ASIC financial adviser exam, Investment, debt and insurance advice strategies question: A$300,000 share portfolio from A$150,000

ASIC examInvestment, debt and insurance advice strategies

Callum, an authorised representative, recommends that his retail client Nadia, 50, build a A$300,000 share portfolio from A$150,000 of her own savings and a A$150,000 margin loan. His proposal sets his ongoing advice fee at 1% a year of the full A$300,000. Which statement about the fee proposal is correct?

A Retail clients may not be advised to gear unless they hold a wholesale certificate
B A 1% fee on the whole portfolio is allowed if Nadia consents to it in writing
C Asset-based fees are banned on a geared portfolio, even on Nadia's own A$150,000
D Charging an asset-based fee on the borrowed A$150,000 is banned

Show the answer and explanation

Answer: D. Charging an asset-based fee on the borrowed A$150,000 is banned

Section 964E of the Corporations Act 2001 (compilation 19 Sep 2026) bans an authorised representative charging an asset-based fee on a borrowed amount used to acquire financial products for a retail client, and s964D applies the same ban to the licensee. Callum can charge 1% on Nadia's own A$150,000, or a fixed fee, but not on the borrowed half. Written consent does not override the ban: the statute's own conditions decide. The ban reaches the borrowed amount, not the whole portfolio. Gearing advice to retail clients is permitted where it is in the client's best interests (s961B) and the margin loan is not unsuitable (s985H).

Common mistake

The ban targets fees that grow with the borrowing, not gearing itself.

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