ASIC financial adviser exam, Applying the best interests duty in practice question: advice on income protection insurance

ASIC examApplying the best interests duty in practice

Callum, 47, a self-employed electrician, ticked 'in good health' on his fact find. In his first meeting with his adviser, Bronwyn, he mentions that he has chemotherapy once a month. He wants advice on income protection insurance. Before advising, the best interests duty requires Bronwyn to…

A make reasonable inquiries to resolve the inconsistency in his health information
B rely on the signed fact find: it is Callum's own written statement
C recommend a policy and leave disclosure of his illness to Callum and the insurer
D add a general advice warning to her advice and continue with the recommendation

Show the answer and explanation

Answer: A. make reasonable inquiries to resolve the inconsistency in his health information

Section 961B(2)(c) of the Corporations Act 2001 (compilation 19 Sep 2026) requires reasonable inquiries where it is reasonably apparent that information about the client's relevant circumstances is incomplete or inaccurate, and s961C measures that against a provider with reasonable expertise exercising care. Monthly chemotherapy contradicts the fact find and goes to the heart of income protection advice: eligibility, exclusions and Callum's duty to take reasonable care not to misrepresent his health to the insurer. A signed fact find does not outweigh what the client says in the room. Leaving disclosure to Callum ignores a fact Bronwyn already knows. A general advice warning belongs to general advice, and even a s961H warning about incomplete information would not replace the inquiries (s961H(5)).

Common mistake

A signed fact find does not override what the client says in the room.

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Original practice material mapped to the learning outcomes in ASIC's exam guidance. Independent, not affiliated with or endorsed by ASIC. Verify figures and rules against current guidance before relying on them.