Best Interests Duty (s961B)

The seven safe harbour steps and how to evidence compliance

What is the Best Interests Duty?

Section 961B of the Corporations Act 2001 requires that a financial adviser must act in the best interests of their client when providing personal advice. Introduced under the FOFA reforms, this duty is the cornerstone of Australian financial advice regulation.

The Seven Safe Harbour Steps

Section s961B(2) provides a safe harbour — if an adviser satisfies all of the following steps, they are deemed to have met the best interests duty:

• (a) Identify the client's relevant circumstances — financial situation, objectives, risk tolerance
• (b) Identify the subject matter of the advice sought
• (c) Investigate alternative products that might achieve the client's objectives
• (d) Assess the consequences of replacing one product with another
• (e) Ensure the advice is appropriate to the client's circumstances
• (f) Ensure the advice is based on the client's needs, not the adviser's interests
• (g) Take any other steps prescribed by regulations

Common BID Compliance Gaps

ASIC enforcement actions and Royal Commission findings have identified recurring gaps: boilerplate language that does not reflect individual client circumstances, inadequate investigation of alternative products, and insufficient evidence of replacement cost analysis. AdviserCheck's six-layer analysis specifically flags these issues.

How AdviserCheck Checks BID Compliance

AdviserCheck analyses every advice document for evidence of each safe harbour step. Findings are triple-confirmed by three independent AI models before being included in the final report.

The Seven Safe Harbour Steps

Section 961B(2) provides seven safe harbour steps that, if followed, mean the adviser is deemed to have met the best interests duty. These steps are: identify the client's objectives, financial situation, and needs; make reasonable inquiries if the information provided is incomplete or insufficient; assess whether the adviser has the expertise to provide advice on the subject matter; conduct a reasonable investigation into available financial products; assess the information gathered and base judgements on the client's relevant circumstances; ensure the client has given informed consent to any limitations; and take reasonable steps to ensure the advice is appropriate to the client (aligned with s961G).

Your SOA should show evidence that each of these steps was followed. For example, it should reference your stated goals (step 1), explain what inquiries were made (step 2), describe the investigation conducted into available products (step 4), and explain why the recommended product was chosen over alternatives (step 5). If the SOA does not address these elements, the adviser may not have fully met the duty.

Proposed DBFO Changes to the Best Interests Duty

The Delivering Better Financial Outcomes (DBFO) reforms, passed in July 2024, propose significant changes to the best interests duty framework. Tranche 2 draft legislation (released March 2025) proposes removing the safe harbour steps and replacing them with a principles-based "reasonable steps" duty. This would give advisers more flexibility in how they demonstrate compliance, but would not reduce the standard of care required.

For consumers, the proposed changes mean that advisers will need to focus on outcomes rather than process. Instead of checking boxes against the seven steps, advisers will need to demonstrate that they have taken all reasonable steps to ensure the advice is in your best interests. ASIC will provide guidance on what "reasonable steps" means in practice. The core obligation to act in your best interests remains unchanged.

How to Check If Your Adviser Met the Duty

Review your SOA and ask: Does it clearly state my goals and financial situation? Does it describe what alternatives were investigated? Does it explain why the recommended product or strategy was chosen over others? Does it address my specific circumstances or could it apply to anyone? If the answers suggest the adviser did not fully meet the duty, raise your concerns with them.

You can also use AdviserCheck to analyse your SOA for compliance with the best interests duty. AdviserCheck specifically checks whether the document demonstrates the elements required under s961B and provides a score and detailed findings. A low score may indicate that the advice was not properly personalised.

Frequently Asked Questions

Does the best interests duty apply to all financial advice?
It applies to personal advice given to retail clients. It does not apply to general advice (information provided to the public without considering personal circumstances), nor does it apply to advice given to wholesale clients.

What happens if an adviser breaches the best interests duty?
A breach of the best interests duty is a breach of the Corporations Act. The client can complain to AFCA, which can award compensation. ASIC can take enforcement action including banning orders, infringement notices, and court proceedings. The adviser may also be in breach of the Code of Ethics.

Can I waive the best interests duty?
No. The best interests duty is a core consumer protection that cannot be waived or contracted out of. Any attempt to exclude or limit the duty is void under the Corporations Act. This protects consumers from being pressured to accept lower standards of advice.

How will the DBFO changes affect my rights?
The core obligation for your adviser to act in your best interests will remain. The changes are about how advisers demonstrate compliance, not about reducing the standard of care. Your right to complain about poor advice and seek compensation remains unchanged.

Regulatory Timeline: 2012 to Today

Each reform below changed what your adviser must do and disclose. Knowing the timeline helps you judge how current your document's obligations are.

Date	Reform	Impact on Consumers
July 2012	FOFA enacted	Best interests duty (s961B), ban on conflicted remuneration, opt-in for ongoing fees
July 2013	FOFA mandatory	Full compliance required — advisers must act in your best interests
July 2016	Accountants' exemption repealed	Accountants need AFSL to give SMSF advice, increasing consumer protection
2018-2023	Royal Commission + response	FEAR Act (2019) — higher penalties, breach reporting, enforceable director duties
Dec 2022	QAR Final Report	22 recommendations including simplified SOAs, new adviser class, streamlined best interests duty
July 2024	DBFO Tranche 1	FSG website disclosure option, conflicted remuneration clarification
Jan 2025	DBFO changes commence	Fee Disclosure Statements removed, streamlined ongoing fee consents, legal clarity for super advice fee deductions
Mar 2025	DBFO Tranche 2 draft	SOA rationalisation, collective charging for super, super fund targeted prompts. Best interests duty modernisation and new adviser class still in development.

Sourced from ASIC, Treasury DBFO documentation, FAAA and APESB publications.