MenuFAAA Principles of Good Professional Practice
Unifying Principles
The Unifying Principles set out the fundamental underpinning of good financial advice practice. The principles identified here are:
- The exercise of professional judgement
- Appropriate scope of advice
- Complete and accurate record keeping
- Client Communication
- Managing conflicts of interest
- Applying the best interest duty
- Acting only where it is appropriate to do so
These principles apply across all advice contexts and client relationships, regardless of the specific advice scenario, and are key to fulfilling your obligations to clients and other counterparties. Each principle includes a clear definition, followed by a brief explanation of what the principle entails.
The FAAA Principles of Good Professional Practice booklet is also available to download.
Please note
The principles presented here should not be taken as an exhaustive list. As with all aspects of financial advice, you should use your own professional judgement to establish what actions are required to reach the standard described by each of the Unifying Principles, and use those principles as a foundation to develop your own best practice approach to providing financial advice for your clients.
The exercise of professional judgement
Principle
In all situations a professional must use their own judgement to assess how an outcomes should be delivered, and what actions are needed to achieve those outcomes.
Explanation
Professional judgement is paramount. It is the cornerstone of ethical and effective financial advice. Each adviser has a personal and professional duty to assess what is appropriate in a given situation, based on the client’s circumstances, needs, and the broader ethical, regulatory and legislative context. This responsibility cannot be delegated or outsourced.
While guidance (including this document), client instructions, licensee and employer requirements may inform the adviser’s thinking, they should not be followed blindly. The adviser must critically evaluate these factors and determine whether they align with the client’s best interests and the adviser’s professional obligations. The exercise of judgement must be thoughtful, ethical, and defensible.
Professional judgement is not optional – it is a core obligation. It enables the adviser to navigate complexity, balance competing priorities, and deliver advice that is both appropriate and principled.
Selecting the appropriate source of advice
Principle
Financial advisers must clearly define and document the scope of advice, ensuring it aligns with the client’s needs, complies with legal and ethical standards, and that the client understands its limitations and implications. In doing so, advisers must assess whether the scoped advice will meet the client’s best interests—even if this requires challenging or refining the client’s articulated priorities.
Explanation
Defining the scope of financial advice is a foundational step in the adviser-client relationship, as it is key to the agreement between the adviser and the client as to what is being provided as part of their relationship.
It is crucial that the scope of advice meets the clients’ needs and aligns with their best interests.
This scope must be documented and communicated clearly, ensuring that, where there is an intention to provide scaled advice, the client understands that some matters will not be included in the advice, what will be included and excluded, and the potential implications of not addressing the excluded matters.
Importantly, advisers must not simply accept the client’s stated priorities at face value. They are obliged to assess whether limiting the scope of advice will genuinely serve the client’s best interests, which may involve challenging the client’s assumptions or preferences.
It is the adviser’s obligation to inform the client of the relevant considerations and significant risks of excluding an area or areas of advice and ensure that the client has sufficient understanding to provide their informed consent.
Advisers should keep the scope of advice under review as the advice process progresses. If new information comes to light or circumstances change, advisers should be ready to adapt the scope of the advice they are providing.
Even when advice is limited in scope, advisers must still meet all regulatory obligations, including the best interest duty and the ethical standards set by the Financial Planners and Advisers Code of Ethics 2019. This means the advice must be appropriate, not misleading, and based on a reasonable investigation of the client’s circumstances. Advisers must also disclose any limitations that could materially affect the client’s decisions, ensuring transparency and accountability throughout the advice process.
Complete and accurate record keeping
Principle
Financial advisers must maintain complete and accurate records of how an Outcome has been achieved, including the actions taken to achieve it, setting out their reasoning as appropriate.
Explanation
Record keeping is fundamental to good practice. In addition to being a regulated outcome, accurate records provide the evidence base for the professional’s decisions and support transparency, accountability, and continuity of care.
Good records demonstrate how professional judgement was applied and enable the adviser to show the rationale behind specific actions. This is especially important when advice is reviewed, challenged, or audited. Quality record keeping also supports collaboration and protects both the client and the adviser by diminishing the risk of any misunderstandings.
Just as professional judgement is key to applying the principles, understanding how that judgement was exercised in a given situation is crucial to evaluating whether a particular action was appropriate.
Client communication
Principle
Financial Advisers must communicate with clients in a manner that is appropriate, tailored, and sufficient to enable informed decision-making.
Explanation
Effective communication is central to building trust and achieving good outcomes.
As well as setting out the advice, advisers must inform and educate their clients, manage client expectations, keep clients adequately informed and ensure that clients understand the roles that both adviser and client will fulfill. However advisers must balance this with ensuring that they do not over-communicate, obscure or confuse relevant matters or overwhelm the client’s capacity to engage and comprehend.
An adviser must be aware of the factors which may impact on how they communicate with their clients, including cultural background, language, financial literacy, prior experience with advice, personal values, health or disability, vulnerability etc, and must tailor their communication accordingly. Additionally, advisers must take into account the client’s preferences as to the medium by which communication takes place.
Communication should be ongoing and responsive to changes in the client’s situation.
Crucially, advisers must communicate in a way that enables the client to sufficiently understand what services and advice is being provided, and what that advice entails, so that they can give their informed consent to proceed.
Managing conflicts of interest
Principle
Financial Advisers must identify situations that involve a conflict of interest or duty, and approach these in a way that meets the obligation to act in a client’s best interest, but also the obligation to act within the law and regulation, declining to act where it is not possible to do so.
Explanation
The Financial Planners and Advisers Code of Ethics 2019 (often referred to as the “FASEA Code”) Standard 3 states that “You must not advise, refer or act in any manner where you have a conflict of interest or duty”.
ASICs Regulatory Guide 181 – AFS licensing: managing conflicts of interest provides important context and guidance for AFS licensees and their representatives. Financial advisers must be able to identify whether a situation places them in a conflict of interest or duty and exercise professional judgement appropriately to decide what action needs to be taken. As part of their assessment process, financial advisers must be able to identify whether a situation is such as to create a “real and sensible possibility that the conflict will sway” their judgement or actions1, taking a “common sense approach”2 to conflict identification.
There is an inconsistency between the position taken by the Financial Planners and Advisers Code of Ethics and the position taken by RG 181 in terms of the capacity to manage conflicts of interest and duty. It is the FAAA’s view that it is not possible to advise whilst avoiding all conflicts. Therefore, it is the FAAA’s view that where a conflict is identified financial advisers should go on to establish whether the conflict is one that can be managed – and if so how – or if it is one which must be avoided.
The best interests duty
Principle
Financial Advisers must act in the best interests of their client, their community and the profession.
Explanation
The Corporations Act 2001 defines an advisers best interest duty to their client under section 961B. This section also sets out a number of steps (known as the safe harbour steps) that – if followed – should enable an adviser to demonstrate that they have fulfilled their legal duty to act in a client’s best interest. ASIC provides explanatory guidance regarding its interpretation of the legislated duty under Regulatory Guide 175 AFS licensing: Financial Product Advisers, Conduct and Disclosure.
However, the duty to act in a client’s best interest does not just originate from the law. It is a fundamental aspect of a professional’s duty to their clients.
It requires that the adviser form a proper understanding of their client and their client’s circumstances, needs and goals, considers how best to meet these needs and advises accordingly; and uses their understanding of the client to give due consideration to the clients’ wider circumstances and the potential downstream impacts of any advice.
When advising the client, the adviser should reasonably believe that implementing the advice will result in the client being in a better position than if they had not been advised. The advice provided should be appropriate for the client based on their needs and circumstances.
The Corporations Act 2001 section 961G codifies the requirement that the advice be appropriate to the client.
The nature of a client’s needs, and the advice that should be given to satisfy those needs, are necessarily subjective. Depending on the circumstances, it is entirely possible for two different advisers to recommend different strategies for meeting a client’s needs, and for both to satisfy their duty to act in the client’s best interest.
The best test to determine if a client’s needs have been properly identified and whether the advice provided is appropriate to meet those needs is whether a hypothetical adviser, with appropriate levels of knowledge and skills, and exercising due care, would agree that the client’s needs have been appropriately identified and that the advice is appropriate to meet those needs. This “reasonable adviser” test is also codified by the Corporations Act 2001, section 961E. However, as with the other legislated concepts highlighted in this section, the test’s origin lies in financial advisers’ status as professionals, as well as in legislation.
There is also a duty to prioritise the client’s interest over that of the adviser, their employer, licensee, or any other related entity. This is addressed in the Corporations Act 2001 under section 961J and in legislation it is treated as distinct from the legislative best interest duty defined by section 961B. However, both duties are part of the wider duty to the client that originate from an adviser’s status as a professional.
Certain circumstances may mean that, were the adviser to provide advice, it would not be possible to do so in a way that fulfilled the best interest of their client. These circumstances may include (but are not limited to) the nature of the instructions provided by the client, issues in obtaining the relevant information needed to form a proper understanding of the client and their circumstances, a lack of relevant knowledge or expertise on the part of the adviser, or inhibiting factors arising from the adviser’s employment or authorisation. Notwithstanding the nature of the circumstances preventing the adviser from acting in their client’s best interest, where it is not possible for the adviser to act in their client’s best interest, the adviser should decline the engagement to act for the client.
Acting only where it is appropriate to do so
Principle
An adviser should apply their professional judgement and identify situations where it is not possible to act in a manner that is ethical, or in line with regulatory or legislative requirements. In those situations, the adviser should refuse to act.
Explanation
There are circumstances where an adviser may encounter conflicts between ethical obligations, regulatory requirements, or legislative standards. In such cases, it is not enough to simply attempt to manage or mitigate these conflicts; the adviser must critically assess whether it is possible to act in a way that is both ethical and compliant. If, after careful consideration, the adviser determines that any action would compromise ethical standards or breach regulatory or legislative requirements, the only responsible course is to refuse to act.
Advisers should also consider their own strengths and limitations in serving a client’s unique needs. There may be situations where an adviser determines that they are not the right fit for a client —perhaps due to the nature or complexity of the client’s circumstances, specific vulnerabilities, the adviser’s own expertise and capacity, or simply because of a clash of values or personalities.
This approach protects the integrity of the profession, ensures that clients are not exposed to inappropriate or unlawful advice, and upholds public trust in financial advice. Refusing to act in such situations is not a failure of service, but rather a demonstration of professional responsibility and commitment to the highest standards of practice. Advisers should document their reasoning and communicate transparently with clients about the limitations and rationale for their decision, ensuring that all parties understand the importance of ethical boundaries.
Supporting Behaviours
This section sets out behaviours that support the delivery of good financial advice outcomes. The behaviours differ from the unifying principles in the previous section in so far as they are tools that assist the financial adviser to achieve high standards, not ethical principles in themselves.
As with all aspects of this guidance, the extent to which these behaviours would apply in any given scenario is a matter to which the individual adviser should apply their own professional judgement:
1. Establishing rapport
2. Ask open questions
3. Encouraging client questions
4. Checking in frequently and keeping the client informed
5. Tailoring explanations to the client
6. Tailoring language to the client
7. Demonstrate empathy and patience
8. Set realistic expectations
The FAAA Principles of Good Professional Practice booklet is also available to download.
3 FPSB Standards 1, 2, 3
4 Div 2 of Pt7.7A(a),(c) of the Corporations Act; s961J(1); AML/CTF Act 2006
5 s961B(2)(b)(i); RG 244.65; FPSB Standard 6
6 FPSB Standard 3
7 FPSB Standard 6, 11
8 s961J(1); RG 181
9 RG 244.68; RG 244.81
10 s961B(2)(d)
11 RG 244D
12 FASEA Code of Ethics Standards 4, 5c, 7