The Best Interest Duty (s 961B) and the Safe Harbour Steps, Explained for the Exam

9 min read · facts checked 29 Oct 2026

As at 29 October 2026, s 961B(1) of the Corporations Act requires anyone giving personal advice to a retail client to act in the best interests of the client in relation to the advice, and s 961B(2) lists seven steps, the safe harbour, that satisfy the duty if the adviser can prove them (Compilation No. 149, 19 September 2026). Three related duties sit beside it in Part 7.7A, Division 2: appropriate advice, a warning for incomplete information, and priority to the client's interests.

The best interest duty in one minute

• Who it binds: the individual who gives personal advice to a retail client (the provider). It does not apply to general advice or to advice to wholesale clients (Part 7.7A, Division 2, s 961).
• What it requires: act in the client's best interests in relation to the advice (s 961B(1)). The Act calls it the duty to act in the best interests of the client; it is usually shortened to the best interests duty, and often searched as the best interest duty.
• How to show it: prove the seven safe harbour steps in s 961B(2), set out below.
• What sits beside it: appropriate advice (s 961G), a warning when information is incomplete (s 961H) and priority to the client's interests (s 961J).
• Since when: the duty came in with the Future of Financial Advice (FOFA) reforms and has been mandatory since 1 July 2013.

The four duties in Division 2

The seven safe harbour steps

One way to comply, not the only way

ASIC's RG 175 (November 2024) says showing every safe harbour step is one way to satisfy the duty, not the only way, but that advisers must take those steps or others that produce at least the same standard of advice. If even one step cannot be shown, the safe harbour is not available (RG 175.188). ASIC also expects the process to leave a reasonable adviser believing the client is likely to be in a better position by following the advice (RG 175.180).

Scaled advice

The note to s 961B(2) anticipates that a client may seek scaled advice on a narrow subject. ASIC's RG 244 explains how to scope it (see our RG 244 guide). The scope can be limited, but the adviser still has to identify the circumstances relevant to that scope and make inquiries where something is reasonably apparent. Scoping out a fact that plainly affects the advice is the trap the exam sets.

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Where the duty is lighter

• For advice on a general insurance product, only steps (a) to (c) apply (s 961B(4)), and the priority rule does not apply to that advice (s 961J(3)).
• The same lighter test applies to advice from bank staff that relates only to basic banking products, general insurance and consumer credit insurance (s 961B(3)).

Who is liable

The duties sit on the individual provider, but the licensee contravenes a civil penalty provision if it, or a representative other than an authorised representative, breaches ss 961B, 961G, 961H or 961J (s 961K), and must take reasonable steps to make sure its representatives comply (s 961L). A client who suffers loss can be compensated by court order (s 961M).

How the Code of Ethics goes further

Code Standard 2 adds integrity, and Standard 5 requires reasonable grounds to be satisfied that the client understands the advice and the benefits, costs and risks of the products. Standard 6 asks you to consider the client's broader, long-term interests, even when the advice is scaled. The Code of Ethics guide sets out all 12 standards.

Traps the exam sets

• "The client limited the scope, so the adviser can ignore it." Only if the fact is not relevant to the subject matter.
• "The adviser must research every product." No: a reasonable investigation does not require every product (s 961D(1)).
• "The warning fixes missing information." No: the s 961H warning does not replace the duty to make reasonable inquiries (s 961H(5)).
• "Disclosure resolves the conflict." Disclosure is required, but s 961J still demands priority to the client, and Code Standard 3 may rule out acting at all.
• "Following the steps proves the advice was good." The advice must also be appropriate (s 961G).

Quick check

Original example: Aaron, 34, asks his adviser only about income protection insurance. He mentions that he plans to stop work for a year to study. Which step does that fact engage? Step (b): his plan bears directly on the cover he needs and whether he can keep paying for it, so it is part of his relevant circumstances, and under step (c) the adviser should ask about it before recommending cover.

Our study notes cover best interests and remuneration and best interests in practice. Then try the duty on whole client files. Our free financial adviser practice exam is a timed mock of 20 original questions in 30 minutes across all three areas, mostly on client scenarios. You can try 5 questions with no sign-up, each marked with a worked answer; the full timed mock needs a free account.