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

A client's fact find says he is 'in good health', but in the meeting he mentions monthly chemotherapy. He wants advice on income protection insurance. Which step does the best interests duty MOST require?

A Making reasonable inquiries to resolve the inconsistency before advising
B Relying on the signed fact find: it is the client's written statement
C Recommending a policy and leaving disclosure of the illness to the client
D Adding a general advice warning and continuing with the recommendation

Show the answer and explanation

Answer: A. Making reasonable inquiries to resolve the inconsistency before advising

Section 961B(2)(c) of the Corporations Act 2001 (compilation 19 Sep 2026) requires reasonable inquiries where it is reasonably apparent that information about relevant circumstances is incomplete or inaccurate; s961C defines 'reasonably apparent' as apparent to a provider with a reasonable level of expertise exercising care. A current illness is critical to insurance advice (eligibility, exclusions and the duty to take reasonable care not to misrepresent). A general advice warning has no place in personal advice.

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.