
• Disclose any potential conflicts of interest so the advice clients receive is unbiased and free from hidden incentives
• Exercise sound judgment, due diligence and integrity when managing assets on behalf of their clients.

Ultimately, this duty is the cornerstone of the adviser-client relationship. By aligning directly with the twelve standards (figure one) that comprise the Financial Planner and Adviser Code of Ethics (Code of Ethics), the fiduciary standard transforms financial advice from a simple transaction into a trusted, long-term partnership built on accountability.

ASIC describes the best interests duty and related obligations as:

“…designed to ensure that retail clients receive advice that meets their objectives, financial situation and needs, and that you act in the best interests of your clients when providing advice.”

As it relates to financial advisers, this can be articulated as always acting in the client’s best interests, acting with competence, honesty, integrity and fairness…words that appear in the value statements that underpin the Code of Ethics.

In July 2013, the introduction of FOFA included an amendment to the Corporations Act 2001 that enshrined the best interests duty into law and extended the existing fiduciary duty financial advisers owe to clients.

This duty encompasses the know your client requirement, the obligation to understand recommended products and the mandate to keep the client’s interests central to all advice. Alongside these amendments, strict penalties for non-compliance were introduced, including banning and disqualification orders.

Section 961B of the Corporations Act 2001 (as amended) lists the actions advisers must undertake to satisfy the best interests standard. In summary, these are^[1]:

1. To identify the client’s financial situation, objectives and needs; these should be provided to the adviser by the client.
2. To identify the subject matter of the advice sought by the client (whether explicitly or implicitly).
3. To identify the client’s relevant circumstances – the objectives, financial situation and needs that would reasonably be considered as relevant to the advice sought on the identified subject matter (i.e. the client’s relevant circumstances).
4. To ensure this information is complete and correct, and to make reasonable enquiries if gaps or inconsistencies are apparent.
5. To assess whether you have the expertise required to provide the client advice on the subject matter sought and, if not, decline to provide the advice.
6. When considering the advice sought, whether it would be reasonable to consider recommending a financial product. If a financial product is deemed relevant, a recommendation should only be made after thoroughly investigating the most appropriate products relevant to the client’s circumstances.
7. When advising the client, the financial adviser must base all judgements on the client’s relevant circumstances.
8. Take any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client’s relevant circumstances.

Number eight is a catch all statement that encapsulates the spirit of the legislation. Regardless of a client’s specific requests, all advice must be rooted in a deep understanding of their unique profile and circumstances. While the best interests duty is a formal requirement for retail clients, a comparable fiduciary standard governs professional conduct when dealing with wholesale clients.

A failure to act in a client’s best interests would not only breach section 961B of the Corporations Act 2001, but it would also breach several ethical standards, including:

ASIC notes that the best interests duty and related obligations are designed to ensure that retail clients receive advice that meets their objectives, financial situation and needs, and that you act in the best interests of your clients when providing advice.

ASIC’s Regulatory Guide 175 AFS licensing: Financial product advisers—Conduct and disclosure  (November 2024) contains guidance about:

• How the best interests duty applies to personal advice (both comprehensive and scaled advice)
• Features of good quality advice
• The ‘safe harbour’ provisions, defining how to comply with the best interests duty
• The modified best interests duty and when it applies
• Use of processes to provide advice
• How to recognise a possible conflict of interest, and
• The conflicts priority rule and how it applies to products or services provided by a related party.

A practical fiduciary framework

There are several practical measures your advice practice can implement to ensure your team consistently meets its fiduciary duties and ethical responsibilities as outlined in the Code of Ethics.  These include:

Transparency and disclosure

At its core, a fiduciary duty requires you to act with undivided loyalty to your clients. Transparency is the mechanism that makes this loyalty verifiable. By clearly communicating all costs, risks and associations, you eliminate any information asymmetry that may favour the professional over the layperson.

Ultimately, transparency and disclosure can transform your relationship from being simply transactional into a partnership built on informed consent, one that ensures your client’s best interests remain the primary driver of every decision.

There are several ways transparency and disclosure can support your fiduciary duty:

1. Transparency ensures clients have access to all relevant information about their investments, including potential risks, fees and conflicts of interest. By disclosing such information, your clients can make informed decisions and understand the implications of their investment choices. This transparency helps you fulfill your fiduciary duty by avoiding any misleading or incomplete information that could compromise any clients’ best interests.

Transparent disclosure of fees enables clients to understand the costs associated with your advice and their investments. This disclosure allows your clients to assess the value they receive from your services and make informed decisions about their financial goals.

Transparency also ensures you meet standards four and seven of the Code of Ethics; without transparency, a client cannot provide informed consent. Being transparent about your advice, particularly about any benefits you receive – whether they flow to you or your licensee – are more likely to result in costs that are fair and reasonable and represent value for money for the client, as required by the standard.

2. It is an obligation for advice professionals to avoid or appropriately manage conflicts of interest. Transparency about any potential conflicts that could compromise clients’ interests provides clarity to your clients and ensures you take necessary steps to mitigate such conflicts. Full disclosure allows your clients to evaluate the advice they receive, helps you to maintain the clients’ trust and meet your fiduciary obligations.

Being transparent about any potential conflict of interest and how it is being managed can keep you on the right side of standard three.

3. Advisers must be transparent about investment advice provided to clients: the strategies, associated risks and any potential limitations or drawbacks. Clients need to have a clear understanding of how your recommendations align with their financial goals and risk tolerance.

Transparent disclosure helps clients make informed decisions and helps you fulfill your fiduciary duty by providing suitable investment advice. Advice and product recommendations are covered by standards five, six and nine. Approaching advice with full transparency will help you meet those standards.

Ultimately, transparency enables clients to make informed decisions and trust that you have prioritised their best interests.

Client centric decision making

A commitment to client centric decision making provides the foundation for meeting your fiduciary duty. This approach means placing the client’s best interests at the forefront of each action and recommendation.

You have a legal and ethical obligation to act in all clients’ best interests, which requires prioritising factors such as their life goals, financial objectives, risk tolerance and financial security. By embracing a client centric mindset, you can tailor advice to align with each client’s unique circumstances, aspirations and long-term financial success.

A client-centric approach allows you to deliver personalised financial solutions that empower clients to achieve their objectives with confidence. This not only reinforces your fiduciary responsibility but also elevates the value and impact of the financial advice you provide.

Investing the time to understand your clients’ unique needs, preferences and concerns allows you to craft financial strategies that are both highly effective and personally resonant. This client-centric approach does more than just deliver results; it cultivates a foundation of trust and solidifies long-term loyalty, significantly boosting your professional credibility. Ultimately, a robust client-adviser relationship is the cornerstone of building and sustaining a thriving, reputable financial advisory practice.

A client first approach positions you to comply with key ethical and professional standards, including those outlined in the Code of Ethics, notably those in the ‘Client Care’ subsection (standards four-six). By prioritising your clients’ best interests at every stage of the advice process, you fulfill both your fiduciary duty and ethical obligations and, at the same time, enhance the overall quality and effectiveness of your advice.

Duty of care and skill

Fiduciary duty mandates a high standard of care and skill. Financial advisers are expected to possess and maintain the requisite expertise to provide truly competent advice. This requires a commitment to continuous professional development, staying ahead of shifting industry trends, evolving regulations and emerging best practices.

By upholding this standard of excellence, you ensure that every recommendation is underpinned by current data and optimised strategies. Fulfilling this duty not only demonstrates your professional integrity but also ensures direct alignment with the requirements of Standard ten.

Legal protection and accountability

Fiduciary duty also provides clients with legal protection and avenues for recourse in the event an adviser does the wrong thing for a client. Clients can seek redress through AFCA, and both ASIC and AFCA can hold financial professionals accountable for any misconduct or negligence that results in financial harm.

The legal framework that governs financial advice creates a strong incentive for advisers to act with integrity and maintain the trust of their clients. Legal protection and accountability are also enshrined in the Code of Ethics.

Case studies

The following case studies are based on real cases dealt with by ASIC or AFCA; however, the names of people and organisations have been changed and some details altered. For each case study, it will be shown where the adviser has potentially breached or upheld their fiduciary duty and how this did or did not comply with the twelve standards that comprise the Code of Ethics.

Case study one: A failure of fiduciary duty

Readers will be aware that there have been a number of cases relating to investments in the First Guardian Master Fund (First Guardian), many of which are ongoing. This first case study is drawn from ASIC’s actions in relation to First Guardian. Names and details have been altered.

ASIC has issued a 10-year ban against former financial adviser Phillip following findings of serious professional misconduct. The regulator determined that Phillip breached his fundamental obligations by prioritising personal gain over client welfare, specifically regarding recommendations to invest in, and roll superannuation into, the First Guardian Master Fund.

Key findings of misconduct

The investigation revealed several critical failures in Phillip’s practice:

• Conflict of interest – he accepted $100,000 in payments classified as conflicted remuneration
• Deceptive conduct – he issued SOAs falsely claiming he received no benefits that could influence his recommendations
• Failure of care – he failed to investigate the suitability of First Guardian for his clients, exposing them to unacceptable risk levels.
• Lack of competence – ASIC concluded that Phillip was not a “fit and proper person” to provide financial services and posed a high risk of future legal contraventions.

The 10-year prohibition is comprehensive. Phillip is barred from:

• Providing any financial services.
• Controlling any entity within the financial services sector.
• Performing any function related to the operation of a financial services business.

ASIC stated that its enforcement action serves to protect consumers, maintain public confidence in the financial system and act as a deterrent against similar unethical behaviour within the industry.

This case study highlights the interrelationship of fiduciary duty and ethics. As well as failing in his fiduciary duty to his clients, Phillip potentially breached nearly every standard in the Code of Ethics as follows:

Case study two: Inappropriate advice

Lydia sought compensation from her adviser, Charlie, and his firm, ACME Financial Advice, asserting that they had mismanaged her portfolio. Her primary contention was that the advice provided failed to meet her goal of maximising capital growth to facilitate retirement by age 60. She argued that the poor investment performance constituted a failure to act in her best interests.

ACME Financial Advice and Charlie denied any mismanagement, maintaining that the advice was appropriate for the client’s profile. They highlighted two key factors for the portfolio’s decline:

1. To achieve the aggressive returns Lydia desired, she would have had to take on risk levels far exceeding her documented tolerance, which would have been inappropriate and contrary to her best interests.
2. The firm noted that the significant reduction in Lydia’s portfolio balance was primarily driven by several large capital withdrawals she made over a three-year period.

The AFCA investigation of the matter saw the body rule in favour of the financial firm based on several key points:

Evidence versus recollection – while Lydia claimed her primary goal was early retirement, AFCA gave greater weight to contemporaneous documentation maintained by Charlie and ACME Financial Advice (Fact Finds, SOAs and file notes), which did not support her assertion.

Suitability of advice – AFCA concluded that advising Lydia to pursue the high-risk strategies required to attain her desired returns would have been negligent, given her recorded risk profile.

Responsibility for losses – AFCA found there to be no evidence of mismanagement; rather, the depletion of funds was attributed to market performance and Lydia’s own withdrawal history.

AFCA found the advice to be appropriate and determined that ACME Financial Advice was not liable for compensation. In this case, Charlie met his fiduciary duties. Specific standards in the Code of Ethics that he upheld in relation to this case include:

Case study three: A violation of fiduciary duty

The case against Simon involves a severe breach of the fiduciary relationship between a financial adviser and their client. Simon received $476,000 from his client George, specifically earmarked for investment in designated stocks.

Rather than executing George’s instructions, Simon misappropriated the funds to engage in personal trading on his own account. Following significant trading losses, he engaged in deceptive conduct by leading George to believe his investment remained intact, effectively concealing the loss.

Upon an ASIC investigation, it was determined that Simon’s actions demonstrated a fundamental lack of the integrity required for the advice profession. The regulator’s findings focused on three key areas:

Character and judgment – Simon was found to lack the necessary judgment and character to operate within the financial services industry.

Suitability – Simon was officially declared not a ‘fit and proper person’ to hold a position of financial trust.

Legal contravention – Simon’s conduct represented a flagrant misuse of client funds and a total breach of professional trust.

To protect consumers and maintain the integrity of the Australian financial system, ASIC imposed a permanent ban, prohibiting Simon from:

• Providing any form of financial service.
• Controlling any entity that carries on a financial services business.
• Performing any professional function within the industry.

This case is a reminder of the consequences of violating the duty of loyalty. Fiduciary duty is not merely a regulatory checkbox; it is a legal and ethical mandate to keep client assets separate and secure.

Transparency is required even (and especially) when losses occur; ASIC noted that deceptive reporting to hide a breach of trust is viewed as a separate and serious offense.

As a result of his actions, Simon potentially breached the following standards in the Code of Ethics:

Case study four: Fulfilling one’s fiduciary duty

The complainants in this case, Adam and Deanne, were growth investors with an ongoing advice relationship with ACME Financial Planning that spanned 15 years. The couple were informed investors, and both paid the highest marginal tax rate.

In 2020, the couple received advice from their adviser, Monique, that they should decrease their exposure to international equities in favour of Australian equities. The couple subsequently claimed the advice was not in their best interests and contrary to ACME Financial Planning’s own target asset allocation. As a result of the greater weighting to Australian equities, the couple claimed the portfolio underperformed by 14.7% – or $52,630 in dollar terms.

ACME Financial Planning acknowledged the allocation was contrary to its target allocation but said this was in the couple’s best interests because it provided access to tax benefits in the form of franked dividends. It also provided greater stability as it reduced foreign currency risk. The overweighting to Australian equities was clearly disclosed and explained in the Statement of Advice (SOA) that accompanied the advice.

The subsequent AFCA investigation determined that the advice Adam and Deanne received was in their best interests. Although it resulted in them having a greater exposure to Australian equities, AFCA was satisfied the rationale was clearly articulated and documented, and the reasons were not contrary to either party’s best interests.

Consequently, AFCA found in favour of Monique and ACME Financial Planning; neither party needed to compensate the client.

Clients seeking financial advice expect the advice provided will leave them in a better position. Section 961G provides that the resulting advice must be appropriate to the client. In relation to this advice, AFCA found there was a sound basis for deviating from the firm’s target asset allocation.

This case study demonstrated that financial adviser Monique had done the right thing. As such, she most likely complied with the following standards of the Code of Ethics:

Fiduciary duty is more than a regulatory hurdle; it is the moral and professional backbone of a sustainable financial advice practice. By centring the client’s best interests, advisers move beyond the role of a mere service provider to become a trusted partner in their clients’ life journeys. This commitment to loyalty, transparency and professional care does more than protect the public – it builds the very credibility and trust that allow a practice to flourish over the long term. In an industry where reputation is a valuable asset, upholding a rigorous fiduciary standard is not just a legal obligation, but the hallmark of professional excellence.

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Ethics form the foundation of advice, underpinning trust, long-term client relationships and a resilient, sustainable business.

Ethics in financial advice isn’t just about ‘doing the right thing’ to sleep better at night, it’s the fundamental bedrock of a sustainable business model. In this article, proudly sponsored by GSFM, the importance of ethical practice is explored.

In the world of financial advice, it’s common to speak in the language of numbers: compound returns, asset allocation, insurance, yield…

However, the true foundation of a thriving advice practice isn’t found in numbers, it’s built upon the bond of ethical integrity. When a client walks into your office, they aren’t just looking for a higher rate of return. Instead, they’re looking for a partner they can trust with their future, their legacy and, importantly, their peace of mind.

Choosing to lead with ethics is a proactive commitment to excellence. It transforms the adviser-client relationship from a transactional relationship to a partnership. By placing professional standards and the client’s best interests at the centre of every decision, an advice practice does more than just meet requirements, it creates a sense of security, important in this increasingly volatile world.

In this light, a code of Ethics is not a restrictive set of rules. It is a tool that fuels long-term business growth because it fosters deep-seated client loyalty and elevates the professionalism of financial advice.

Professional standards reforms for financial advisers were introduced to the Corporations Act 2001 in March 2017. These reforms were designed to raise the education, training and ethical standards of those providing personal advice to retail clients on ‘more complex financial products’^[1]. Those reforms required FASEA (as was) to develop the Financial Planners and Advisers Code of Ethics (Code of Ethics), which came into effect in January 2020.

The introduction of the Code of Ethics came with an expectation from ASIC that Australian Financial Services licensees would take reasonable steps to ensure that their authorised representatives comply with the Code. For example, licensees must:

• Ensure their authorised representatives are aware of the need for compliance with the Code of Ethics and that this compliance is ongoing.
• Provide training and/or guidance to their authorised representatives about the types of conduct that is consistent/inconsistent with the Code of Ethics..
• Facilitate individual advisers’ ability to raise concerns with the AFS licensee about how the licensee’s systems and controls may be hindering their ability to comply with the Code of Ethics, and act on those concerns where appropriate.
• Consider whether advisers are complying with the Code of Ethics as part of their regular, ongoing monitoring of adviser conduct.
• Make any necessary changes to systems and processes to ensure compliance with the Code of Ethics and other regulatory requirements.

The Code of Ethics addresses five core values: trustworthiness, competence, honesty, fairness and diligence. It requires that financial advisers must act at all times and in all cases, in a manner that is demonstrably consistent with Code’s twelve ethical standards, summarised in figure one. These standards are regulated and monitored by ASIC’s approved compliance schemes.

Ethics is a ‘team sport’

An ethics-centred approach is not a solo performance by the adviser; it is a team sport played by the entire practice. From the first greeting at the front desk to the final signature on a Statement of Advice, every touchpoint is an opportunity to reinforce a culture of integrity, professionalism and care.

The ethical chain of command

To truly embed the values that underpin the Code of Ethics, every role within an advice practice must understand that ethics isn’t just the adviser’s responsibility, they need to know how the Code of Ethics translates into their roles. For example:

• The receptionist – as the face of the firm, they champion ethics through data privacy and by creating a welcoming, transparent environment for every client who walks through the door.
• The paraplanner and administrator – these ‘engineers’ of the financial plan need to ensure that every strategy is executed with technical precision and that paperwork is handled with the highest degree of integrity.
• The practice manager – by prioritising ethical training and fostering an open-door policy, they ensure that the practice’s moral compass remains calibrated as the business grows and new staff join the team.

While every staff member must perform their duties in a way that aligns with the firm’s values, the professional weight remains clearly defined. Each team member’s commitment provides the essential support that allows advisers and licensees to fulfill their regulatory obligations.

Ultimately, although the entire team builds the culture, the adviser and licensee stand as the final guardians of the practice and bear the ultimate responsibility for ensuring that every action taken meets the highest standard of care.

To establish an ethics-centric practice and minimise the risk of violating the Code of Ethics, there are a range of strategies that could be implemented. These include:

1. Code of conduct: by establishing a practice-wide code of conduct, one which encapsulates your firm’s values as well as the Code of Ethics, your team should have a clear understanding of their role and the expectations that go with it.

Any code of conduct should set clear expectations about employee behaviour when performing their role and, in an ethics-centric practice, how each of the twelve standards may specifically intersect their role. This should be a concise and accessible document that is distributed to all staff members, and which is readily available for reference.

2. Communication: establish clear communication channels within your practice to convey the importance of ethics. Regularly discuss ethical considerations during team meetings, emphasising the relevance of the Code to each staff member’s role. A collaborative environment where colleagues can monitor and support each other in upholding ethical standards is important to create and maintain an ethical practice. Encourage open discussions about ethical dilemmas and provide guidance on navigating challenging situations.

It’s also important to communicate clearly, openly and honestly with your clients. In the initial meetings, don’t simply tell them what you will do for them, but detail how you will work with them to achieve their objectives. Establish ongoing channels of communication and explain how you will communicate with them. It’s important to detail the method and frequency.

Remember that it’s important not to make promises that cannot be honoured. As well as potentially breaching the Code, it will reflect badly on the practice.

3. Set key performance indicators (KPIs): by reinforcing your company’s values, adhering to your practice’s code of conduct and behaving in a way that makes ethical behaviour central to each team member’s work will support the creation of an ethical practice. Although a value driven KPI may sometimes be more challenging to quantify than one with specific and measurable outcomes, it will highlight the importance of values and ethics to your practice.

The implementation of accountability measures will ensure that all staff members integrate ethical considerations into their daily responsibilities. Further, to recognise and reward ethical behaviour will reinforce a positive ethical culture.

4. Checklist: a checklist can be used to safeguard compliance with the Code. The questions in the checklist should be tailored to each role in the practice and include those relevant to dealing with prospective clients, new clients and existing clients.

5. Workplace training: this is essential to ensure all staff understand both the practice’s values and the obligations of the Code. Using workshops to promote ethics in your workplace will reinforce the practice’s standards of conduct and clarify behaviours and practices that do and don’t work within your own code of conduct – and within the Code.

Importantly, ethics training should not be a once off. Ethics training could be incorporated as part of a regular team meeting; for example, by using a variety of case studies that address common ethical dilemmas across the financial planning industry. It can be used to emphasise your firm’s commitment to continuous improvement in ethical practices. It also provides an opportunity to seek feedback from staff as to how the practice can better support ethical decision-making and incorporate this input into ongoing improvements.

Ideally, this workplace training should be practical as far as possible and teach team members to make good decisions that are compliant with the law and consistent with your practice’s values.

Ethics training should also be incorporated into the onboarding process for new employees.; this will ensure they receive the necessary information and guidance to understand and comply with the Code from the beginning of their tenure.

6. Feedback loop: by encouraging staff to provide honest feedback about the processes, conversations and client interactions, you are better placed to make sure you’re aware of issues that may arise that could potentially compromise your business. A feedback loop can help you identify gaps in relation to processes and procedures, and where a checklist or workplace training may be useful tools.

7. Lead by example: regardless of your position in a practice, it’s important to set a good example. For those who are senior in the practice, it’s more important to demonstrate those behaviours that are and are not acceptable. Senior advisers and personnel will set the tone for ethics in the practice; as such, they need to embody the Code in all they say and do.

8. Regular audit: These or similar strategies may have already been implemented in your practice. If so, it’s important to review the effectiveness of each. What’s working well and what’s not? If you can identify gaps in processes that may lead to a breach of the Code, it’s better to identify them ahead of time than when ASIC comes knocking on your door.

Why is an ethics-centric practice important?

An ethics-centric practice is important because it transforms the nature of financial advice from a mere commodity into a high-trust partnership. In an industry where clients often share their most intimate life goals and vulnerabilities, a firm commitment to ethical standards provides a moral compass that guides every decision, especially when regulations don’t provide a clear-cut answer.

A culture of integrity does more than just protect the firm from reputational risk; it creates a superior client experience characterised by transparency and peace of mind. Ultimately, when a practice prioritises doing the right thing, it builds a sustainable legacy where the interests of the adviser, the staff and the client are perfectly aligned. This ensures long-term success that can be measured by more than just assets under management.

Furthermore, aside from the legal obligations the Code place on licensees and advisers, ethics play a crucial role in running a successful financial advice practice. The reasons for this in more detail:

1. Client trust: ethical behaviour builds trust and clients are more likely to trust a financial adviser who demonstrates a commitment to ethical conduct. Trust is fundamental in establishing and maintaining long-term client relationships.

Each of the Code’s standards is trust building. A failure in any one area can erode trust and derail the adviser/client relationship.

2. Integrity and professionalism: an adherence to ethical practices upholds the integrity of the financial advice profession. It demonstrates both professionalism and a dedication to acting in the best interests of clients. This, in turn, enhances the credibility and reputation of the individual financial adviser, his or her practice and the industry as a whole.

While integrity underpins several of the Code of Ethic’s standards, it is a specific requirement of standard two, which requires advisers to always act with integrity.

3. Client’s best interests: financial advisers have a fiduciary responsibility to act in the best interests of their clients. Ethical behaviour ensures that financial advisers prioritise their clients’ needs and goals over their own, thereby avoiding conflicts of interest that could compromise the quality of advice provided.

Acting in each client’s best interests is aligned with several standards within the Code of Ethics, notably standards two and five that specifically reference client best interests. Other standards also align with the need to act in a client’s best interests, including standard three (avoiding conflicts of interest), standard four (acting with informed consent) and standard six (consider the long-term effects of advice).

4. Legal and compliance: ethical behaviour aligns with the legal requirements and regulations governing the Australian financial advice industry. Financial advisers who act ethically are more likely to comply with legal standards and have a reduced risk of encountering legal issues or regulatory scrutiny. Unethical behaviour can result in legal consequences, damaging both your career and the practice’s reputation.

Standard one of the Code of Ethics requires that advisers act in accordance with all applicable laws (including the Code).

5. Risk management: ethical decision-making contributes to effective risk management. By considering all advice through an ethical lens, advisers can identify and mitigate potential risks, protecting both clients and the reputation of the advice practice.

This also comes back to standard two, the requirement to act with integrity, for this is a quality that enables advisers to identify and manage risks.

6. Long-term success: ethical behaviour will contribute to the long-term success of your practice. Clients who feel well-served and that you have always acted in their best interests are more likely to remain loyal to you and provide referrals, contributing to the ongoing growth and success of your business.

7. Industry reputation: ethical conduct by financial advisers collectively enhances the reputation of the entire financial services industry. Unethical practices can lead to negative perceptions and erode public trust, affecting not only individual advisers but the industry as a whole.

The reputational damage possible to the industry is the subject of standard twelve and its requirement that individually and in cooperation with peers, advisers must uphold and promote the ethical standards of the profession.

8. Personal satisfaction: Knowing you are making a positive impact on your clients’ lives, acting in clients’ best interests and adhering to a strong ethical framework is likely to enhance the sense of purpose and professional satisfaction in your work. Replicate this across your practice and it’s a recipe for success.

Case studies

The following case studies are based on ASIC’s enforcement activities, FSCP cases or AFCA complaints; however, names and other details have been changed for privacy reasons.

Case study one: Failing to sufficiently account for client circumstances

Financial adviser Margot, an authorised representative of ACME Advice, was referred to the FSCP sitting panel after ASIC became aware of allegations of misconduct. The sitting panel determined that Margot contravened sections 961B(1), 961G and 921E(3) of the Corporations Act 2001 in relation to advice provided to two of her retail clients between February 2023 and April 2024.

In relation to the first client, the sitting panel found that Margot had failed to make “reasonable inquiries to obtain complete and accurate information about whether the client held insurance through their existing superannuation before recommending that the client transfer their superannuation from one fund to another fund”.

The second case regarded Margot’s failure to base all judgements in advising the clients on their relevant circumstances. The sitting panel determined that there were “numerous errors and inconsistencies recorded in the SOA” regarding:

• where the client’s existing superannuation was held
• the client’s self-employed status
• whether the client held insurance or not.

Further, the panel commented that in providing the advice, Margot had “failed to demonstrate the Code of Ethics’ values of competence and diligence and breached Standards 5 and 9 of the Code of Ethics.”

In this instance, Margot received a written reprimand from the FSCP.

The FSCP sitting panel determined that Margot breached two standards. There are other potential standards the panel could have considered to have also been breached as follows:

Case study two: Dishonest practices

Financial adviser Sam was a sole practitioner whose financial advice practice, ACME SMSFs, focused on dealing in listed securities and advising on self-managed superannuation funds (SMSFs). He was investigated by ASIC after clients Pam and Nigel grew concerned about funds being withdrawn from their SMSF, transactions they had not authorised.

Although Sam did not initially cooperate with ASIC’s investigation, the regulator eventually exposed his dealings and found Sam had:

• made 144 unauthorised transfers, impacting 11 clients, totalling nearly $2.75 million
• used these stolen funds for personal reasons, including gambling and paying off personal debt
• made false representations to clients and other third parties about the unauthorised transfers with the intent to conceal his dishonest conduct.

Sam was convicted of 15 offences of dishonesty and sentenced to eight years’ imprisonment with a non-parole period of five years. He was also permanently banned from providing financial services or from controlling an entity carrying on a financial services business.

ASIC found Sam took advantage of the trust placed in him by his clients. The regulator determined it was appropriate to permanently ban Sam because of the seriousness of his misconduct, the impact on his clients and the need to prevent future harm to consumers.

Sam potentially breached the following standards of the Code of Ethics.

Case study three: Bad advice

The complainants in this case, Christine and Cameron, are corporate trustees of a self-managed superannuation fund. They were clients of financial firm ACME Financial Advice from 22 October 2019 to 4 July 2025.

The complainants believe that the financial firm’s advice was not appropriate for their SMSF during this period. They cited several reasons in their complaint:

• the recommended asset allocation was too aggressive for its conservative members
• it was unnecessary to take on the degree of risk that was recommended to achieve their objectives
• the financial firm was conflicted when it made the recommendations.

The financial firm denied the allegations. Its stated case is that the recommendations were appropriate for the complainants and that it managed any potential conflicts of interest in accordance with its obligations.

AFCA’s investigation found that ACME Financial Advice did not provide appropriate advice to Christine and Cameron, nor did it act in their best interests. The findings noted that ACME Financial Advice:

• failed to provide advice within the risk parameters it set
• failed to diversify the portfolio’s growth assets, with the portfolio too heavily weighted towards property
• recommended an overly high proportion of related entity investments without justification.

AFCA found that the SMSF would have been $252,565 better off had Christine and Cameron not followed the advice provided. Consequently, AFCA’s determination was in favour of the complainants and ACME Financial Advice had to pay the complainants $252,565 compensation plus interest.

By not disclosing required information and misleading the client by omission, ACME Financial Advice potentially breached the following standards in the Code of Ethics:

Case study four: Unethical practice

Gold Coast based financial adviser Dinesh – also a certified practising accountant, registered tax practitioner and self-managed superannuation fund auditor – was a director of ACME Financial Services & related company ACME SMSFs.

Following an ASIC investigation, it is alleged that between March 2018 and August 2024, Dinesh provided unlicensed financial services related to securities, executed unauthorised share trades on client accounts, falsified a fixed-term deposit certificate and misappropriated funds from both personal and SMSF bank accounts belonging to his clients for his benefit or the benefit of third-parties.

As a result of his conduct, it was alleged that Dinesh misappropriated funds totalling nearly $5 million and caused trading losses of approximately $1.25 million.

At the relevant time, Dinesh was authorised by ACME Financial Services Pty Ltd to provide financial product advice regarding retirement savings account products and superannuation. He was charged with two counts of dealing in securities without a licence to do so. The maximum penalty is between two and five years’ imprisonment. He was also charged with breaching each of:

• s1041G Corporations Act 2001, which requires that a person must not, in the course of carrying on a financial services business in this jurisdiction, engage in dishonest conduct in relation to a financial product or financial service.
• s1311 of the Corporations Act 2001 which establishes the general penalty provisions for offences under the Act, creating criminal liability for contravening, or failing to comply with, the Act’s requirements.

Each of these breaches carry a maximum penalty of 15 years’ imprisonment.

Dinesh was also charged with seven counts of dishonestly applying property of another to himself or another, in circumstances where the value of the property has a value of at least $100,000 (aggravated fraud). The maximum penalty for each offence is 20 years’ imprisonment.

In the constantly evolving financial advice landscape, products can be replicated and strategies can be automated, but a culture of trust and integrity remains irreplaceable. Managing an ethics-centred practice is more than a strategy for avoiding risk: it’s an investment in the most valuable asset any firm can manage…your clients and the trust relationship.

An ethics centric practice will benefit from three key synergies:

1. Client retention – because trust creates the strongest bond in any professional relationship, ethical practices hold on to their clients (and grow through referral) whatever is happening in markets.
2. Operational clarity – a shared ethical code simplifies decision-making for staff, as the ‘right’ path and important decision making is defined by values rather than rules.
3. Professional pride – employees are more engaged and productive when they believe in the social value and honesty of their work.

When every member of your team operates with a shared moral compass, a virtuous cycle is created, one where clients feel secure, staff feel empowered and the business achieves a level of resilience that market volatility cannot shake. In this industry, doing the ethical thing is quite literally the best way to do well.

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Notes:
[1] https://www.legislation.gov.au/Details/F2019L00117

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How do advisers work with vulnerable clients, particularly those affected by ageing and cognitive decline?

This article, proudly sponsored by GSFM, examines how advisers work with vulnerable clients, particularly those affected by ageing and cognitive decline. Part two focuses specifically on the rising incidence of elder abuse and the practical application of the Code of Ethics.

As highlighted in part one of this CPD series, vulnerability is a growing issue for Australians. Our nation’s demographic trajectory makes an increase in vulnerable clients unavoidable and, statistically, an increase in clients at risk of financial abuse inevitable.

Financial abuse is unfortunately common and accounted for 30 percent of allegations reported to the NSW Ageing and Disability Commission between 1 July 2019 and 31 March 2025^[1]. The seriousness of this issue has resulted in the Financial Elder Abuse Project, an initiative of the Australian Human Rights Commission, which aims to strengthen the financial safety of older Australians. Running from 2024-2026, the project brings together representatives from the banking, financial, legal and community sectors to improve the prevention of, and response to, financial elder abuse^[2].

Defined as ‘the misuse or theft of an older person’s money or assets’, financial elder abuse can cover a broad spectrum of behaviours, sometimes described as existing in the grey area between thoughtless practice and outright theft. It’s important to note that while all vulnerable clients may be at risk of financial abuse, it is most prevalent among the elderly.

The Financial Elder Abuse Project is being championed by Age Discrimination Commissioner Robert Fitzgerald AM who believes the risk factors contributing to financial elder abuse are likely to increase in the next 20-30 years, including the issue of inheritance impatience.

The risk factors noted by the Age Discrimination Commissioner include:

• the growing ageing population, with people living longer and healthier lives
• the largest intergenerational wealth transfer in history
• growing economic pressures, such as the rising cost of living, lack of affordable housing and low wage growth.

As an adviser, you are in the box seat to serve as frontline defenders to bridge the gap between financial management and safeguarding the personal autonomy of your clients. As will be explored in greater detail in this article, your role includes the proactive identification of risks by monitoring for red flags as identified by the Australian Financial Complaints Authority (AFCA).

Beyond technical oversight, you are uniquely positioned to engage in meaningful conversations with older clients and their families and facilitate transparent family meetings that clarify the client’s wishes. By acting as an objective third party, you have an opportunity to normalise the discussion of protective measures such as Enduring Powers of Attorney (EPOA) protocols to ensure that family involvement remains supportive rather than exploitative.

To ensure ongoing compliance with the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics) and its twelve standards (figure one), it is important that advice practices have strategies to define, identify and manage potential cases of elder financial abuse.

Financial elder abuse: definition, prevalence and forms of abuse

Definition

Elder abuse, as a broad concept, is defined by the World Health Organization (WHO) as:

“A single or repeated act, or lack of appropriate action, occurring within any relationship where there is an expectation of trust which causes harm or distress to an older person.”

Elder abuse typically takes several forms, and some individuals may be subject to one or more of these:

• Psychological abuse
• Physical abuse
• Financial abuse
• Social abuse
• Sexual abuse
• Neglect

Elder abuse can have serious physical and mental health, financial and social consequences. These can include physical injuries, premature mortality, depression, cognitive decline, financial devastation and placement in aged care facilities.

The Financial Services Council (FSC) defines elder financial abuse as:

‘Any activity by an individual that seeks to use fraudulent, illegal, deceptive or otherwise improper acts or processes to advantage from the financial resources of an older or elderly individual.’

In this definition, advantage can include:

• personal profit or gain
• enabling profit or gain for a relative, friend, spouse or business associate
• deprivation of the right of an older or elderly individual to benefits, resources, belongings or assets for any reason.

Prevalence

While several reports are currently in train, the most recently published show financial abuse to be the second most common form of elder abuse; disturbingly, 69.5 percent of victims experienced more than one type of abuse.

however, as highlighted by the Age Discrimination Commissioner earlier in this article, circumstances suggest that instances of financial elder abuse are expected to increase.

AFCA notes^[3] the following risk factors may increase the likelihood of elder abuse:

• limited digital literacy
• language barriers
• geographical or social isolation
• cognitive impairment
• reduced mobility, vision, or hearing
• physical dependence on another person for care or help with tasks.

Forms of financial abuse

Elder financial abuse can take many forms. Your experience as a financial adviser is likely to vary from experiences across other financial services such as banks or insurers.

The NSW Ageing and Disability Commission (ADC) recently released a granular breakdown of financial abuse allegations, revealing that exploitation and the misuse of legal authority are the most dominant types of abuse.

Recent research has identified three specific ‘modern’ methods of financial abuse:

1. Coerced ‘Granny Flat’ arrangements^[4] – whereby a family pressures an older relative to sell their home and fund the construction of a granny flat on the child’s property, often without a legal contract. If the relationship breaks down, the older person is left homeless and without their original capital.
2. Technology-facilitated abuse – the perpetrator exploits the older person’s digital illiteracy and gains access to banking apps, passwords and MyGov accounts. A 2025 study found that men are statistically more likely to experience this form of tech-based financial control than women^[5].
3. Tax and business exploitation – this involves unwitting tax fraud, where family members list an older person as a director of a shell company or use their Tax File Number to claim fraudulent refunds or shift business debts^[6].

Ethics and financial elder abuse

Elder abuse can be an ethical minefield. You may have older clients at risk of financial abuse and you need to be alert to red flags. It’s hard to meet the basic ethical requirement – to always act in the client’s best interests – if you don’t act to protect your clients from potential (or actual) financial abuse.

Ethical considerations include:

• Avoid conflicts of interest, particularly in situations where two generations of a family are clients
• Avoid contributing to the perpetration of unlawful acts
• Ensure all clients are well informed; as clients age, ensure they understand what constitutes elder abuse
• Ensure your client understands the advice, and has capacity to act
• Be respectful – after all, just because a client is old does not mean they’re not able to make valid financial decisions
• Your client’s best interests come first.

In its updated approach to financial abuse of older people, AFCA expects that where a financial firm sees warning signs that an older person might be experiencing financial abuse, it will take steps to ensure the person is making an independent and informed decision. It further notes the importance of distinguishing signs of potential financial abuse of an older person from a decision freely made by an older person who has capacity to do so.

Warning signs of elder abuse

AFCA has observed the following warning signs in complaints involving financial abuse of older people, but notes that it is a non-exhaustive list.

An older person may:

• Engage in financial activity that is unusual or inconsistent with their long-standing patterns of financial activity
• Be accompanied by someone who appears to pressure them into making financial decisions
• Have a third party speak on their behalf, including in situations involving language barriers
• Ask for communications to be sent to a third party, especially when that person is not formally authorised
• Appear fearful (particularly of the person accompanying them) or withdrawn
• Not understand or be aware of recent financial decisions (e.g. they are confused about why they are being asked to consent or sign a document)
• Sign a guarantee of a company’s loan when they were not encouraged to obtain independent financial or legal advice about the guarantee
• Be unable to explain, or appear confused about, their financial products or decisions
• Register for online services despite having no prior history of online interactions
• Express concerns about missing funds or financial documents.

Where these or other signs arise, AFCA states that financial firms should make further inquiries and proceed with caution. This may include delaying the processing of a customer’s request or taking other preventative steps.

In a situation where a financial firm has reasonable cause to suspect financial abuse, they should not require evidence before escalating the matter or considering what safeguards may need to be put in place.

When considering the appropriateness of a financial firm’s response, AFCA will consider whether it took timely preventative, supportive and restorative action without first placing a burden on the customer to provide further information. Any additional safeguards introduced should be proportionate and sensitive to the older person’s circumstances – for example, it would not be appropriate to ask someone with limited digital literacy to use online portals.

AFCA general principles for dealing with financial abuse

AFCA’s approach aims to align with community expectations and good industry practice, including meeting industry codes of practice, such as the Code of Ethics, in relation to elder financial abuse. This approach includes the following general principles:

1. Consider the context – understand older people experiencing financial abuse are likely to be experiencing considerable stress and may need additional care. Financial firms should take a flexible approach and tailor support options to each customer’s unique circumstances and needs.In complaints, AFCA considers whether financial firms should have been aware of the potential warning signs of financial abuse.

2. Engage with care – engage with the older person with sensitivity, dignity, respect and compassion. This may include referring them to services with specialist training and experience.In complaints, AFCA considers whether the financial firm exercised its role with reasonable care and skill, identifying and responding to warning signs of abuse that emerge from engagement with its customer.

3. Prioritise safety and agency – the safety and wellbeing of the older person must be a priority in the firm’s communication, documentation and financial and account arrangements. This includes accepting an older person’s disclosure of financial abuse at face value and working with the older person to provide information in an accessible and flexible way.In complaints, we consider whether the financial firm should have taken precautions or other preventative action when warning signs of abuse were present.

Assessing client vulnerability

Today’s landscape of shifting family dynamics and complex wealth transfers highlights the importance of establishing a thoughtful process to identify and support vulnerable clients. This isn’t simply about meeting regulatory requirements; it is about honouring the trust your client has placed in you to safeguard their hard-earned legacy and independence.

One way to do this is to develop a simple checklist to be used when meeting with older and/or vulnerable clients. As well as being the right thing to do for potentially vulnerable clients, it can help you meet your ethical requirements. Such a checklist could include sections on:

• Identifying vulnerabilities – type of vulnerability, signs of reduced understanding or inconsistent instructions or the recent life events that may have occurred.
• Clients’ comprehension and ability to provide informed consent – for example, the client being able to demonstrate understanding, and adequate time was allowed for reflection and follow-up questions.
• Your communication approach – did you adapt language and pace to the client’s capacity, your use of plain English, repetition or visual aids where needed.
• Presence of family members, carers or other third parties – were the client’s views clearly distinguished from the input of others, did you assess the risk of undue influence and in the case of EPOA involvement, was it aligned with client’s welfare and wishes?
• Appropriateness of advice – measured in relation to the client’s capacity as well as goals, would you be comfortable defending that advice under ethical scrutiny?
• Ethical red flags – did you experience discomfort or unease about proceeding and if so, did you consider the risk of financial elder abuse and evaluate any potential harm to your client’s dignity, independence or security?
• Documentation and escalation – where appropriate, did you document ethical reasoning or discuss concerns with peers or licensee? Should you pause, decline or escalate advice and related issues?

By weaving empathy-led vulnerability checks into your advice process will better help you identify   subtle changes in a client’s wellbeing before a crisis unfolds. A proactive, compassionate approach can build on your trust relationship and ensure vulnerable clients have a professional ally.

It’s important to ensure that, practice wide, advice reflects the spirit and intent of the Code of Ethics. That is, client wellbeing is always prioritised over technical or commercial outcomes and any action taken would withstand public and professional scrutiny.

Case studies

The following case studies are loosely based on those published by ASIC and AFCA. Names of people and places have been changed.

Case study one: Due diligence

Martin sought compensation for a series of withdrawals totalling $737,000 that he had made from his account-based pension. He had made the withdrawal requests himself. Martin told his adviser, Mark from ACME Advice, that the funds were being used for personal matters, to support family members and to cover his living expenses.

After the funds had been withdrawn, Martin’s daughter advised Mark and ACME Advice that her father had been the victim of a sophisticated scam. She argued that Mark (and ACME Advice) should have recognised the signs of financial abuse and intervened. She made a formal complaint to AFCA.

AFCA found that Mark went above and beyond his duties in attempting to assist Martin. His contact notes and contemporaneous records demonstrated that the adviser had:

• made repeated enquiries about the purpose of the withdrawals
• expressed concern for Martin’s wellbeing
• encouraged him to seek legal advice
• offered to provide personal financial advice.

Martin declined each of these offers. Consequently, AFCA found that Mark and ACME Advice had met their obligations under the law, including the Code of Ethics. The transactions were authorised, conducted on an ‘execution only’ basis, and deposited into the complainant’s own account. AFCA determined that Mark and ACME Advice were not responsible for Martin’s loss.

Mark’s actions saw him make best endeavours to determine whether there was an issue and comply with his ethical obligations. Importantly, he upheld the following standards.

Case study two: Coercion into a granny flat

Audrey had been widowed for 15 years. She and her husband had invested well over time and her financial adviser, Lisa from ACME Financial Advice, had looked after her financial interests for more than a decade.

At their semi-annual review meeting a year prior, Audrey told Lisa she planned to sell her home and contribute the proceeds toward her daughter’s intended purchase of a new home. She was to have her own granny flat on the property and would live there permanently. That way she would be closer to her daughter and if she needed assistance or care, it would be readily available.

Lisa was surprised. Audrey’s daughter lived in the country; at least two hours from Audrey’s current home and in an area not well serviced by transport. Lisa knew Audrey had remained active in her community. She loved her regular bridge session, was on a bowls team and volunteered at a local charity shop.

Despite Lisa expressing her misgivings, Audrey proceeded with her plans. As well as contributing the proceeds of her property sale to her daughter’s new home, Lisa later redeemed some investments to pay for the fit out of her granny flat.

Less than one year after Audrey moved to her new residence, Lisa received a tearful call. Audrey and her daughter had fallen out; she had missed her community and had not found her place or her people in the new location. She wanted to return to her community but, when she requested the money to do so, was told she had no right. Despite the money from the sale of her property and investments, she was not listed on the title deed, nor was her financial contribution recorded elsewhere.

Although she had some investments, it was not enough for her to set up home, leaving Audrey in a vulnerable position. It’s not an uncommon scenario – as identified by the Australian Human Rights Commission in its current Financial Elder Abuse Project, granny flat arrangements are an increasingly common form of financial abuse.

Although Lisa recognised the situation as unusual and unexpected, she failed her elderly client. She did not recognise coercion, and she failed to recommend that Audrey seek legal advice before selling her home and investments. Legal advice would likely have led to contractual arrangements that provided Audrey with some protections. Ultimately, Lisa’s inaction resulted in her client being in a financially vulnerable position. Lisa potentially breached the following standards in the Code of Ethics:

Case study three: Misuse of an EPOA

Will is in his early 80s and had been a client of ACME Advisors for over a decade. A few years ago, Will’s two sons established a joint EPOA should their father require assistance and stewardship in his later years. Will’s financial adviser Brigid knows of the EPOA and has met with both sons on several occasions.

Despite a recent stroke, Will’s mental acuity had remained strong. However, he’s no longer able to drive and found it challenging to live at home on his own. As a result, Will moved in with his son Gary and daughter in law Cynthia. Although he’s able to be reasonably independent in their home, Cynthia sees herself as Will’s default carer.

Gary contacted Brigid and asked her to redeem a managed fund investment valued at $88,000. He explained that it would be used to make some modifications to his and Cynthia’s home to make it safer and more comfortable for Will to live there. He talked about a ramp in the event Will needed to use a wheelchair, railings in the ensuite bathroom used by Will and some garden landscaping to make it easier for Will to safely enjoy their outdoor space.

Brigid called Will at a time she knew Gary would be at work. She wanted to ensure that Will was aware of this request, its purpose and quantum. Will was aware of the building works and had seen the quotes. He was aware that the modifications had been quoted at $46,000. Gary had intended to keep the remaining $42,000 as ‘payment’ for Will living in his house and his wife’s services as a ‘carer’. He had not intended to inform his father about this, let alone seek his approval. Brigid did not action the transaction and made a file note of this issue in case the situation arose again at a time she wasn’t present at the firm.

Although AFCA acknowledges that employees of financial firms are “not expected to be detectives”, it does state that it is an adviser’s duty to exercise reasonable care and skill. This includes an obligation to question a client’s authorisation of a transaction, especially in circumstances where financial abuse is possible, or the use of funds is not consistent with the customer’s wishes or is not for their benefit.

Through her actions, Brigid acted in Will’s best interests and did not breach the Code of Ethics. However, had she simply actioned Gary’s request, she would have potentially breached the following standards:

Read Part 1:
CPD: Ethical financial advice for vulnerable clients – part one

Take the FAAA accredited quiz to earn 0.5 CPD hour:

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Notes:
[1] NSW Government Ministerial Release, World Elder Abuse Awareness Day, 15 June 2025
[2] https://humanrights.gov.au/resource-hub/by-resource-type/reports/older-peoples-rights/financial-elder-abuse-project
[3] The AFCA approach to financial abuse of older people, November 2025
[4] Australian Human Rights Commission (AHRC), Financial Elder Abuse Project (Launched Nov 2024; Progress Report October 2025)
[5] AIHW (2025), “Technology-facilitated abuse” subsection, citing Powell et al. and the ANROWS Technology-Facilitated Abuse National Survey
[6] Professor Ann Kayis-Kumar and Professor Jan Breckenridge (UNSW), Exploitation of Financial Systems in Domestic and Elder Abuse, 2026

The post CPD: Ethical financial advice for vulnerable clients – part two appeared first on AdviserVoice.

Advisers need a strong understanding of the ethical and professional complexities of providing advice to vulnerable clients.

This article, proudly sponsored by GSFM, examines how advisers work with vulnerable clients, particularly those affected by ageing and cognitive decline. It explores the ethical tensions that may arise and the practical application of the Code of Ethics when autonomy, consent and power are challenged.

Vulnerability is a growing issue for Australians, and our demographic trajectory makes an increase in vulnerable clients unavoidable. More clients are living longer and are having to manage retirement savings over multiple decades. At the same time, these same clients need to navigate superannuation, aged care and estate planning decisions, all at a time when their cognitive ability may be changing.

Conditions such as mild cognitive impairment and dementia rarely arrive suddenly. They typically progress unevenly and are often unnoticed at first. This can create time periods where your clients remain legally competent but are increasingly vulnerable to confusion, influence or harm.

As an adviser, you are trusted to recommend strategies, interpret complexity and guide decisions that may affect a client’s security and independence for the rest of their life. Advice that meets legislative requirements may still fail the client if it overlooks their reduced capacity to understand, question or provide informed consent.

To ensure ongoing compliance with the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics) and its twelve standards (figure one), it is important that advice practices have strategies to define, identify and manage vulnerable clients. This could include guidance on how to identify early warning signs of diminished capacity, how to assess genuine understanding, or how to respond ethically when legal authority (such as the use of EPOAs) and moral concerns diverge.

What is vulnerability?

Defined by the Oxford Dictionary as “the fact of being weak and easily hurt physically or emotionally”, vulnerability is often misunderstood as a static label or a synonym for old age or disablement.  However, in the financial advice context, vulnerability is a dynamic state that can affect any client at any time. You also need to be aware of vulnerability that affects a client’s spouse, a dependent or parent, which in turn may impact the advice you provide.

ASIC views vulnerability through the lens of consumer detriment^[1]. While age is a common factor, ASIC emphasises that vulnerability arises when a consumer’s circumstances make them more susceptible to harm or less able to advocate for their own interests. This may include people who have health issues or disabilities, experience language barriers or who are victims of scams.

As the vulnerable clients most likely to be advisory clients are older people, this article focuses primarily on the issues and ethics surrounding age-related vulnerability. However, many of the key points are as relevant for clients with vulnerabilities not related to their age.

Three dimensions of vulnerability

To apply a practical definition in an advice practice, advice practices could categorise vulnerability into three distinct types:

1. Situational vulnerability, which is often triggered by life events. Bereavement, relationship breakdown or a sudden medical diagnosis can temporarily impair a client’s cognitive load and decision-making ability.
2. Progressive vulnerability, which involves a gradual decline. This may be a worsening chronic illness or declining cognitive health such as the early stages of dementia. It may require advisers to adapt their communication styles over time.
3. Structural vulnerability, which refers to a client’s environment, and might include a heavy dependency on family members or carers. While support is positive, it creates a risk of elder abuse or coercive influence, where the client’s own wishes may be overshadowed by others.

Temporary versus permanent diminished capacity

It is also important to distinguish between temporary and permanent diminished capacity. A client grieving the loss of a spouse may experience brain fog that makes complex financial decisions impossible soon after their loss, but they are more likely to regain full capacity in the shorter term. Conversely, permanent conditions often require the formal integration of Enduring Powers of Attorney (EPOA) to ensure the client’s long-term interests are protected.

As advisers know all too well, the Australian financial landscape is complex, particularly when it comes to the later stages of life. The intricacies of superannuation, transition to retirement strategies, estate planning and aged care can be difficult for clients to understand at the best of times. When a client is in a vulnerable state, these complexities are magnified.

One of the difficulties for advisers is the need to navigate a cultural reluctance to discuss decline. Many clients view the loss of financial autonomy as a loss of dignity. This makes your role dual-purpose: you must be both a technical expert and a behavioural specialist, identifying red flags even when the client is hesitant to disclose them.

Alignment of vulnerability with the Code of Ethics

Defining and identifying vulnerability is the bedrock of compliance with the Code of Ethics:

Cognitive decline

The statistics around cognitive decline in Australia are alarming. There were an estimated 433,300 Australians living with dementia in 2025, a figure that’s projected to nearly double to 812,500 by 2054^[2]. You are likely to have clients who are either experiencing cognitive decline themselves or are caring for others who suffer from it. If not today, certainly in the near future.

Australia’s ageing profile suggests that cognitive impairment will become a primary driver of capital erosion. The total cost of dementia is expected to soar to over $26 billion by the 2040s, much of which will be borne by individuals through self-funded aged care and medical out-of-pocket expenses^[3].

What makes it especially challenging is that cognitive decline rarely presents as a clear dividing line between capacity and incapacity. For many clients, it unfolds gradually and unevenly, creating a prolonged ethical grey zone. It’s a time that’s not simply a health issue, but one that can be a structural risk to wealth management and long-term estate planning. Clients remain legally competent but increasingly vulnerable in their decision-making. It is within this space that financial advisers may face some of their most difficult ethical judgements.

A critical distinction must be drawn between legal capacity and functional decision-making ability. Legal capacity is a binary concept and is typically assessed only when formally challenged. Functional capacity, by contrast, exists on a spectrum and relates to a client’s practical ability to understand information, weigh consequences and make consistent decisions. Advisers are not qualified to diagnose impairment, nor are you expected to make clinical assessments. However, from an ethical perspective, you are obliged to respond to what you observe in the advice relationship with your client.

So, how do you make those judgements? It’s challenging and early warning signs are often subtle. You may notice repeated confusion about previously explained (and understood) concepts, inconsistent or contradictory instructions, or difficulty recalling earlier decisions and their rationale. A client who once confidently engaged with discussions may begin to defer decision making, become anxious when choices are presented or rely heavily on written prompts. In isolation, none of these signs establishes incapacity; collectively they indicate heightened vulnerability and should be a red flag.

Family involvement may resolve issues or can potentially intensify the complexity of the situation. As cognitive decline progresses, adult children or carers may step in. It is important to remain alert to the risk that family pressure can interfere with decision-making. This can occur whether those pressures are well-intentioned or self-serving. The client’s interests must remain central, even when others speak authoritatively on their behalf.

Ethical practice in this grey zone of cognitive impairment may mean you need to slow down the advice process. Strategies could include breaking your advice into smaller steps, revisiting decisions across multiple meetings or narrowing the scope of advice. In some cases, you may have to defer or decline to implement recommendations until you are satisfied your client’s best interests are adequately protected.

Alignment with the Code of Ethics

Working with cognitively impaired clients is challenging but is a time when delivering advice that is compliant with the Code of Ethics becomes increasingly important:

Informed consent

Informed consent is not established by disclosure alone. In the context of vulnerable clients –particularly older clients or those experiencing cognitive change – ethical consent requires you to be satisfied that your client genuinely understands the advice, its implications and its alternatives. A signed authority or SOA acknowledgement may demonstrate procedural compliance, but it does not necessarily confirm informed consent.

Adequate time has been identified as a critical element of informed consent. Vulnerable clients may require longer meetings, multiple discussions or time between meetings to reflect and ask further questions. They may wish to involve other family members. Ethical advice in such circumstances may require you to slow down the advice process.

Allowing the client to have time for reflection can reduce the risk of decisions being made under pressure, whether that pressure comes from family members or market conditions. It is important to be cautious about advice delivered or implemented in a single meeting where vulnerability is present.

Where you are not satisfied that a client understands your advice, proceeding may breach the spirit of the Code of Ethics, even if legal requirements have been met. In these situations, ethical options may include:

• Further explanation using alternative communication methods
• Deferring implementation until understanding improves
• Narrowing or staging your advice to reduce its complexity
• Involving appropriate support persons (with the client’s consent)
• Declining to proceed if informed consent cannot be established.

Importantly, the ethical response to unclear understanding is not to push through or rely on documentation as protection. In this scenario, to act conservatively will generally be in the client’s best interests.

Alignment with the Code of Ethics

Obtaining informed consent will be more challenging when your client has identified vulnerabilities. The following standards in the Code of Ethics must be considered with respect to vulnerabilities and informed consent. 

Family, Powers of Attorney and Conflicted Loyalties

As your clients age, it is natural for their adult children to take a more active role in their parents’ financial affairs. In most cases, this involvement is well-intentioned support, and the children (or other relatives) act with their parents’ best interests at heart. In some cases however, intent may be less positive and there may be a point where support shifts into control.

‘Inheritance impatience’ has been widely documented. This term is described as ‘the phenomenon where heirs become cognitively or emotionally entitled to a family member’s wealth before their passing’^[4].  This often leads the impatient family member to pressure ageing parents into financial decisions that benefit the beneficiaries rather than your clients. This is increasingly a driver of elder financial abuse in Australia and often manifests through the misuse of legal instruments to accelerate the transfer of wealth. Elder abuse will be discussed in more detail in part two of this article.

Advisers need to be alert to adult children viewing their parents’ superannuation, home or other assets as rightfully their own. This mindset can lead to E/POAs making decisions that preserve the capital for the beneficiaries rather than funding the high-quality care their parents (or other relatives) require.

For the adviser, the big challenge lies in honouring the legal authority of an E/POA while maintaining their client’s best interests.

To protect the client, yourself and your practice, it is important to document everything. If a family member attempts to override a client’s known wishes, you should refer to the Statement of Advice created when the client had full capacity. While a legal document grants a family member the right to sign papers, it does not grant them the right to erode the client’s autonomy for their own future gain.

Case studies

The following case studies are loosely based on those published by ASIC and AFCA. They have been amended to better fit the subject matter of this article; names of people and places have been changed.

Case study one: Cognitive decline

Alexander is a senior financial planner with ACME Advice. His client, Dorothy, is 78, and has been widowed for several years. Dorothy has been Alexander’s client for 15 years, has a $1.2 million portfolio and has historically been sharp, conservative and very organised.

During an annual review in early 2024, Alexander noticed subtle shifts in Dorothy’s behaviour. She repeated the same question regarding her franking credits several times and seemed uncharacteristically overwhelmed by a simple rebalancing proposal. Her son Marcus began attending meetings, frequently finishing her sentences and trying to speed up the process. Alarmingly, he started to push for a large one-off withdrawal from Dorothy’s portfolio to fund his own business venture, claiming it was “what Mum wants, I’ll get it eventually.”

Alexander recognised that Dorothy was displaying signs of potential cognitive decline and Marcus was showing classic inheritance impatience.

Alexander realised that proceeding with business as usual would potentially be an ethical breach as Dorothy seemed inclined to agree to the withdrawal, despite it not being in her best interests. As such, he implemented the following adjustments to his process:

1. Alexander insisted on a brief, private session with Dorothy before Marcus joined the meeting. This allowed him to gauge her uncoerced intent and assess her capacity without influence from her son.
2. He simplified the discussion, using visual aids and plain English summaries to ensure Dorothy could grasp the longer-term implications of the proposed withdrawal.
3. Rather than seeking a signature on the day, Alexander implemented a mandatory 48-hour cooling-off period. He encouraged Dorothy to sleep on the decision and documented her rationale in her own words.

Alexander recognised that his primary duty was to protect Dorothy’s interests, even if it meant frustrating Marcus, a potential future client. He analysed Marcus’s requested withdrawal and determined that while Dorothy wanted to help Marcus, the capital depletion would risk her ability to fund a Refundable Accommodation Deposit should she need high-level residential care in the future. Alexander advised against the full amount, prioritising Dorothy’s longevity risk over Marcus’s liquidity needs.

Alexander also documented the high risk of undue influence. He made file notes to record specific instances where Dorothy’s verbal instructions contradicted her historical financial values, creating a paper trail to protect her from financial exploitation in the future.

Ultimately, Dorothy agreed to a smaller withdrawal to support her son. Alexander’s proactive stance prevented a significant erosion of Dorothy’s capital, and she remained in a secure financial position. At the same time, ACME Advice avoided the significant compliance risk of facilitating a transaction under duress.

Alexander’s actions saw him comply with his ethical obligations. Importantly, he upheld the following standards.

Case study two: Misuse of EPOA

Adviser Bruce is the principal of a mid-tier advice firm, ACME Investments.  His client Michael, aged 82, lives with advanced Alzheimer’s disease. His son Patrick holds an EPOA.

In March 2025, Michael’s cognitive health declined to the point where he was no longer capable of making financial decisions. His son, Patrick, activated his Enduring Power of Attorney (EPOA). Bruce, who had managed Michael’s substantial portfolio for a decade, saw an opportunity to meet the firm’s internal capital targets.

Bruce proposed a strategic shift to Patrick. His recommendation was to liquidate $1.2 million (50 percent) of Michael’s blue-chip shares to invest in a private, unlisted property development fund being promoted by ACME Investments’ licensee. To secure Patrick’s cooperation, Bruce offered a referral fee – a hidden 2% ($24,000) kickback, to be paid to Patrick personally under the guise of an administrative consultant fee.

The ethical and legal ramifications for Bruce documented by the regulator are severe:

• Disciplinary action that would likely result in a permanent banning from the industry
• Michael’s estate or other family members could sue Bruce and his firm for the loss of capital and the recovery of the commission paid to Patrick
• In many Australian states, the deliberate misuse of an EPOA for financial gain can lead to criminal prosecution for fraud or theft.

Bruce failed to act as a fiduciary and potentially breached the following standards:

Protecting vulnerable clients is not just a regulatory expectation, it is central to maintaining trust in financial advice as a profession. The surge in cognitive decline and other vulnerabilities across Australia – particularly among ageing clients – represents a shift in the financial services landscape.

The differing paths taken by case study advisers Alexander and Bruce underscore how profoundly the role of the financial adviser has evolved. Advisers now play an essential role to preserve their clients’ wealth and dignity, particularly where family dynamics and inheritance expectations threaten to overwhelm objective judgement. In such circumstances, ethical financial advice can be the difference between protection and unintended harm.

Part two of this article, to be published March 2026, will explore elder financial abuse and provide a practical framework for assessing client vulnerabilities within an advice practice.

Take the FAAA accredited quiz to earn 0.5 CPD hour:

CPD Quiz

The following CPD quiz is accredited by the FAAA at 0.5 hour.

Legislated CPD Area: Professionalism & Ethics (0.5 hrs)

ASIC Knowledge Requirements: Ethics (0.5 hrs)

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Notes:
[1] ASIC’s expectations for protecting vulnerable customers, November 2020
[2] https://www.dementia.org.au/about-dementia/dementia-facts-and-figures
[3] National Centre for Social and Economic Modelling (NATSEM), Economic cost of dementia in Australia 2016-2056, February 2017
[4]  National Elder Abuse Prevalence Study, Australian Institute of Family Studies, December 2021

The post CPD: Ethical financial advice for vulnerable clients – part one appeared first on AdviserVoice.

Adherence to the Code of Ethics can avoid risk of criminal activity in your practice.

Ethical standards are the foundation of financial advice, defining the trust and professional bond between advisers and their clients. While most professionals operate with integrity, a small minority within the industry act with criminal intent. This article, proudly sponsored by GSFM, explores the complex relationship between ethical conduct and criminal behaviour in the financial advice sector.

Financial advice serves a vital function, empowering individuals and organisations to make educated choices regarding their economic prospects. In a world of increasing complexity and market volatility, the insight provided by seasoned professionals often dictates the boundary between financial security and hardship. Professional guidance transforms overwhelming data into actionable strategy, ensuring that long-term stability remains achievable for everyone.

From retirement and investment planning to debt and estate management, advisers help clients navigate market intricacies while mitigating risks and capturing growth. By offering tailored strategies and fostering trust-based partnerships, these professionals provide the support necessary for clients to reach their objectives. This personalised approach is essential for securing a prosperous and stable future in an unpredictable global economy.

Ethical considerations are the cornerstone of financial advice, defining the professional bond and the trust that sustains it. Central to this integrity is the principle of fiduciary duty, which requires advisers to act with total loyalty and good faith toward their clients. This commitment ensures that the client’s welfare remains the primary focus of every recommendation and strategic decision made.

This duty requires providing unbiased advice, disclosing all conflicts of interest and prioritising client best interests over personal or corporate gain. Transparency and professionalism are the core pillars of this ethical framework, as highlighted in the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics). Such standards ensure that every individual is fully informed and capable of making decisions that reflect their specific goals and risk tolerance.

To meet these rigorous standards, advisers must comply with all regulatory requirements while continuously evolving their professional knowledge and technical skills. By embracing these ethical principles, advisers do more than just follow the law; they protect the integrity of the entire financial profession. Ultimately, this dedication builds more resilient, respectful relationships that benefit both advisers and consumers over the long term.

Ethics and financial advice

There are two types of ethics relevant to financial advice: deontological ethics and virtue ethics.

Deontological ethics

Deontological ethics, rooted in Greek philosophy, emphasises the intrinsic relationship between duty and the morality of human behaviour. The term itself is derived from the Greek words deon, meaning ‘duty’ and logos, meaning ‘science’ or ‘study’. This framework suggests that the rightness of an act is found in the motive of the actor rather than the final result.

This ethical branch holds significant relevance for the financial advice profession. Within this framework, an adviser’s actions are judged by their adherence to established moral principles and rules, rather than their eventual outcomes. In practice, deontology stresses the necessity of following professional standards even when different choices might lead to greater financial benefits or more favourable short-term results.

Advisers operating under this framework, particularly through the industry’s Code of Ethics, are guided by moral imperatives such as honesty, integrity and transparency. They recognise a fundamental duty to act in their clients’ best interests, maintain strict confidentiality and proactively avoid conflicts of interest. For these professionals, the ‘right’ thing to do is defined by the rules of the profession.

A deontologist views a breach of ethical standards as a failure to fulfill a professional obligation. To them, the solution is to re-establish the rule of law and ensure future compliance with the Code of Ethics.

By prioritising ethical duties over personal gain or the pursuit of profit, advisers practicing deontology contribute to the cultivation of trust and credibility within the sector. This commitment fosters enduring relationships built on principles of honesty and ethical conduct. It ensures that the integrity of the profession remains intact, regardless of market volatility or

Virtue ethics

Virtue ethics is rooted in the deliberate cultivation of character and moral excellence. Within this philosophical framework, the focus shifts from merely adhering to external rules or duties to embodying internal qualities such as integrity, honesty, prudence and fairness. It suggests that ethical behaviour is not a checklist of obligations, but a natural reflection of a person’s ingrained habits and disposition.

For financial advisers, virtue ethics emphasises the importance of developing a virtuous character that instinctively guides their daily decision-making and professional behaviour. A virtue ethicist would view a breach of the Code of Ethics as a symptom of a deeper problem: the adviser lacks the internalised virtues – such as honesty, fairness or diligence – required for the job.

Advisers practicing this approach typically prioritise building trust and fostering meaningful relationships with clients based on mutual respect and empathy. They strive to demonstrate excellence in all aspects of their practice, from providing unbiased guidance to acting with genuine transparency in every transaction.

By embracing virtue ethics, financial advisers do more than just uphold high standards; they contribute to a broader culture of integrity and trust within the entire financial sector. This focus on character enhances the overall well-being of their clients while strengthening the profession’s reputation within the community. Ultimately, it creates a self-sustaining environment where ethical conduct is the standard rather than the exception.

In the context of the Code of Ethics, this approach aligns perfectly with the requirement for advisers to exercise ‘professional judgment’. While a rule can tell you what to do, virtue gives you the wisdom to know how to do it well in complex, real-world situations.

To illustrate deontological and virtue ethics in practice, let’s apply both lenses to a common dilemma: an adviser who recommends a slightly higher-fee managed account because it has a simpler administrative platform for the practice.

The deontological approach (the ‘duty’ view)

A Deontologist doesn’t care if the client ends up making money anyway; they care that a rule was bypassed.

The problem: The adviser did not act in the client’s best interests, potentially violating standards one, two and five.

The resolution: The adviser is disciplined because they failed to follow the Code. The solution is to reinforce the rules. The focus is on the fact that the action of choosing a higher-fee product for administrative ease is inherently a breach of the contract between the professional and the public.

The virtue ethics approach (the ‘character’ view)

A virtue ethicist looks at the adviser’s disposition. They aren’t just looking for a bad act; they are looking for a bad habit.

The problem: The adviser displayed the vice of self-interest rather than the virtue of integrity. They lacked the practical wisdom to see that their ease of doing business should never outweigh a client’s best interests.

The resolution: The solution involves mentorship; the adviser needs to be retrained to value the client’s outcome as their own. The goal is to develop a character so strong that even if a loophole in the rules existed, the adviser would still choose the lower-fee product because they always put their clients’ best interests before their own.

However, both deontological and virtue ethics are relevant to financial advisers. Both are enshrined in the values upon which the twelve ethical standards are based (figure one). Financial advisers are required to act in a way that demonstrates, realises and promotes each of these values. Further, the law intends that all provisions of the Code of Ethics are to be read and applied in a way that promotes the following values. While the values detailed in figure one can be said to enshrine value ethics, the standards themselves (figure two) are an example of deontological ethics.

Each of the five values relates to specific ethical standards (figure two) that must be applied to all interactions with every client. As such, to meet the spirit and legal obligations of the Code, advisers must embrace both deontological ethics and virtue ethics.

Ethics and criminal behaviour

Navigating the ethical landscape of financial advice is rarely simple. Advisers must manage a daily gauntlet of unforeseen conflicts of interest, competing fiduciary duties and regulatory loopholes that often create challenging grey areas.

In 2025, the Australian Securities and Investments Commission (ASIC) significantly increased its enforcement activity, driven by a 50 percent rise in investigations and a 20 percent increase in civil proceedings^[1].

Enforcement actions range from numerous corporate matters, such as those related to insolvency or failing to maintain licence conditions even if not actively providing financial services, through to the more criminal: cases of fraud, pump and dump activity, insider trading, providing unlicensed financial advice and dishonest conduct.

Despite several sensational trade press headlines in 2025, criminal actions within the financial advice sector remains rare. There is a tendency to approach enforcement under civil rather than criminal law. However, when high-profile cases emerge, they typically gain a disproportionate level of notoriety.

By way of example, is the Shield and First Guardian Master Funds collapse. As of late 2025, ASIC is treating this collapse as a highly complex, large-scale civil enforcement investigation rather than a criminal prosecution, although criminal charges have not been ruled out. The regulator has over 40 people investigating the matter and anticipates further enforcement actions in 2025-2026. The headlines and ripple effects are expected to continue well into 2026.

Described by ASIC as ‘industrial-scale misconduct’ involving over $1 billion of investor funds, such media-driven ‘spectre’ of wrongdoing can unfairly cloud an industry predicated on trust. Such instances underscore the vital importance of standard twelve of the Code of Ethics, which mandates that advisers not only uphold ethical standards themselves but also hold their peers accountable to protect the public interest.

ASIC’s regulatory powers

ASIC’s primary objectives are to facilitate markets, promote trust and confidence in the financial system, and take action to enforce the laws it administers, which includes the Code of Ethics. Consequently, ASIC is empowered to take a range of criminal, civil and administrative action to address alleged misconduct within its jurisdiction.

ASIC investigates and takes enforcement action to detect, disrupt and respond to unlawful conduct. It aims to prevent and deter actual and future misconduct, improve standards and behaviours within its regulated population and importantly, reduce the risk of harm to Australian consumers and investors.

When deciding whether to investigate and take enforcement action, ASIC considers a range of factors that vary according to the nature and circumstances of the suspected misconduct. However, ASIC typically considers the following four factors when selecting matters for formal investigation and possible enforcement action:

1. Areas of significant harm
2. Broader public benefit
3. Issues specific to the case
4. Alternatives to formal investigation^[2].

ASIC focuses its enforcement actions on preventing and addressing significant harm to consumers, markets and our financial system and prioritise those that involve:

• Actual or potential harm to vulnerable consumers or investors, particularly if the behaviour is predatory
• Misconduct that has caused or may cause widespread public harm
• Misconduct that is likely to have a significant market impact, which includes its impact on market integrity and the confidence of investors and consumers
• Misconduct that is systemic or widespread
• Misconduct that has recently emerged or is part of a growing trend.

There are three types of enforcement action ASIC may pursue, and it may take one or more of these to address a contravention of the law:

• Criminal proceedings
• Civil proceedings
• Administrative and other enforcement action.

The type of action taken is subject to what the laws governing the particular misconduct allow.

In the case of criminal proceedings, the laws administered by ASIC permit the courts to impose criminal sanctions for conduct ranging from minor regulatory offences to serious offences involving dishonesty. Examples of the sanctions that may be imposed are prison terms, criminal fines and court orders such as community service.

ASIC is most likely to pursue criminal proceedings in cases of serious and harmful wrongdoing, with the view to deter similar misconduct in the future. It generally considers criminal proceedings for offences that involve serious misconduct that is dishonest, intentional or highly reckless, even when civil action is also available.

Criminality and advice

So, what sort of action could result in ASIC instigating criminal proceedings? Here are just a few examples.

Fraud

Fraud is, unfortunately, the most common criminal offence perpetuated by advisers against their clients. Defined as “wrongful or criminal deception intended to result in financial or personal gain” by the Oxford dictionary, fraud can take a range of forms including:

• Falsifying documents
• Forging signatures on documents to authorise transactions without the client’s knowledge or consent
• Having money paid into personal accounts
• Running ponzi schemes
• Fraudulent investment schemes
• Elaborate investment ruses.

Fraud potentially breaches a number of ethical standards, including:

Money laundering

Financial advisers may knowingly (or unknowingly) facilitate money laundering activities by helping clients disguise the origins of illicit funds through complex financial transactions. This can involve structuring transactions to avoid reporting requirements or knowingly investing proceeds from criminal activities.

The Anti-Money Laundering and Counter-Terrorism Financing Act was introduced in 2006 and was designed to prevent and combat these crimes, which is essential to protect the integrity and stability of financial markets and the global financial system.

Holders of an Australian Financial Services Licence, including financial advisers, need to complete Part B of an AML/CTF program. Part B is focused on identifying clients and beneficial owners, including politically exposed persons.

However, it is important to note that major reforms to the AML/CTF Act and its rules are taking effect this year. For current reporting entities, such as existing AFSL holders, these new program requirements generally commence on 31 March 2026.

In broad terms, the new legislation officially removes the prescriptive requirement to separate AML/CTF programs into Part A and Part B. Businesses will now have the flexibility to organise their AML/CTF programs, provided they meet the overall obligation to identify, mitigate and manage risk.

Even though the Part B label is being phased out, the substance of the obligation remains:

• You must still identify clients and beneficial owners
• Identifying and managing risks associated with Politically Exposed Persons (PEPs) remains a mandatory component of due diligence

An adviser who is sloppy with paperwork may face enforcement action but is unlikely to face criminal proceedings. However, those found to have deliberately flouted the law with nefarious intent would face more serious charges.

In the situation where an adviser has been found to breach AML/CTF requirements, it potentially breaches the following ethical standards:

Insider trading

Strengthening investigation and prosecution of insider trading conduct is one of ASIC’s enforcement priorities for 2026. Insider trading breaches Section 1043A of the Corporations Act 2001 and prohibits a person from trading in listed securities while in possession of non-public, price-sensitive information.

The ASX regulatory guide explicitly states that Key Management Personnel, employees and family members are not permitted to trade when there is sensitive information not yet publicly disclosed. Inside information can easily come across an adviser’s path in the daily course of business and there’s nothing wrong with that – as long as they don’t act on it. Examples could include:

• A client who discusses a significant new contract won or issued by their business when either party to that contract is a listed company
• A friend who bemoans a substantial revenue hit for the listed company they work for and the potential ramifications
• Dinner party conversation in which you learn of a major merger between two listed companies
• An event at which a fellow attendee excitedly tells you how close his firm is to a significant innovation that will potentially boost the company’s share price
• An acquaintance working at the local council who happens to mention the reclassification of an area of commercial property to residential zoning.

While being in possession of said inside information is not against the law, advising a client to act upon it is, or acting on the client’s behalf, would likely breach the following standards:

Dishonest conduct

As with so many acts of criminal behaviour, dishonest conduct can be viewed on a continuum, one where a first or minor misdemeanour may result in a minor enforcement action, through to more serious cases that face a criminal trial. Examples can include:

• Misrepresentation of a service offering
• Misrepresentation of qualifications and abilities of individuals and/or a business
• Misrepresentation of financial products
• Churning
• Ponzi schemes
• Pump and dump schemes

Tax evasion

While some tax minimisation strategies may be legal or exploit the grey zone between right and wrong, tax evasion is illegal. A small number of advisers may assist clients to evade tax by providing false information for tax returns, hiding income and assets offshore, or by using other tax avoidance strategies. Tax evasion is a serious crime that can result in criminal charges and severe penalties from both ASIC and the ATO.

Ethics, criminality and your practice

In a financial advice practice, maintaining ethical standards is not just about your own conduct but also about the actions of your colleagues and referral partners. Regular education and reinforcement of ethical practices are crucial to ensure the integrity of your business and relationships.

Dealing with ethical dilemmas, which can sometimes exist in shades of grey, requires time and effort for resolution. However, addressing these challenges can offer valuable insights and contribute to the ongoing improvement of your practice, helping to prevent or resolve similar issues in the future. In cases where dilemmas edge on criminality – or are well down that path – quick action is required.

It is easier to take appropriate action when your practice has procedures in place to deal with issues. These could include:

• A code of conduct that embodies the Code of Ethics and ethical practice
• Well documented policies and procedures that include an escalation policy in the event of malfeasance or criminal behaviour
• Regular training sessions for staff that use real-life examples and case studies to facilitate meaningful training and discussion within your team
• Support for team members who raise issues, including whistle-blower protection

The presence of ethical grey areas underscores the importance of alignment among all employees. You cannot assume that each of your team shares a highly developed ethical sense consistent with your expectations. Therefore, ongoing education, restatement, and reinforcement of integrity, corporate values and ethical behaviour are essential components of your educational efforts.

Case studies

The following case studies are based on real events; however, the names of people and organisations have been changed, and some details altered. The case studies have been drawn from ASIC and for each, potential breaches of the Code of Ethics are identified.

Case study one: The ‘mega returns’ fraud – ponzi scheme

In 2025, a long-running and significant ponzi scheme investigation reached its legal conclusion with the sentencing of Perth-based adviser Mark from ACME Advice. Between 2014 and 2019, Mark ran an unregistered managed investment scheme through his personal company, one that was unrelated to ACME Advice. However, he used his role as an adviser to promote his illegal scheme.

Mark targeted select high net wealth investors, many from his own social and community circles, promising ‘mega returns’ by supposedly leveraging international debt markets and high-yield private placement programs. In reality, no such investments existed.

The mechanics of the scheme

Mark operated a classic ponzi scheme. Instead of generating profit through market trading, he maintained the illusion of success by:

• Pooling investor money into personal and company bank accounts
• Paying ‘interest’ to early investors using the capital deposits of newer investors
• Building false trust; he provided investors with regular updates painting a positive picture of imminent massive payouts to discourage them from withdrawing their principal.

The investigation and collapse

The scheme began to unravel in 2019 when ASIC obtained asset preservation orders. In December 2020, the federal court ordered the winding up of the scheme and noted that it was operated by an entity that did not have an AFSL. The court appointed liquidators, with the primary role to identify, seize and sell Mark’s assets to distribute any remaining value to creditors.

Early in the investigation, it was revealed that while over $250 million had flowed through the scheme’s accounts, the majority had either been paid out to earlier investors as ‘returns’ or had been spent; this left a substantial gap between what was owed to investors and what was available.

Mark was eventually charged with more than 40 counts of fraud.

Verdict and sentencing

Most investors experienced substantial losses, with many unlikely to recover their full principal investment. Mark was found guilty of all counts of fraud, totalling nearly $35 million and relating to six specific investors. He was sentenced to 14 years in prison, with a non-parole period of 12 years.

Mark’s actions saw him potentially breach several standards in the Code of Ethics, including:

Case study two: Fraud

Following an extensive ASIC investigation, adviser Michelle, director of ACME Investment and Coaching, currently faces criminal prosecution. The case centres on an unregistered investment scheme that allegedly defrauded investors of millions of dollars through misrepresentations and the improper handling of funds.

In March 2023, the federal court found that ACME Investment and Coaching was operating an unregistered managed investment scheme and carrying on a financial services business without a licence. It also noted the falsification of books relating to the company, specifically concerning the company’s annual returns.

The court ordered that the firm be wound up on just and equitable grounds. Liquidators found that the business had minimal legitimate revenue and exhibited the hallmarks of a ponzi-style structure.

The red flags noted by ASIC include:

• Promises of guaranteed high returns – Michelle allegedly enticed investors with promises of consistent, high-yield returns, often cited as being around 15% per annum
• The scheme was framed as a ‘private loan’ arrangement or part of a ‘wealth coaching’ program rather than a financial product
• A lack of legitimate revenue streams as identified by the liquidators; it was discovered that the company had no discernible business model or significant source of legitimate income
• Lack of an AFSL, which means no professional indemnity insurance, dispute resolution memberships (such as AFCA) or regular audits. Operating without an AFSL means investors have almost no regulatory safety net
• The scheme grew through social referral networking, word-of-mouth and social connections, which created a false sense of security and exclusivity.

The charges brought against Michelle include a combination of state-based criminal law and Commonwealth corporate regulations. In total, more than 20 counts of fraud relating to more than $4 million in investor funds. As well as charges under the state-based laws, Michelle faces additional charges under federal corporate law, including:

• Section 184 (5 counts): failing to act in good faith in the exercise of her powers and duties as a director. These charges relate to the use of approximately $2.5 million.
• Section 1307 (5 counts): Falsifying books relating to a company, specifically concerning the company’s annual returns.

While the case won’t be heard until later in 2026, potential penalties include:

• a maximum of 15 years’ imprisonment per offence in relation to Section 184
• a breach of Section 1307 carries up to five years per offence.

Michelle’s actions saw her potentially breach several standards in the Code of Ethics, including: 

Case study three: Misappropriation of retirement savings

In early 2025, Kevin, former financial adviser and director of ACME Financial Freedom, was sentenced in relation to a scheme that targeted the retirement savings of his clients.

An ASIC investigation found that over 2019-2020, Kevin abused his position of trust to misappropriate funds from his clients’ superannuation accounts. He did this by submitting ad-hoc adviser fee forms to a specific super fund trustee. These forms purported to authorise the withdrawal of fees from his clients’ ACME Super superannuation accounts.

The clients had no knowledge of these fees, had never signed the forms and did not consent to the withdrawals. To cover his tracks, Kevin created fictitious client file notes that detailed non-existent conversations where clients supposedly agreed to the fees.

Kevin was prosecuted under the Corporations Act 2001 (Cth), specifically section 1041G, engaging in dishonest conduct in the course of carrying on a financial services business.

Kevin pleaded guilty to a consolidated charge of dishonest conduct and was sentenced to three years’ imprisonment, suspended on the condition of a five-year good behaviour bond. He was ordered to pay a $20,000 pecuniary penalty and make full reparation to the trustee for the money stolen.

Kevin’s actions saw him potentially breach several standards in the Code of Ethics, including:

The preservation of the industry’s integrity is a collective mandate. From regulatory bodies to individual practices, every stakeholder must be a guardian of the highest ethical standards. By proactively confronting ethical dilemmas and rooting out criminal conduct, the profession can secure a future where financial advice is defined by an unbreakable bond of trust, transparency and accountability. This is good for advisers, consumers and the industry as a whole.

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Notes:
[1] ASIC Media Release: ASIC’s annual report reveals strong growth in enforcement action and investigations and keen focus on strengthening markets, October 2025
[2]  https://asic.gov.au/about-asic/asic-investigations-and-enforcement/asic-s-approach-to-enforcement/

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How does the Code of Ethics govern and interact with the advice provided to clients regarding the establishment and ongoing operation of SMSFs?

The appropriate establishment of SMSFs has recently come under increased scrutiny by ASIC and, at around the same time, AFCA’s Annual Review noted SMSFs elicited the highest number of investor complaints. This article, proudly sponsored by GSFM, examines ethical considerations relevant to advisers recommending SMSFs to their clients.

The recent release of the Australian Financial Complaints Authority’s (AFCA) 2025 Annual Review contained some unwelcome numbers for the advice profession. Investment and advice complaints increased to 18 per cent over the 2024–25 financial year, hitting 4,193. While representing around 4 percent of the total number of complaints received by AFCA, it nevertheless makes for uncomfortable headlines.

The current rise in complaints follows a 26 percent decline in the previous Annual Review, where the total number of investment and advice complaints dropped to 3,559. Further, when the numbers are examined by product, SMSFs top the list of the most complained about, with 1,323 complaints lodged, nearly double the number of complaints received the previous year (figure one).

AFCA’s Annual Review cited the primary driver of the recent increase in overall complaints as a failure to act in the clients’ best interests. This specific issue saw a 124 percent surge in financial year 2025, with 1,266 complaints (figure two). While implied in many of the twelve standards that make up the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics), acting in the client’s best interests is specifically referenced in standards two and five.

Other issues of note were:

• Failure to follow instructions or agreements
• Inappropriate advice

AFCA noted a range of other factors that contributed to the overall rise in investment and advice complaints, which included concerns about advice business models such as:

• Cold-calling and pressured sales tactics
• Conflicted advice
• Undiversified and common product recommendations being made to the majority of a firm’s clients.

ASIC recently published Report 824: Review of SMSF establishment advice (released November 2025)^[1], which raised serious concerns about the quality of advice financial advisers are providing to retail clients regarding the establishment of Self-Managed Superannuation Funds (SMSFs).

The report’s key findings and concerns were as follows:

• Failure rate – ASIC reviewed a risk-based sample of 100 financial advice files relating to SMSF establishment. It found that 62 percent of the files failed to demonstrate compliance with the Best Interests Duty and related obligations. This in itself would have breached several standards in the Code of Ethics.
• Client detriment – more alarmingly, more than one-quarter of the files raised significant concerns about client detriment, meaning the recommendation to set up an SMSF was unsuitable and potentially detrimental to the client’s retirement outcomes.
• Mis-selling ‘control’ – ASIC found advisers often justified the SMSF recommendation solely on the client’s desire for ‘control’” without adequately exploring what that notion meant for the client’s actual needs, skills and time commitment. ASIC noted that other superannuation vehicles may offer the desired level of control without the client taking on the additional responsibilities and risks of an SMSF.
• Acting as ‘order-takers’ – advisers failed to provide rigorous, well-considered advice and instead acted as ‘order-takers’, recommending an SMSF and its proposed investments (such as off-the-plan properties via limited recourse borrowing arrangements) without properly investigating whether the SMSF or the associated high-risk investments were suitable for the client.
• Conflicts of interest – in many files of concern, ASIC was worried that the financial adviser failed to prioritise the client’s interests above their own or those of their advice licensee or an associate, particularly where the advice involved establishing an SMSF to facilitate the purchase of specific assets.
• Ineffective pre-vetting – even when advice licensees had mandatory pre-vetting systems in place to review SMSF establishment advice before it reached the client, these systems were frequently ineffective. Out of 47 pre-vetted files reviewed, 33 still contained advice that failed to comply with the best interests duty.

ASIC emphasised that poor SMSF advice puts retirement savings at risk for two key reasons:

• Loss of protection – clients who move their super from an APRA-regulated fund to an SMSF lose important consumer protections, including the benefits of prudential regulation and the ability to complain about the fund’s trustees to the Australian Financial Complaints Authority (AFCA).
• Suitability and complexity – SMSFs are not suitable for everyone, regardless of the balance, and require trustees to have the time, skills, and interest to meet complex compliance obligations.

ASIC stressed that this report serves as a serious warning to both financial advisers and advice licensees to improve their practices when advising on SMSF establishment. The regulator provided specific action points for the industry to ensure that SMSFs are only recommended when genuinely suitable and in the client’s best interests.

ASIC has a specific role in regulating SMSFs. The regulator considers contraventions of the Corporations Act, the SIS Act and the ASIC Act, and is responsible for regulating the following harms:

• Dishonest conduct and fraud (section 1041G of the Corporations Act)
• Misleading and deceptive conduct (sections 769C, 1041E, 1041F and 1041H of the Corporations Act; sections 12DA–12DC, 12DF–12DG and 12BB of the ASIC Act)
• Unlicensed advice (section 911A of the Corporations Act)
• Contraventions of the relevant conduct and disclosure obligations, including the best interests duty and related obligations (sections 961B, 961G–961H and 961J of the Corporations Act)
• Contraventions of the Code of Ethics (section 921E of the Corporations Act), and
• Contraventions relating to SMSF auditors (sections 128D–128H and 130F of the SIS Act).

SMSFS and ethics

An SMSF is a private retirement vehicle established solely to provide benefits to its members. Capable of having between one and six members, SMSFs are highly regulated and subject to numerous, frequently changing rules and compliance obligations. ASIC Information Sheet 274 (INFO 274)^[2] provides guidance to Australian financial services (AFS) licensees and their representatives who provide personal advice to retail clients about SMSFs. INFO 274 provides tips to help advisers comply with their legal obligations when giving advice about SMSFs, including:

• Understanding obligations when providing SMSF advice
• Using professional judgement to assess whether an SMSF is appropriate for the client
• Consideration of the risks associated with an SMSF
• Consideration of the costs associated with running an SMSF
• Factors to consider when advising a client to withdraw their superannuation from a fund regulated by the Australian Prudential Regulation Authority (APRA) to set up an SMSF.

This article will review the recommendations for each subject matter area outlined in INFO 274, specifically examining them through the lens of the Code of Ethics and its 12 standards (figure three).

Understand obligations when giving SMSF advice

Any adviser providing SMSF advice to their clients must comply with numerous laws, including:

• The conduct and disclosure obligations in Parts 7.7 and 7.7A of the Corporations Act 2001 (Corporations Act)
• The Financial Planners and Advisers Code of Ethics
• The Superannuation Industry (Supervision) Act 1993 (SIS Act).

Importantly, when providing personal advice to clients – including advice about establishing and managing an SMSF – advice providers must meet the best interests duty and related obligations:

• Act in the best interests of the client (section 961B)
• Provide appropriate personal advice (section 961G)
• Warn the client if advice is based on incomplete or inaccurate information (section 961H)
• Prioritise the interests of the client (section 961J).

The first standard of the Code requires advisers to comply with all relevant laws including the Code. While acting in accordance with all laws applies to all areas of financial advice, there are additional regulations specific to SMSFs that advisers must comply with. ASIC holds AFS licensees directly accountable for their advice processes, especially concerning SMSFs.

The regulator expects licensees to tailor their compliance systems and controls to meet both:

• The general obligations under section 912A of the Corporations Act.
• The specific advice obligations set out in section 961K or 961L.

Crucially, ASIC also mandates that licensee processes must be robust enough to proactively detect and address two high-risk activities:

• The potential for dishonest conduct, fraud, or misleading and deceptive client communications. Exercise professional judgement to assess SMSF suitability
• The risk of unlicensed advice, ensuring authorised representatives never act outside the scope of the AFS licence conditions or authorisations.

Before recommending an SMSF, you must diligently assess the client’s existing superannuation arrangements and investigate whether those, or other retail or industry funds, might better meet their long-term retirement funding goals.

It is essential to consider the client’s full circumstances and ensure they fully grasp the implications of the SMSF advice. Establishing an SMSF can have serious consequences regarding their retirement savings, insurance coverage and associated responsibilities.

When providing SMSF advice, you should consider a range of factors, including the following:

What types of professional advice are appropriate?

Clients considering the suitability of an SMSF may benefit from advice from various professionals. When referring clients to SMSF specialists, it is important to comply with standard three and avoid any conflicts of interest that could arise due to the referral.

When referring to a third party SMSF professional, compliance with standard seven requires that you do not derive any benefits from that referral.

Providing personal advice to clients about SMSFs requires specialist knowledge. Before providing SMSF advice it’s important that you have and maintain SMSF knowledge and expertise, as required by standards nine and ten.

Is an SMSF suitable for your client?

Before your client transfers their retirement savings from an APRA-regulated superannuation fund to an SMSF, you must ascertain that the SMSF is an appropriate retirement savings vehicle for that client, based on their objectives, circumstances and needs.

By doing this, you will ensure that you meet the requirements of standards two, five and six:

• to ensure the SMSF is in your client’s best interests
• that you have reasonable grounds to be satisfied your client understands your advice, the benefits and risks of using an SMSF, as well as the ongoing costs involved
• in making the recommendation to establish an SMSF, you have considered the client’s longer-term interests and likely circumstances.

Suitability is paramount because, without it, an adviser fails to act in the client’s best interests. This is not only a breach of the Corporations Act (and thus standard one of the Code) but also explicitly breaches standards two and five and underlies many other ethical duties within the Code.

ASIC provides the following as factors to consider when determining the suitability of an SMSF for your client:

• Your client must understand and accept that although they may outsource their SMSF responsibilities to professional advisers (such as accountants or audit specialists), as the SMSF trustee your client is responsible for ensuring compliance with superannuation, corporations and tax laws
• Your client must have the time, skills, general interest, and experience to meet their trustee responsibilities
• The cost-effectiveness of an SMSF considering your client’s existing arrangements, relevant circumstances and other SMSF members
• Any relevant vulnerabilities your client may be experiencing, such as cognitive impairment, accessibility constraints or coercion/elder abuse
• Other arrangements that may provide some of the benefits of an SMSF, such as ‘a member directed investment facility’ within an APRA-regulated superannuation fund.

Finally, you must have reasonable grounds to be satisfied that your client fully understands the advice, including the complete spectrum of benefits, costs, and risks associated with establishing and running an SMSF. A key area of concern for ASIC is when an SMSF is recommended without proper consideration of whether the client possesses (or can realistically develop) the time, skills, and knowledge necessary to effectively operate as an SMSF trustee.

APRA-regulated superannuation funds versus SMSFs

Compliance with the best interests duty and related standards require you to ensure the client understands and accepts the unique risks and responsibilities of an SMSF compared to an APRA-regulated fund. This detailed disclosure is specifically necessary to meet standard four (informed consent). If the client does not fully grasp the fundamental differences and the burden of the SMSF trustee role, the legal requirement for informed consent has arguably not been met.

When comparing an SMSF and an APRA-regulated fund, there are numerous differences that clients need to be aware of and understand. This needs to occur prior to the establishment of an SMSF.

Prior to SMSF establishment, you must ensure the client fully understands their trustee obligations and the serious penalties that apply for non-compliance. For instance, failure to follow SMSF regulations can result in breaching numerous ATO requirements. Critically, failing to properly inform your client about these onerous long-term duties could result in a breach of standard six, which requires you to consider and act in the client’s broader, long-term interests.

Some of the differences between SMSFs and APRA-regulated funds that you should discuss with clients include:

Protections in the event of theft or fraud

• Access to statutory compensation will differ; an SMSF does not have the same protections as an APRA-regulated fund and is not eligible for government compensation.
• While the client may have legal options in the event of theft or fraud, there is no certainty that compensation will be awarded. However, members of APRA-regulated funds are generally eligible for compensation in the event of theft or fraud.

Trustee complaints and resolution

• SMSF trustees (and members) may be required to resolve their own complaints.
• Clients should be aware of situations where disputes may arise, including:
• in the event of trustee relationship breakdown
• where member death benefits must be paid
• if a trustee/s considers that they have received unsuitable professional advice.
• Access to AFCA is only available to SMSF investors in certain circumstances, such as if they received advice from a licensed financial adviser and their complaint relates to the financial advice about the suitability of an SMSF, the SMSF investments or insurance products.

Client’s legal responsibilities as trustee

• You must be confident your client understands and accepts that as trustee, they are personally responsible for running their SMSF according to its trust deed and must ensure the fund complies with superannuation, corporations and tax laws.
• Your client must understand that:
  • while trustees can use professionals or rely on other trustees to help run their SMSF, responsibility for SMSF compliance remains with the trustees
  • all trustees share responsibility equally
  • SMSFs are regulated by the ATO
  • professionals who provide tax agent services must be on the Tax Practitioners Board register
  • SMSF auditors must be registered with ASIC as an ‘approved SMSF auditor’ on the SMSF auditor register before they can sign off on SMSF audit reports
  • all financial advisers who provide personal advice on SMSFs must be licensed by an AFS licence and registered with ASIC.
• Clients need to understand that a failure to comply with their obligations under superannuation and taxation laws can have significant consequences, such as the loss of tax concessions. All trustees are equally required to comply with trustee responsibilities and obligations and are liable for the actions of other trustees.

Your clients also need to be aware of the penalties they can face for non-compliance with superannuation, corporations or tax laws, including:

1. Tax consequences, such as their SMSF losing its concessional tax treatment.
2. Being disqualified from their role as trustee – this means they can no longer be members of the SMSF, and they are unable to start a new one.
3. Civil or criminal penalties, depending on the seriousness of the breach.

The ATO can disqualify an SMSF trustee, or director of a corporate trustee, if:

• The trustee has contravened the rules.
• The ATO considers the trustee not to be a ‘fit and proper’ person for the role, having regard to the trustee’s personal character and circumstances.

SMSF costs

It is crucial that your client understands the costs of an SMSF throughout its lifecycle. These costs will vary based on your client’s relevant circumstances; examples are set out in figure three.

The second part of standard five requires you to be satisfied that your client understands the costs, risks and benefits associated with your advice. With an SMSF, there can be a cost-benefit trade-off between the time taken to appropriately administer the SMSF versus the expected returns and benefits. To comply with this standard, you need to have reasonable grounds to be satisfied with respect to this cost-benefit trade off.

The starting balance of an SMSF is one of several factors you should consider when recommending an SMSF, as this is relevant to its cost-effectiveness (and compliance with standard five). Statistical data^[3] shows that fund expenses are proportionally higher, and net returns lower, for lower balance funds.

However, it’s important to note that there may be circumstances when an SMSF with a higher starting balance is not in your client’s best interests. This may be because it does not meet your client’s objectives, financial situation or needs, or requires time and/or knowledge that the client does not have. Neither situation would be in the client’s best interest and a potential breach of standards two and five.

Suitable trustee structure

A core component of appropriate SMSF advice is recommending the most suitable trustee structure, whether that be corporate or individual. This decision is crucial due to its lasting impact on the client’s tax profile and succession planning. It is important to remember that changing structures after the fund is operational is often costly and complex.

The regulator is particularly concerned about poor practice here, including the failure to document consideration of the appropriate structure or simply directing a client to one option. Providing your client with a clear comparison of the risks and benefits of both structures meets the demands of several ethical standards, including best interests (standards two and five), long-term interests (standard six) and competence (standard nine). Discussion points to consider during the client conversation about a suitable trustee structure may include:

• Cost, including the potential cost of changing the trustee structure in the future
• Compliance with the SMSF trust deed, superannuation, corporations and taxation laws, the company’s constitution and the Corporations Act
• Administration and reporting requirements
• Trustee succession planning
• SMSF asset ownership considerations.

Trustee succession planning and exit strategy should be considered at establishment; this can help to reduce the impact of ‘unexpected’ events. They also need to understand the steps required to wind up an SMSF. This is relevant to standard six of the Code.

It can be helpful for clients to understand the reasons why they may need to wind up their SMSF, which can include:

• The SMSF proves not to be cost-effective
• Trustee responsibilities become too onerous or too costly
• A trustee dies or becomes incapacitated
• Disputes between trustees.

The investment strategy

As trustees, SMSF members are responsible for developing, maintaining, and reviewing a written investment strategy to ensure the fund is positioned to meet members’ retirement needs. Crucially, trustees remain responsible for all investment decisions, even when those decisions are based on advice from professionals.

It is important to remember that with a maximum of six members, an SMSF typically lacks the scale of large public funds. This size limitation can restrict investment opportunities, such as direct infrastructure or private equity, which usually require significant capital.

You must ensure your client understands the following key obligations:

• An investment strategy must be in place before any investments are made, and it must be regularly reviewed.
• All changes to the strategy must be documented in writing.
• Trustees should actively consider whether to hold appropriate insurance cover.

While you can assist the client in developing investment objectives and a suitable strategy, they must ultimately understand that as trustee, they are legally responsible for managing investments in the best financial interests of all SMSF members and in accordance with the law. When documenting the SMSF’s investment strategy, the following points should be considered and discussed with your client:

• The fund’s investment objectives
• Investment strategy and whether it is consistent with the trust deed
• Members’ risk tolerance
• The types of investments the fund can make, including the likely risk/return profile of these investments
• Implementation of investment decisions
• Diversification
• Death benefit nominations
• Liquidity requirements to meet fund expenses, including retirement benefits.

ASIC’s guidance notes the importance of adequately consider and inform your clients about:

• The benefits associated with diversification
• The restrictions that apply to SMSF investments
• Whether to hold insurance cover
• Prohibited transactions, including lending the fund’s money or providing financial assistance to a member of the fund or their relatives.

Importantly, you ought to ensure your clients understand the costs associated with implementing your SMSF advice recommendations, including ongoing fees. As well as best practice, standard five explicitly requires you to be satisfied your client understands the costs associated with your advice.

In any audit, ASIC is highly likely to scrutinise the advice given regarding the SMSF’s investment strategy to ensure it was appropriate for the client’s stated risk appetite and investment goals. Failure to provide appropriate advice on this strategy constitutes a breach of multiple ethical standards, including:

• Best interests (standards two and five)
• Long-term interests (standard six)
• Competence and good faith (standard nine)

Death benefit nomination

It is essential to ensure your client has a valid death benefit nomination in place and fully understands the consequences of failing to maintain one. This nomination must be reviewed regularly, especially whenever the client’s personal circumstances change, to ensure it remains effective.

Case studies

The following case studies are based on real events; however, the names of people and organisations have been changed, and some details altered. The case studies have been drawn from ASIC or AFCA and for each, potential breaches of the Code of Ethics are identified.

Case study one: Appropriate advice to establish an SMSF

A middle-aged couple, Bill and Jess, were new clients of ACME Advice and adviser Susan. The couple had two dependent children. When they first met with Susan, they mentioned the possibility of buying a property through an SMSF, including borrowing. Bill and Jess owned their home, some shares and an investment property, and had some existing debt.

In conversation with the clients, Susan determined the couple had the skills to manage an SMSF, a general interest to do so and the ability to take on the responsibilities of operating an SMSF.

Further, Susan believed her clients were suited to establishing an SMSF for the purpose of investing in direct property using an LRBA. She recorded sufficient detail on the client file to indicate that although borrowing and investing into a property through an SMSF would be on the upper end of their risk tolerance, the likely long-term retirement result was superior and in accordance with their desire to build financial independence by taking on extra risk.

Susan also considered the SMSF’s expected cash flow position following the proposed LRBA and property purchase and obtained information from Bill and Jess about their health before providing the SMSF advice and recommending an increase to their life insurances. Susan also recommended that a sizable component of the SMSF be retained in liquid, diversified assets to help mitigate the illiquidity and concentration risk of the leveraged direct property.

Upon audit, ASIC determined that the client file demonstrated that the SMSF with LRBA strategy was expected to help the client meet their retirement objectives and that the client was expected to benefit from the SMSF establishment advice.

Consequently, Susan’s advice to Bill and Jess did not breach the Code of Ethics. In particular, the relevant standards she upheld were:

Case study two: Inappropriate SMSF establishment

Monique and Peter complained to AFCA in their personal capacities and on behalf of the corporate trustee of a self-managed superannuation fund. The complainants were referred to Toby, an authorised representative of ACME SMSFs in 2020. Monique and Peter complained that the advice they received to establish an SMSF and use it as a vehicle to make a geared investment in a residential property was not in their best interests and was inappropriate. The complainants want to be compensated for $224,050 for the losses related to the SMSF to resolve this case.

However, ACME SMSFs denies responsibility for the claimed losses as it believes that its representative Toby did not make a specific property recommendation.  It also claims:

• The advice was in the complainant’s best interests and was appropriate
• Monique and Peter would have proceeded with the geared property investment strategy in any event

AFCA determined that ACME SMSFs did not demonstrate that the advice to establish an SMSF and a property investment strategy was in the best interests of the complainants, as objectives and financial goals were inadequately investigated. Because the SMSF establishment was the core element of Toby’s advice, AFCA determined the advice fees should be refunded.

However, Monique and Peter were unable to establish that they would not have proceeded with the property investment irrespective of the establishment of the SMSF. Toby’s notes recorded that the couple articulated their wish to make this investment, hence his recommendation to establish the SMSF.

Accordingly, AFCA’s recommendation took the view that the complainants should be compensated $24,500, representing the advice fees paid by the SMSF between the 2020 SOA and the end of the advice relationship in 2024. However, the other aspects of the 2020 SOA were deemed to be appropriate and therefore no other refund or compensation was required.

From the details provided in the case study, Toby and ACME SMSFs potentially breached the following standards in the Code of Ethics.

Case study three: Failure to act in clients’ best interests

Alex was an adviser with ACME Financial Advice and referred several of his clients to an SMSF administrator to facilitate the establishment of SMSFs. He did this without providing any advice as to the roles of SMSF trustees and without ascertaining the clients’ capability to act as trustees. Alex then advised those clients to rollover their existing APRA-regulated super funds into their recently established SMSFs.

An ASIC investigation found that Alex failed to prioritise his clients’ interests and consistently failed to act in their best interests because:

• Alex provided ‘cookie cutter’ advice rather than the required personal advice. Consequently, the advice he provided was not appropriate to his clients’ circumstances, financial objectives or needs, nor was it appropriate to the subject matter of the advice sought by his clients
• Alex failed to make reasonable inquiries to obtain complete and accurate information about his clients’ relevant circumstances
• Alex focused his advice on rolling over superannuation savings from APRA-regulated super funds to SMSFs without adequately considering alternative options, such as whether his clients would be better off retaining their existing APRA-regulated super funds
• Alex failed to adequately consider and provide information about the risks, costs and obligations of taking on the role of SMSF trustee
• Alex had been informed by his licensee that he did not have the required expertise to advise on SMSFs generally but still proceeded to provide SMSF advice to his clients.

Consequently, ASIC banned Alex from providing financial services for eight years. From the details provided in the case study, Alex potentially breached the following standards in the Code of Ethics.

Just over 800,000 people intend to retire in the next 5 years, and 294,000 in the next 2 years^[4]. As such, the necessity of robust and tailored retirement planning has reached a critical peak.

SMSFs can be a powerful vehicle for clients seeking greater control and investment flexibility. However, this control comes with a heavy regulatory cost. The associated time, financial expense, complex compliance obligations and significant personal liability imposed on trustees often outweigh the perceived benefits for many. Consequently, SMSFs are frequently an unsuitable option for individuals lacking the necessary financial expertise or the capacity to dedicate substantial time to ongoing administration and compliance.

For financial advisers, recommending an SMSF establishment demands deep due diligence. It requires a thorough understanding of the client’s unique circumstances, financial situation, long-term goals and risk tolerance. It is essential to meticulously assess whether the perceived flexibility and control truly align with the client’s best interests throughout their entire retirement horizon.

The decision to establish an SMSF is not a one-size-fits-all solution and should never be taken lightly. The role of professional advice is paramount. You must ensure clients are fully informed about the inherent responsibilities, risks and potential rewards. Ultimately, the adviser’s focus must remain on delivering a tailored retirement strategy that safeguards the client’s long-term financial wellbeing.

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Notes:
[1] https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-824-review-of-smsf-establishment-advice/
[2] https://asic.gov.au/regulatory-resources/financial-services/giving-financial-product-advice/tips-for-giving-self-managed-superannuation-fund-advice/]
[3] https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics
[4] ABS, Retirement and Retirement Intentions, Australia, October 2025

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What is your understanding of the importance of ensuring that referral arrangements  to meet the ethical standards in the Code of Ethics?

Running an ethical and compliant financial advice practice extends far beyond an individual adviser’s desk; it requires meticulous management of the entire professional ecosystem, including colleagues, peers and third-party referral partners.

While the Financial Planners and Advisers Code of Ethics 2019 (Code of Ethics) primarily places responsibility on the individual, the practical reality of modern practice means that an adviser’s compliance and reputation are inextricably linked to the actions of those around them. Every referral, internal file review or shared office conversation acts as a touchpoint that can either uphold or compromise the principles set out in the Code of Ethics.

Effective management of this ecosystem is, therefore, a foundational requirement for satisfying the Code of Ethics. This involves establishing and enforcing clear governance structures and due diligence processes. When engaging with external partners, such as mortgage brokers, paraplanners or accountants, an advice practice must ensure these relationships do not create a conflict of interest and are always in each client’s best interests.

Internally, a culture of peer accountability and compliance monitoring is essential to ensure consistency in client service and adherence to the standards that comprise the Code of Ethics. A failure to manage a colleague who takes shortcuts, or a referral partner who pressures clients, is effectively a failure to uphold the ethical duties of the practice itself.

Ultimately, the commitment to the Code of Ethics must be a shared commitment, enforced from the top down and monitored across all external and internal relationships. It is important to implement strategies to vet, monitor and manage peers and referral parties, transforming the often-unregulated fringes of the practice into a robust line of defence that safeguards both the client’s best interests and the professional integrity mandated by the Code of Ethics (figure one).

Ethics, colleagues and peers

While building a strong ethics and compliance culture is essential for promoting positive decision-making, even well-intentioned companies can inadvertently set the stage for ethical problems. This often happens when the environment compels individuals to make choices they know, or suspect, are not right. Examples might include recommending an in-house product when it clearly isn’t in a client’s best interest, utilising a high-fee platform to reduce an adviser’s administrative workload for a client with few assets, or rigidly adhering to a licensee’s “cookie-cutter” advice model that ignores a client’s specific needs.

Such environments can also foster ‘motivational blindness’, defined as the tendency to overlook the unethical actions of others when noticing them would conflict with one’s own self-interest. This is particularly relevant for support staff who may have reservations about an approach or decision but are unlikely to speak out if the advice business does not genuinely welcome or protect internal questioning. When staff are discouraged from raising concerns, ethical issues can remain hidden and persist, undermining the entire firm’s commitment to compliance and client best interests.

There are five ways companies might unintentionally trigger good people to make unethical choices^[1]. Each of these is examined through the lens of the financial adviser Code of Ethics (Code) (figure one) and illustrates how a weak business and ethics culture can lead your peers to actively or passively make decisions that potentially breach, or support a breach, of the Code.

1. Create an environment where it’s psychologically unsafe to speak up

Managers and team leaders need more than an open-door policy; they need to encourage their staff to raise and discuss ethical concerns. Creating a culture where your team can speak freely is essential if you’re to avoid misconduct in your practice. Equally important is that those team members are listened to.

Appropriate mechanisms for your team to communicate are crucial, as is an environment in which each team member is comfortable to speak up. Importantly, any issues raised must be addressed; a feeling of futility or a negative reaction to an issue that’s raised does not create a supportive environment and is likely to stultify future discussions.

Failing to provide a safe environment for your team to discuss ethical issues or dilemmas can ultimately have a negative impact on clients and could potentially result in the breach of several standards of the Code of Ethics, including:

2. Avoid pressure to reach unrealistic performance targets

Performance targets can be financial targets such as profitability or assets under management or focus on client acquisition or retention. Research from Harvard Business School suggests “unfettered goal setting can encourage people to make compromising choices in order to reach targets²”.

The standards that comprise the Code of Ethics focus on doing the right thing by clients – obey the law, act in client best interests and act professionally. The 2018 Hayne Royal Commission heard several cases in which performance targets may well have influenced actions, such as those to ‘churn’ clients or move them into in-house products or platforms.

While it is common business practice to have a range of performance targets, it’s important that they are both realistic and achievable without having to compromise the advice provided to clients. Targets that are client and service centric can lead to ethical outcomes for those clients.

While striving to reach performance targets can result in breaching several standards of the Code, it’s the ‘Client Care’ standards where it is most likely to cause a breach.

3. Discussing ethics once there’s been a transgression

Too many leaders assume that talking about ethics is something you do once there’s been a client complaint, an obvious transgression or an AFCA investigation. Previous articles in this series have discussed the importance of ethics, business culture and ongoing ethics training in your financial practice. It is not solely a matter of how you behave, but how you and each of your team members conduct business. That’s why it’s important to educate and reaffirm, on a regular basis, the importance of ethical practices in your business.

This is particularly important for considering issues that don’t fall neatly into right and wrong. While the ‘grey zone’ – that area that exists on a continuum between right and wrong – can provide challenges for your business, it can also provide benefits. Being aware of the grey zone and using examples and case studies that aren’t black and white provide an excellent opportunity for training and discussion. List the situations that your team may encounter in their day-to-day work that might not be black and white. Once such situation is identified, you can take a proactive approach with training.

This grey zone reinforces the importance of all employees of a financial planning business being aligned with its values and practices. If you are transparent about how to deal with ethical issues, if you discuss them regularly and not just when there’s an issue, there’s a lower chance of breaching the Code of Ethics and, therefore, less likelihood of facing enforcement action.

This will help maintain professional commitment and uphold standard 12.

4.  A positive example isn’t being set

Positive leadership is crucial and all leaders in your business must accept their responsibility in setting that positive example. They must be vigilant about their intentions and be mindful of how their peers and subordinates might interpret their behaviour.

Leaders must take care with how they react to external and internal factors, as these demonstrate acceptable responses. These factors might include:

• a client complaint or negative review on social media
• lower than expected revenue or poor financial performance
• losing a valued staff member to a rival practice
• a change of licensee
• a systems issue or breakdown
• regulatory change or challenge.

Leaders need to model ethical behaviour. In an advice practice, this includes compliance with the standards that comprise the Code of Ethics. Failure to do this not only sets a poor example, but it could also set the business on a problematic path.

In a letter to investors in 2019, veteran investor Warren Buffet made the following comment:

“Over the years, Charlie and I have seen all sorts of bad corporate behaviour, both accounting and operational, induced by the desire of management to meet Wall Street expectations. What starts as an “innocent” fudge in order to not disappoint “the Street” can become the first step toward full-fledged fraud…And if it’s okay for the boss to cheat a little, it’s easy for subordinates to rationalise similar behaviour.”

All leaders need to set a positive example for their team, particularly where an ethical dilemma that arises is not clearly defined.

5. Avoid cultural numbness^[2]

Cultural numbness creates a situation that, irrespective of how principled you are, over time, the bearings of your moral compass will shift toward the culture of your organisation. Situations where an ethical leadership is lacking are often those where good people can make poor decisions. Cultural numbness is described as a state where the ‘warning bells have stopped ringing’, where a culture of ethics does not exist, and positive examples are not set by business leaders.

In an advice practice, it could be the difference between acting in your or the practice’s best interests rather than the client’s. It could be skirting legal boundaries (breaching standard one), failing to manage conflicts of interest (breaching standard three) or simply recommending products without taking into account the long-term ramifications of the client acting on your advice (breaching standard six).

The standards that comprise the Code of Ethics are not prescriptive, are not intended to provide definitive guidance. Individual circumstances will differ in practice and there is allowance for differences of professional opinion on how the ethical rules of the profession should apply in a particular case.

This is where positive leadership and an ethics centric business culture will stand an advisory practice in good stead, particularly in those circumstances where you encounter ethical decision making that is not black and white. Doing what is right will depend on the circumstances and will require you to exercise your professional judgement in the best interests of each of your clients.

There are several cultural practices to that could be implemented to encourage all staff to speak up in circumstances they believe to be working against client best interests or verging on unethical behaviour.

1. Establish a practice-wide code of conduct
   This code of conduct should encapsulate your business values and the Code of Ethics. Your code of conduct should set clear expectations about your employees’ behaviour when carrying out their duties, including how to deal with difficult issues where a decision could result in a breach of one or more ethical standards. You need to ensure all staff understand each of the twelve standards in the Code of Ethics and how each standard may specifically intersect their role.
2. Foster a safe environment
   Leadership must actively demonstrate that questioning an approach is valued, not penalised. If a support staff member raises a concern that turns out to be minor or unfounded, they should be thanked for their diligence, not reprimanded for wasting time. This removes the fear of negative consequences that fuels motivational blindness.
3. Decouple rewards from questionable outcomes
   The Corporations Act 2001 prohibits conflicted remuneration, designed to protect consumers by ensuring financial advice is in their best interest, rather than being swayed by financial incentives. It is important therefore to ensure that employee compensation, bonuses and promotions are based on ethical behaviour and process adherence, not solely on revenue generation.
4. Leadership by example
   Advisers and principals must visibly and consistently adhere to the highest ethical standards. If leaders are seen cutting corners, staff will quickly learn that ethical practice is optional. Ethical humility, where leaders admit mistakes and seek input, is crucial.
5. Workplace training and discussions about ethical dilemmas
   This is a positive way to ensure all staff understand both the practice’s values and the obligations of the Code of Ethics. The use of case studies to discuss ethical dilemmas can reinforce the practice’s standards of conduct and clarify behaviours and practices that do and don’t work within your code of conduct.

Importantly, ethics training should not be a once off and does not solve a problem. Ideally, training should teach team members to make good decisions that are compliant with the law and consistent with your practice’s values.

This training could be incorporated as part of regular team meeting; as suggested above, by using a variety of case studies which could address common ethical dilemmas across the financial planning industry. The AFCA website^[3] is a good source of cases and decisions made by AFCA to form the basis of discussion.

Ethics and referral partners

Financial advice practices often need to refer clients to other specialists – both inside and outside the firm – to address the full range of client needs that exceed the adviser’s own competency or specialisation. Such specialties might include risk advice, tax services, SMSF administration or paraplanning. These referral arrangements are frequently established at the licensee level, meaning the adviser may be directed to specific third-party providers.

The way these partners interact with your client has a direct impact on your practice. A negative experience with a referral partner not only reflects poorly on them but can damage your relationship with your client. Critically, poor conduct by a partner can lead to a breach of an ethical standard, resulting in consequences for you if you fail to act on the issue.

This makes standard three of the Code of Ethics particularly important. It mandates that you must not advise, refer, or act in any other manner where you have a conflict of interest or duty. While the debate around standard three has been long running, it remains enforceable. In its current form, the standard addresses actual conflicts between the duties owed to your client and any personal interest or duty owed to another individual or organisation.

According to guidance^[4], you will breach standard three if “a disinterested person, in possession of all the facts, might reasonably conclude that the form of variable income (e.g. brokerage fees, asset-based fees or commissions) could induce an adviser to act in a manner inconsistent with the best interests of the client or the other provisions of the Code.”

However, the guidance also clarifies that you would not breach standard three merely by being a duly remunerated employee of an entity that provides retail financial advice and services and referring to a specialist within that practice, even if profit-sharing is involved. Regardless of the referral structure, you are still required to ensure that the advice and services provided are always in the best interests of your client and comply with all other provisions of the Code.

Accountants

It’s one of the most common referral arrangements in the industry. Many a business has taken advantage of the natural synergies between accounting and financial advice to build a business where an accounting practice acquires and embeds financial advice businesses – or vice versa.

As well as being synergistic, there are also areas of overlap. For years, accountants have advised clients about investment strategies to manage and mitigate tax and have been advocates of self-managed super funds (SMSFs). While in many cases an SMSF may be an appropriate strategy for a client, there may be times where you question its validity as an appropriate approach for your mutual client. Irrespective of the relationship with the referral partner, your client and their best interests must always come first.

If there’s a scenario where a client’s accountant makes a recommendation about an investment or a strategy, even if it’s tax related, you have the right to question it, particularly if you don’t believe it to be in the client’s best interest. While there’s a case for making enquiries of a strategy even if the accountant isn’t a referral partner, if it is a formal referral relationship it’s even more important.

You may query a recommendation because you have a better understanding of an asset class or financial product, or because of your in-depth knowledge about the client’s financial objectives and their risk profile. An accountant’s product or strategy recommendation may be too risky for that client or inappropriate when you consider their total portfolio.

In such cases it is important to call it out and discuss the holistic view with the referral partner; that way, you can agree on what’s best for the client, what will help them achieve their financial objectives (including tax management) and what works within the agreed risk parameters.

Risk advice

Risk advice is a specialist area. Some financial planning practices may have an in-house risk expert, others refer to a specialist business. It would be expected that in-house risk advisers would adhere to your practices’ approach to managing ethics in a way that’s consistent with your firm’s code, as well as the Code of Ethics. That, however, needs to be stipulated and not assumed; a failure to act accordingly can have negative repercussions not only for your client, but for the broader practice and its staff.

Where you refer to a specialist risk practice, it is important to have an agreement with respect to the service provided. You need to ensure that it’s appropriate for each client and will meet their needs over time.

Mortgage brokers

Mortgage brokers have a particular skill set and there may be times you need to refer a client for loan assistance. Renumeration for mortgage brokers typically comes from the financial institution where they place the business and, in most cases, they are paid an upfront commission and a trail or ongoing commission for the business. These commissions are paid out once the loan settles and are based on a percentage of the loan amount. It is important your client understands this, and you both need to be confident that the loan has been placed with the most appropriate institution for the client, not that which offers the most handsome remuneration.

In January 2020, at the same time as the Code of Ethics became law, the Federal Government passed legislation to create a duty for mortgage brokers to act in the best interests of consumers. The legislation created a duty for mortgage brokers to act in the best interests of consumers and requires mortgage brokers to prioritise consumers’ interests when providing credit assistance (known as the conflict priority rule)^[5].

Managing referral arrangements

When engaging with specialists for client referrals, you should formalise the relationship with a Service Level Agreement (SLA) that clearly outlines your expectations regarding their conduct and service standards. If a formal SLA isn’t in place, or if it doesn’t cover the requirements stipulated in the Code of Ethics, establishing or amending it is a priority. Never assume your clients will be treated in the manner or receive the quality of advice you expect.

It is crucial to review the advice provided by any third party to whom you have referred a client. If you have any doubts or queries about the appropriateness of the advice, you must address them immediately with the referral partner. This may be a difficult conversation, as the partner might perceive it as a challenge to their professionalism. However, if you genuinely believe a recommendation is not in the client’s best interest, you have an ethical duty to act.

To make this conversation effective and less confrontational, frame your concern around the client’s best interests. Explain your query by referencing the client’s specific financial objectives, risk profile, estate plan, or existing portfolio, whichever is most relevant. By making the client and their outcomes central to the discussion, the conversation becomes less personal and remains focused on achieving positive results for your mutual client.

Case studies

The following case studies are based on real events; however, the names of people and organisations have been changed, and some details altered. The case studies have been drawn from ASIC or AFCA and for each, potential breaches of the Code of Ethics are identified. These case studies represent examples of those that would be of value for the business to discuss as part of its workplace training.

Case study one: A focus on gearing strategies

Roger was an authorised representative of ACME Advice on Queensland’s Gold Coast. An ASIC review found that Roger failed to act in the best interests of his clients. ACME Advice actively encouraged its authorised representatives to recommend gearing strategies to clients to invest in the sharemarket. ASIC noted that Roger provided advice that was inappropriate when his clients’ relevant personal circumstances were reviewed. When queried by ASIC, Roger commented he was following the strategy provided by his licensee and adopted by other authorised representatives of ACME Advice.

In providing advice to his clients, ASIC found that Roger failed to consider their relevant personal circumstances, their cash flow or their ability to cover margin calls. He also failed to consider an exit strategy from the gearing arrangements for his clients and did not recommend or implement appropriate personal insurance cover.

Additionally, ASIC found that Roger failed to keep proper records and that he was not adequately trained or competent to provide the financial product advice that formed the basis of his recommendations. His lack of understanding about relevant legal and professional obligations as a financial adviser created additional risks to his current and future clients.

Roger received a five-year ban from ASIC with respect to providing financial services, carrying on a financial services business or controlling an entity that carries on a financial services business. The licensee was also penalised.

Roger’s approach to working with clients would have seen him potentially breach the following standards of the Code:

Case study two: Mortgage broker gone rogue

Alison was a mortgage broker with ACME Mortgage Brokers. She provided mortgage broking services to a number of financial advice practices in Sydney’s northern beaches 2015 to 2024. Between 2017 and 2022, Alison dishonestly obtained funds from her employee and clients.

She was convicted of 15 counts of dishonestly obtaining a financial advantage by deception, five counts of dealing with identity information to commit an indictable offence, and one count of dishonestly obtaining property by deception. She was sentenced to four years’ imprisonment.

Under the Corporations Act and the National Consumer Credit Protection Act, ASIC may permanently ban a person from the financial services and credit industries if they are convicted of fraud. Consequently, based on her convictions, Alison has been banned permanently, which means she cannot:

• provide any financial services or engage in any credit activities,
• control an entity that carries on a financial services business or engages in credit activities
• perform any function for an entity carrying on a financial services business or engaging in credit activities, including as an officer, manager, employee or contractor.

Shelley and Louise from ACME Financial Advice referred several clients to Alison over a four-year period; five were among those she defrauded. While Shelley and Louise had conducted due diligence before forming a referral relationship with Alison and they had a formal SLA in place, her actions reflected badly on them. It adversely affected their client relationships and they believed their association with Alison sullied their reputation.

By defrauding her clients, Alison would have potentially breached the following standards in the Code of Ethics had it applied to her as a mortgage broker. She did fail to meet the mortgage brokers best interests duty:

Case study three: Keeping referral partners in check

ACME Financial Advice was located in a growth corridor in Melbourne’s northern suburbs, in an area that had experienced gentrification and an influx of professional couples. The practice was growing quickly and the business principals, Mark and Trevor, decided to outsource some of their business processes so they could scale their business more quickly, without having to add too many more staff.

Mark was charged with finding some potential outsource providers and they held a ‘beauty parade’ to see what each had to offer. They settled for ACME Outsourcing, with staff based offshore, as they could get a significant amount of their business processes dealt with at a very reasonable cost. One of the processes they outsourced was paraplanning.

As part of the due diligence process, Mark and Trevor made sure that the paraplanners provided by ACME Outsourcing had appropriate Australian-equivalent accreditation and qualifications, were RG146 compliant and there were processes in place to ensure ongoing professional development.

Once satisfied this was the case, as ACME Outsourcing met the other criteria the practice leaders required, the company was appointed to provide services to ACME Financial Advice.

At the six-month review, Mark and Trevor expressed their satisfaction with ACME Outsourcing. It had met the KPIs set and in the case of paraplanning, provided quality and timely service. However, not long after, they noticed a sudden decline in the quality of Statements of Advice and reporting. They were undertaking client reviews and the information coming into the practice was incomplete and/or inaccurate.

After making several enquiries, they discovered the initial high quality paraplanners had been replaced by inexperienced and less qualified staff. Mark and Trevor also noted that the record keeping by these new team members was not meeting their service level agreement. It was evident the new staff members were being paid less by ACME Outsourcing.

Because they had used the Code of Ethics to frame the KPIs agreed with ACME Outsourcing, they were able to refer to them when detailing the issues arising from the change in paraplanning staff. In particular:

Trust is the foundation of every successful financial advisory relationship. An adviser’s credibility is hard-earned and must be fiercely protected. When a colleague or referral partner breaches this trust, it doesn’t just damage their reputation; it directly undermines the adviser-client relationship, potentially causing irreparable harm.

Advisers must be vigilant. It’s important to choose referral partners who share a deep commitment to integrity, transparency and, crucially, an ethical framework that aligns with the Code of Ethics’ twelve standards. Colleagues must be measured by the same standards. By carefully selecting and regularly reassessing these partnerships, advisers safeguard the trust they’ve cultivated, ensuring the bedrock of their practice remains unwavering.

Take the FAAA accredited quiz to earn 0.75 CPD hour:

CPD Quiz

The following CPD quiz is accredited by the FAAA at 0.75 hour.

Legislated CPD Area: Professionalism and Ethics (0.75 hrs)

ASIC Knowledge Requirements: Ethics (0.75 hrs)

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Notes:
[1] https://hbr.org/2016/12/why-ethical-people-make-unethical-choices
[2] https://hbr.org/2019/04/the-psychology-behind-unethical-behavior
[3] https://my.afca.org.au/searchpublisheddecisions/?_gl=1*qdtfpa*_gcl_au*MTE1NDQ0NzYzMi4xNzU5OTY4NzU5
[4] Financial Planners & Advisers Code of Ethics 2019 Guide, October 2020
[5] ASIC Regulatory Guide 273, Mortgage brokers: Best interests duty

The post CPD: Managing peers and referral partners in an ethical advice practice appeared first on AdviserVoice.

Strong business culture is essential to maintaining an ethical advice practice.

A strong business culture has been identified as a critical attribute of an ethical business. This article, proudly sponsored by GSFM, investigates the interrelationship between a strong business culture and ethics in financial advice.

The relationship between ethics and business culture is deeply connected. Business culture is a defining force that shapes an organisation’s identity and guides its conduct, whatever the industry it operates in. The values, norms and behaviours embedded in a company’s culture are what hold the organisation and its people together.

In today’s hyperconnected, highly regulated and closely scrutinised environment, the focus on ethical conduct is greater than ever. Your colleagues, stakeholders, regulators and clients expect accountability, transparency and an unwavering commitment to doing what’s right. In this context, business culture acts as both the driving force and the testing ground for how values are applied in practice.

Organisational culture provides the foundation upon which ethical standards are built and sustained. This is especially true in financial advice, where clients place immense trust in professionals to safeguard their financial wellbeing, deliver on their objectives and ultimately help them to meet their future goals. In recent years, increasing attention on the ethical dimensions of advice has highlighted just how strongly business culture influences client outcomes and the broader reputation of the industry.

A global perspective of business culture and ethics

Several reports on ethics in the workplace have been published in 2024-2025. Two key reports were published by the Institute of Business Ethics, which was established in 1986 to champion the highest standards of ethical behaviour in business. Its Ethics at Work 2024 report^[1] is based on a survey of over 12,000 working adults in 16 countries. From it and other similar reports published over the past two years, several common themes and issues emerged. These include:

1. A growing concern around AI, automation and emerging technologies: Many employees worry about misuse of AI, potential bias, replacement of human roles, and insufficient organisational readiness. This is especially pertinent in advice practices, in which ‘fintech’ has already disrupted many traditional roles through automation.
2. Cultural disconnects: Senior leadership often claim high ethical behaviour, but this doesn’t always filter down; consequently, research finds that middle managers are less likely to behave accordingly. This can result in poor modelling for all staff and an adverse impact on business culture.
3. Measurement & accountability gaps: Many firms that were surveyed lack robust ways to measure ethical culture, supply chain or third-party risk, real-time analytics and benchmarking.
4. Employee well-being: The wellbeing and psychological safety of employees was noted as becoming more central as ethics issues. Stress, overwork, the growing concern around automation have been found to tie directly into misconduct risk and reputational risk.
5. Regulatory change: Globally, there has been ongoing regulatory change and scrutiny, particularly in the financial services sector. Respondents noted an increase in oversight and greater prominence given to ethics culture in supervisory work.

Although these results arise from a myriad of businesses across industries and geographies, there are parallels with Australian financial advice businesses and the importance of business culture. Here’s how those global ethics and culture findings translate into clear parallels and lessons for Australian financial advice businesses.

1. AI and technology

There has been increased discussion about the use of AI across varied aspects of advice businesses such as reporting, client service and in some cases, investment selection and portfolio construction. As well as concern for job losses, thought must be given to the ethics of emerging technologies – are they to benefit the business or the client?

The uncertainty created by emerging technologies can adversely impact business culture, which in turn can affect the ethical frameworks that underpin the business. The same risks seen globally – potential for bias, loss of human judgement and lack of transparency – apply here.

Advice businesses must ensure technology enhances, not replaces, human ethical judgment. It is important to maintain rigorous oversight, explain algorithms in plain language to clients, and ensure data privacy and fairness are built into every system. ASIC and the Financial Planners and Advisers Code of Ethics (Code of Ethics) both demand informed consent, transparency and fairness – principles that should extend to digital tools.

2. Cultural disconnects: culture is more than compliance

The financial advice sector is not immune to toxic workplace behaviours that undermine ethical decision-making. A culture tolerant of bullying, cutting corners or discrimination corrodes professionalism and client trust.

Strong governance around how staff behave and not just what financial advice they give is critical. It is important to embed respect, inclusion and psychological safety in training, policies, and critically, for leadership to set the right example.

While principals and licensees often articulate ethical values, the message can weaken at the operational level where client-facing staff experience conflicting pressures. Middle management must be empowered and accountable for living the firm’s ethical values. Performance reviews should be linked to cultural and conduct outcomes, not just business targets. Ethical leadership should cascade consistently from the top through every adviser and support role.

3. Measurement and accountability: turn ethics into metrics

Many advice firms rely on anecdotal or compliance-driven views of culture. Few track ethics performance in a systematic way. Consider the adoption of measurable indicators to monitor culture. These could include staff engagement, complaint resolution rates, compliance audit outcomes and client trust scores. Regular surveys and benchmarking can make ethics tangible and manageable.

4. Employee wellbeing: ethics starts with the individual

Burnout, excessive compliance pressure and the fear of making mistakes can create an environment where ethical lapses and poor decision-making thrive. A business culture that promotes good mental health, balanced workloads and open communication creates a healthy work environment.

It’s important to encourage staff to raise ethical concerns without fear. A healthy, supported team – from advisers through to support staff – make better ethical decisions and build stronger, trust-centred client relationships.

5. Regulatory change – it’s inevitable!

Just as global regulators have the spotlight firmly centred on culture and non-financial misconduct, ASIC and Treasury continue to emphasise ethical standards in the advice profession through the Code of Ethics and Quality of Advice Review outcomes.

So, regulatory change can be expected to reach further than in the past. Assume greater scrutiny of culture and governance, as well as personal and business conduct beyond compliance checklists. Firms that proactively demonstrate a strong business culture maturity – through transparent leadership, client-centric outcomes and staff engagement –will be better positioned in the evolving regulatory landscape.

For Australian advice businesses, these parallels highlight that business culture and ethics is not peripheral. It is strategic infrastructure. Embedding ethics into leadership, systems and daily behaviours isn’t simply about avoiding regulatory breaches. It is about building resilient, trusted businesses that can thrive amid technological change, regulatory evolution and shifting societal expectations.

Ethics and financial advice

Financial advisers play a vital role in helping Australians achieve their financial goals. However, trust in the profession has been undermined over time by a small number of individuals engaging in unethical behaviour.

The Code of Ethics (figure one) is closely aligned with the legislation that governs the provision of financial advice. ASIC expects Australian Financial Services (AFS) licensees to take reasonable steps to ensure their authorised representatives comply with both the law and the standards set out in the Code.

To meet these expectations, licensees should:

• Ensure authorised representatives understand their ongoing obligation to comply with the Code.
• Provide training and guidance on the types of conduct consistent with the Code’s principles.
• Support advisers in raising concerns about how the licensee’s systems or controls may affect their ability to comply—and act on those concerns where appropriate.
• Monitor adviser conduct regularly to assess compliance with the Code.
• Update systems and processes as needed to maintain compliance with both the Code and the Corporations Act 2001.

Building a positive business culture in an advice business

The results from global surveys discussed earlier in this article have drawn clear parallels between a positive business culture and a business that acts ethically. Creating a positive business culture is fundamental to the success of any organisation, regardless of industry.

A strong culture creates an environment where employees feel valued, respected and motivated to perform at their best. This in turn drives productivity, strengthens retention and improves overall business outcomes. In sectors where ethical integrity is critical, a positive culture provides the foundation on which ethical behaviour and decision-making thrive.

Several key elements underpin a positive business culture: a clear sense of purpose and values, effective communication, recognition and reward, and opportunities for growth and development.

At the heart of any positive culture is a well-defined purpose and set of values. Organisations must clearly articulate their mission and core principles, communicate them widely and embed them into daily operations. When employees understand and identify with their company’s purpose, they feel more connected to their work, more motivated to contribute to its success and more inclined to act ethically.

Open, transparent communication is another essential pillar. This means fostering dialogue between employees and leadership, as well as among peers. When communication is clear and consistent, employees are more informed, engaged and comfortable sharing ideas or raising concerns. This openness is especially vital in ethical matters, allowing staff to seek guidance or question decisions without fear of reprisal.

The ethics centric advice practice

It’s important that an ethics-centred approach to financial advice should extend beyond the adviser. It should encompass everyone within the practice; from the receptionist who greets clients, to the administrator managing documentation, to the adviser developing financial plans and the paraplanner implementing investment strategies.

Every team member must understand how the Code of Ethics relates to their responsibilities and how they can uphold the Code in their daily work. By doing so, they not only support advisers and licensees to meet their obligations but also help safeguard the integrity of the entire practice. Ultimately, it is the licensee and adviser who bear accountability, and the consequences, if the Code of Ethics is breached.

So, how can advisers optimise their business culture and embed ethics at its heart? Listed below are twelve strategies that can be implemented to create an ethics-centric practice that can help support your business culture and mitigate the risk of breaching the Code of Ethics.

1. Define and communicate your company’s mission and values

This should be a clear and concise statement that outlines the purpose of your business and the values that guide it. It is important to state a purpose that goes beyond profit, such as “helping Australians achieve financial wellbeing with integrity.”

This is an opportunity to ensure ethical practice forms a key part of your mission and values. Values could include ‘Always put the client’s best interests first’ or ‘We help our clients attain their financial and life objectives by situating their interests front and centre.’ Clients and staff should hear and see these values consistently in your marketing, client and staff onboarding and internal messaging.

2. Code of conduct

A practice-wide code of conduct, one which encapsulates your business’s values as well as the Code of Ethics, should provide your team with a clear understanding of their role and set clear expectations about employee behaviour when performing that role. It should also detail how each of the Code’s twelve standards may specifically intersect their role.

3. Checklist

Create a checklist to be used to safeguard compliance with the Code of Ethics. The questions in the checklist should be tailored to each role within your practice and include those relevant to dealing with prospective, new and existing clients.

4. Client communication

It’s particularly important be transparent in your communications to foster openness and trust. Establish ongoing channels of communication and explain how you will communicate with them; it’s also important to detail the method and frequency.

Remember to not make promises you know you cannot (or may not be able to) keep. As well as potentially being a breach of the Code of Ethics, it will reflect badly on your practice.

5. Foster open and transparent intra-practice communication

This can be achieved through regular team meetings, one-on-one check-ins with employees, and other communication tools. Encourage team members to discuss issues that could potentially breach the ethical standards in the Code of Ethics.

6. Set key performance indicators (KPI)

Reinforcing your company’s values, adhering to your practice’s code of conduct and behaving in a way that makes ethical behaviour central to their work you and your team will create an ethical practice. Although a values-driven KPI may sometimes be more challenging to quantify than one with specific and measurable outcomes, it will highlight the importance of your company’s values and ethical practice to your business.

7. Workplace training

It is essential to make sure all staff understand both your values and the obligations of the Code of Ethics. You can use workshops to promote ethics in your workplace, which will reinforce the practice’s standards of conduct and clarify behaviours and practices that do and don’t work within your own code of conduct – and within the Code.

Importantly, ethics training should not be a once off and, as far as possible, should be practical. Training should teach team members to make good decisions that are compliant with the law (including the Code) and consistent with your practice’s values.

Ethics training could be incorporated as part of a regular team meeting; for example, by using case studies that address common ethical dilemmas across the financial planning industry. Cases could be drawn from the AFCA data base and discussed – how would your practice have dealt with situation that arise? You can also encourage team members to discuss issues arising with their clients, or something within your organisation’s processes or technology that might lead to a breach of the Code.

8. Feedback loop

Feedback is important. By encouraging staff to provide honest feedback about processes, conversations and client interactions, you are better placed to make sure you’re aware of issues that may arise that could potentially compromise your business. A feedback loop can help you identify gaps in relation to processes and procedures, and where a checklist or workplace training may ensure your business is not exposed.

9. Lead from the top

As highlighted in the findings from global ethics surveys, it’s important to set a good example for staff, irrespective of your position in a practice. Culture reflects leadership. If principals or senior advisers cut corners, staff and clients will notice.
For those who are senior in the practice, it’s even more important to demonstrate acceptable behaviour. Senior advisers and personnel will set the tone for ethics in the practice; as such, they need to demonstrate the Code of Ethics in their words and actions.

Mentoring and coaching is important here; you can pair junior advisers with leaders who emphasise integrity. Coaching should include ethics and emotional-intelligence modules, not just technical CPD.

10. Hire the right people

When hiring new employees, it is important to consider whether they share the same values as your business. Consider including some ethics-based questions into your interview; this could include client scenarios to see what actions your prospective employee would take.

Having the right people in your business will help support the business culture and ensure that all team members are working towards the same goals, that there is a strong sense of cohesion within the team and that your clients are prioritised.

11. Regular audit

These or similar strategies may have already been implemented in your practice. If so, it’s important to review the effectiveness of each. What’s working well and what’s not? If you can identify gaps in processes that may lead to a breach of the Code of Ethics, it’s better to identify them ahead of time, rather than when ASIC comes knocking on your door.

12. Encourage a good work-life balance

Employees who feel that they have a good work-life balance are more likely to be happy and productive in their work. A happy team member is more likely to be aligned with your values, support your business culture and work hard to support your business and its most important asset – your clients.

For financial advisers, an ethical business culture is a living system. It has a shared purpose, transparent leadership, rigorous governance, client-first practice, supportive workplace, engaged community, responsible technology and measurable progress. Implementing these elements not only satisfies regulatory standards but also creates lasting trust, a competitive advantage in a sector where reputation is everything.

Case studies

The following case studies are based on real events; however, the names of people and organisations have been changed, and some details altered. The case studies have been drawn from the Australian Financial Complaints Authority (AFCA) or ASIC. For each, potential breaches of the Code of Ethics are identified.

These case studies are representative of those that could be used as part of workplace training. An example of what the adviser did or did not do, why the client complained (or ASIC investigated) and the outcome. How would your team members have dealt with the situation? What would they do if they saw a colleague conducting themselves in a similar way? What are your business’s processes and procedures in such an event?

Case study one: Weak business culture and licensee failure

ASIC received numerous complaints about adviser Karen and instigated an investigation. The investigation found Karen had had frequently breached her best interests obligations by providing her clients with inappropriate advice and failing to put her clients’ interests first. At the time, Karen was an authorised representative of ACME Financial Advice.

When Karen’s case went to the Federal Court, it was found that ACME Financial Advice had received numerous complaints from clients, however they had failed to take appropriate action. In ASIC’s words, ACME Financial Advice failed to take reasonable steps to ensure that Karen had provided appropriate advice to clients, acted in her clients’ best interests and put her clients’ interests ahead of her own.

After hearing the case, the Court’s findings included that ACME Financial Advice did not have a strong business culture. Processes to monitor the advice given by advisers were inadequate, and the group failed to identify when their authorised representatives were avoiding advice quality checks or recommending non-approved financial products. There were also no steps taken by the licensee to monitor their authorised representative’s compliance with the Code of Ethics.

Commenting on the case, ASIC Deputy Chair Sarah Court said, ‘Financial advice licensees need to understand that they can be liable if their advisers do not act in the best interests of their clients and do not prioritise their clients’ interests over their own.’

Both ACME Financial Advice and Karen were subject to penalties arising from the case.

In this case, the licensee ACME Financial Advice and adviser Karen potentially breached the following standards:

Case study two: Poor business culture results in poor client outcomes

AFCA has a large number of determinations relating to a single licensee. In this case study we’ll refer to it as ACME Advisory and examine a single determination. This particular licensee is a good example of a poor business culture, one in which clients’ interests were not prioritised and advisers not encouraged to necessarily act in clients’ best interests. The financial firm entered voluntary administration on in January 2022 and did not provide a response to the complaint.

Peter and Deidre lodged a complaint as trustees of their self-managed superannuation fund (SMSF). The complainants were clients of ACME Advisory from November 2009 to October 2021 during which time the financial firm provided them with investment advice for the SMSF portfolio.

The complainants say the financial firm’s advice was inappropriate during this period because it failed to diversify the portfolio according to the SMSF’s risk profile and was highly concentrated in a related party product.

AFCA’s finding was that ACME Advisory did not provide appropriate advice. As a result of its recommendations the complainants were exposed to a level of risk that was too aggressive for their risk profile and the SMSF portfolio lacked diversity. AFCA also noted that it shared the complainants’ concern about whether ACME Advisory adequately disclosed the risks associated with its related products and prioritised their SMSF’s interests ahead of its own.

AFCA found in favour of Peter and Deidre and note: “But for” the financial firm’s failure to provide appropriate advice, the SMSF would have been $1,016,175.80 better off.”

ACME Advisory was informed that it had to pay ​$1,016,175.80 to the SMSF or a superannuation fund nominated by the complainants plus interest on the above compensation amount equal to the change in the consumer price index from 1 July 2022 to the date of payment.

In this case, the licensee ACME Advisory and its adviser potentially breached the following standards:

Case study three: Poor business culture results in fees charged for no service

Fees for no service (FFNS) conduct was a key focus of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that was held between 2017 and 2019. That business still engage in FFNS conduct suggests a poor business culture that prevails within the firm.

ASIC has banned Monty, financial adviser and director of ACME Advice in Brisbane.

ASIC found that ACME Advice engaged in FFNS conduct in relation to a number of clients between January 2022 and October 2023. During this period, Monty held executive roles in the firm, as well as being both a shareholder and financial adviser of ACME Advisers. ASIC noted that he became aware of the FFNS conduct but failed to adequately investigate the FFNS conduct, or to implement adequate systems to prevent it from reoccurring.

Further, ASIC also found that it had reason to believe that Monty was not a fit and proper person to participate in the financial services industry. A key reason for this was because as one of ACME Advice’’ shareholders, Monty “enriched himself at the expense of affected clients by failing to refund an estimated $81,652 in fees plus interest.”

Because of his actions, Monty has been banned for 10 years from:

• Providing any financial services
• Performing any function involved in the carrying on of a financial services business (including as an officer, manager, employee or contractor)
• Controlling an entity that carries on a financial services business.

In this case, adviser Monty potentially breached the following standards:

Case study four: Dishonest conduct

ASIC issued a permanent ban for financial adviser Finn. The regulator found that for a one-month period in 2023, Finn had made 37 unauthorised transactions on the trading accounts of his clients using an online trading platform.

During the same period, Finn also lodged seven hard copy investment instruction documents with the same trading platform. These documents contained forged signatures and purported to relay instructions to deal with financial securities on behalf of his clients.

The permanent banning follows Finn’s conviction earlier this year for engaging in dishonest conduct and providing financial services without appropriate authorisation. While he was sentenced to a total of 18 months’ imprisonment, he was released after entering a recognisance release order of $5,000. This required him to be of good behaviour for 18 months. He was also fined a total of $15,000.

As a consequence of his actions, Finn is permanently prevented from:

• Providing any financial services or engaging in any credit activities
• Controlling an entity that carries on a financial services business or another person who engages in credit activities
• Performing any function involved in the carrying on of a financial services business or in the engaging in of credit activities.

The action taken by Finn were illegal, unprofessional and potentially breached the following standards of the Code of Ethics:

The lessons from global ethics research are clear: culture is the backbone of ethical, sustainable performance. For Australian financial advice firms, this means that integrity cannot be treated as an afterthought or a compliance exercise. It must be woven into leadership, systems, technology and daily client interactions.

As AI, automation and regulatory complexity reshape the profession, advice businesses that prioritise ethical culture – supported by psychological safety, transparent leadership and measurable accountability – will be better equipped to navigate uncertainty and build enduring trust. Non-financial conduct, diversity, wellbeing and ESG are not distractions from core business goals; they are now essential components of long-term credibility and client confidence.

A strong business culture can serve as a compass. It can steer staff through the complexities of ethical dilemmas and ensure that they consistently act in the best interests of clients. This alignment of values fosters a sense of accountability and responsibility. By investing in the development of a strong business culture, financial advice firms not only fulfill their moral obligations to clients but also lay the groundwork for sustainable success in an industry where trust is the most valuable currency of all.

Take the FAAA accredited quiz to earn 0.75 CPD hour:

CPD Quiz

The following CPD quiz is accredited by the FAAA at 0.75 hour.

Legislated CPD Area: Professionalism and Ethics (0.75 hrs)

ASIC Knowledge Requirements: Ethics (0.75 hrs)

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Notes:
[1] https://www.ibe.org.uk/ethicsatwork2024.html

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