In an industry rebuilding consumer trust after the Royal Commission, client consent is a vitally important factor in the advice process. It promotes transparency and a higher level of engagement for the client on their advice journey, and in the wake of the introduction of The Code of Ethics, we now face different and additional requirements.

Proper consent requires evidence:

• Just because you’re passionate and persuasive, and you’ve explained something to your client (who is nodding), a signed form will always be a better option.
• It’s also a legal requirement, both prior to the advice (Standard 4) and ongoing to receive fees and commissions (Standard 7 and S962G).

In addition to this, a new level of consent will be required as of 10^th July 2025, for advisers who receive insurance commissions, as part of the DBFO Act.

We’ll touch on this in this article, but we’ll address this in more detail in a coming edition of THT.

For now, ‘The B-52 Bomber’ Ben Moffatt (“The Bomber” 26-0-0) and Keith ‘Krippler’ Henderson (“Krippler” 22-2-1) will iron out some of the upcoming changes (and each other) and how they interact with duties and obligations. They have both provided their informed consent, and one of them is going to sleep either way.

You must think and move fast in financial services. Muhammad Ali, ‘The Greatest’, always said he floated like a butterfly. Well, advisers need to as well, so they don’t get stung by the bee.

It’s time…

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WARM UP SPARRING

I’m about to give you all of my money
And all I’m askin’ in return, honey
Is you obtain my consent

Aretha Franklin – Respect

‘Bomber’:

A question I often ask advisers is —if a client doesn’t understand the services, the advice they’ve been given (and the costs), and what benefits the adviser receives, how can they provide their informed consent?

In financial advice, consent isn’t a ‘box ticking exercise’ or a mere formality; it is the cornerstone of ethical conduct.

But what does consent really mean in this context?

To answer, we need to examine The Code – particularly Standards 4, 5 and 7. These Standards interact closely with obligations under the Corporations Act 2001 and together they create a framework, demanding transparency, understanding and respect for client autonomy.

Standard 4:

“You may act for a client only with the client’s free, prior and informed consent. If required in the case of an existing client, the consent should be obtained as soon as practicable after this Code commences.”

Standard 5:

“All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances.”

Standard 7:

“The client must give free, prior and informed consent to all benefits you and your principal will receive in connection with acting for the client, including any fees for services that may be charged. If required in the case of an existing client, the consent should be obtained as soon as practicable after this Code commences.

Except where expressly permitted by the Corporations Act 2001, you may not receive any benefits, in connection with acting for a client, that derive from a third party other than your principal.

You must satisfy yourself that any fees and charges that the client must pay to you or your principal, and any benefits that you or your principal receive, in connection with acting for the client are fair and reasonable and represent value for money for the client.”

Legal reinforcement of these Standards comes via s961B (advisers must act in the best interests of the client) and 99FA of the SIS Act (fees charged to members):

• S961B aligns with Standard 5, and 99FA aligns with written fee consent.

Broadly speaking, advisers sometimes miss the mark and can end up with a standing ‘8’ count, or on the canvas, if they:

• Assume silence equals consent (Standard 4):

• Unfortunately, if there’s no objection, this doesn’t necessarily mean it is implied consent. Consent must be active, not passive. Free, prior and informed means the client needs to understand what they’re reading and consenting to, such as the information provided in the FSG.

• Use overly technical or vague language (Standard 5):

• Providing advice that is overly technical or explanations that are vague/ambiguous may make it difficult for the client to understand the implications of the advice. In this scenario, consent cannot be informed.

• Failing to renew/update fee consents (Standard 7):

• Consent isn’t ‘set and forget’. Advisers need to renew their arrangements with clients and ensure fee consent is obtained annually. This is not only an issue with Standard 7, but also SIS Act (99FA).

• Fail to convey the limitations of scope (standard 5):

• As ASIC puts it in INFO 267, “We consider that limited advice will be unlikely to meet the best interests duty and related obligations if the client does not understand any of the significant limitations or qualifications that apply to it.”

‘Krippler’:

There are plenty of examples where the Financial Services and Credit Panel (FSCP) includes references to consent and to the Code of Ethics in its decisions. For example,

• A recent FSCP finding (17 Jun 2025, against “Mr V”) found that the relevant provider, in relation to Standard 7, “…did not obtain the clients’ free, prior and informed consent to all relevant remuneration arrangements by failing to disclose the benefits that the relevant provider and their associates would receive as a result of the clients’ investment in the recommended financial product”.

Obtaining consent is nuanced and requirements do change over time:

• For example, as part of the new consent requirements for life risk insurance that apply from 09 Jul 2025, advisers must disclose “the nature of the services that you will provide to the client in relation to the relevant product (if any)”, and that “the client’s consent, once provided, is irrevocable” (ASIC INFO 292).

This raises some interesting points, particularly for the initial part of the advice process:

• How much detail should advisers give about the services they will provide (if any)?
• Will the services merely be an “offer” of a service (e.g. an annual review), or will the adviser commit to providing any services?
• What happens if, upon presentation of a Statement of Advice, a client decides to withhold consent for commissions?

The legislation will require advisers who provide life risk advice to revisit their consent process – check out the B-52 Bomber’s recent article on the topic (he’s much less confrontational outside of the ring).

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ROUND 1: PUNCHING ON STANDARD 4

All we have to do now,
Is obtain free, prior (and) informed consent somehow,
All we have to see,
Is that I’m obligated to, prior to acting for thee

George Michael – Freedom

‘Krippler’:

FASEA Standard 4 required advisers to act “only with the client’s free, prior and informed consent.”

One area of client engagement that many advisers don’t get right is where the advice is being provided to two or more clients (e.g., a married couple or the members of an SMSF).

There are many labels or descriptions one can apply to describe different client dynamics:

• Primary client and secondary client,
• Lead decision-maker and supporting decision-maker,
• Engaged client and non-engaged client,
• Active participant and passive participant, or
• Spokesperson client and silent partner.

Regardless, all parties to the Terms of Agreement are legal clients under the Corporations Act, as they are receiving personal advice. The advice itself needs to be addressed to (and record the relevant circumstances) of each person or party.

Overlaid with this is the adviser’s best interest duty to ask sufficient questions and find out sufficient information to adequately scope the advice.

• This is challenging when one client may be more engaged than the other(s).

On another point, it is worth noting that the requirement to obtain consent does not cease after it has been obtained once:

• AFCA case number 900713 describes a determination against a financial firm that liquidated a portion of the clients’ assets (personally and in an SMSF) without obtaining consent.
• This was despite the longstanding relationship the adviser held with the clients, and “at least two attempts to contact the client”.
• AFCA referenced Standard 4 in this determination.

‘Bomber’:

Krippler is spot on here. Each entity/individual needs to provide consent prior to acting for them, no matter how familiar the adviser is with the client(s), or the type and amount of dealings in the past.

So, what are the better advisers doing to ensure obligations are met?

Set expectations early:

The better advisers set expectations at the outset and clearly explain their role, client obligations and set the scene, requesting active engagement. They let the clients know that they all need to be involved, and the adviser needs to understand their circumstances and objectives. Questions will be asked of all involved, which helps create a balanced dynamic from the start.

Joint and individual conversations.

Joint meetings are essential, but there may be times when the other person needs to be contacted to clarify or verify information provided. This is common when only the decision maker attends the meeting, but there is another partner/member to consider.

Better advisers contact the other person to uncover goals or concerns that may not have been voiced in the meeting. It allows the quieter/less involved person to express themselves and reduce the risk of influence.

Noticing red flags.

There may be times when one client consistently dominates discussions, interrupts the other client, or answers on their behalf. Better advisers notice this and take active steps to ensure equal involvement and engagement.

They pause, or slow down the advice process, and direct questions specifically to the other person. They also include in the notes their assessment of the situation and their concerns. This helps support the decision to continue with the advice process, because there may be times when it isn’t appropriate to provide joint advice if the situation can’t be managed properly.

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ROUND 2: KICKING INTO STANDARD 5

Plans are worthless, but planning is everything

Dwight D. Eisenhower, 34th President of the United States

‘Bomber’:

Standard 5 is about understanding the person behind the advice and their unique circumstances, and providing advice that truly suits them. The challenges some advisers face is getting behind the circumstances and objectives to uncover the drivers. What makes the client tick?

Sometimes all is needed is a few more questions, other times and full-blown therapy session. It’s important that advisers actively engage with the client to better understand their:

1. Values and preferences.
2. Risk tolerance, understanding and capacity.
3. Circumstances (now and expected changes).
4. Personal and financial goals.
5. Emotional drivers and beliefs.

Some of the better advisers spend extra time delving into these areas and build the advice around them. This is where they also avoid making assumptions. This can be problematic and may result in inappropriate advice that isn’t in the client’s best interest.

Getting it wrong:

Making assumptions. 

Investment philosophies are built by many businesses, and they create specific products and services for clients. This takes time and resources to execute and while this product or service may offer a solution for many clients, and the business firmly believes in the approach, it doesn’t necessarily mean it will suit everyone.

Too often we see advisers recommending products that might meet technical requirements but leave the client feeling like they don’t understand what’s happening, or that they haven’t had their objectives and preferences addressed.

Not giving the client time to digest.

Another common failure is rushing the advice process. Standard 5 requires that clients understand the advice they receive, including the benefits, costs, and risks. This understanding cannot occur if clients are pressured to make decisions on the spot.

There are instances where clients are given advice and asked to agree to implement it during the same meeting. This is appropriate in some circumstances, but there needs to be a robust conversation, and this is where some advisers get it wrong. This practice undermines the client’s ability to make an informed decision and fails to meet the ethical requirement of ensuring the client understands the advice.

Confusing or unclear fee structures.

Standard 5 interacts with Standard 7 in some areas, as Standard requires that the client understands the benefits, costs and risks. Standard 7 requires that the client provide informed consent for the fees being charged.

In both cases, this is difficult to satisfy if the fees are unclear or poorly disclosed in the advice document.

An engaging advice process and clear disclosures are key here, and some advisers don’t always get this part right.

‘Krippler’:

Process Wins

In demonstrating consent, the onus is very much on the process. If an adviser can demonstrate a repeated, systematic approach, this gives clients a reference point and will protect an adviser from claims more effectively than simply stating “I’ve known and advised Mr & Mrs Smith for 20 years”. The AFCA case I discussed above is ample proof that this latter approach is not a strong defence.

We now see many advisers who ensure there are multiple demonstrated touchpoints with clients during the advice process, for example:

• Engagement email (clearly setting expectations and limitations),
• Pre-advice strategy email (ensuring each client is referenced and has a chance to respond),
• Advice email (containing the SoA, PDS links, etc.),
• Follow-up email (with personalised commentary about client reactions),
• Completion email (with personalised commentary about the process and outcomes).

For many advisers, the concern is that for long-term clients (e.g., annual review clients), this may be overkill. However, the above do not need to be “war and peace” emails; they can be brief and to the point, serving as useful reference points.

Why not Keep It Simple (stupid)?

Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.

Jack Bogle: founder of Vanguard

I cannot stress enough that when an adviser recommends a complex overall strategy in which the adviser and/or related parties to the adviser may benefit, demonstrating that relevant, simple, and affordable alternative strategies (where possible) have been considered is crucial.

Take the example:

• Recommendation is for an accumulator couple (middle-aged) to roll over super to an SMSF, invest in property via an LRBA, invest in managed funds via an investment wrap account, and apply for new insurance to cover personal and SMSF debt.

To demonstrate client consent for such recommendations, the adviser really needs to demonstrate that a client understands why a simpler alternative is not suitable or is less preferable:

• This needs to go beyond the “you trust property and want to invest in property” type of approach.
• If a complaint arises, the adviser needs to be able to demonstrate that all advised parties have had a genuine opportunity to understand and react to the advice.

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ROUND 3: CLINCHING STANDARD 7

Misconduct exploiting superannuation savings is an ASIC enforcement priority… Financial services licensees who employ advisers to provide personal financial advice need to ensure that they place their clients at the forefront.

ASIC Deputy Chair Sarah Court

‘Krippler’:

When you look at Standard 7, which states that “the client must give free, prior and informed consent to all benefits you and your principal will receive in connection with acting for the client,” this ties in closely with the scenario I raised above in relation to Standard 5.

When recommending a complex solution to a client, such as rolling over to an SMSF and then gearing into property and applying for insurance, potential conflicts of interest or client priority issues must be considered. For example:

• If there is a related-party accountant, mortgage broker, property service provider, or insurance adviser, and/or
• If the adviser is paid insurance commissions (on the increased risk resulting from increased debt).

The strategy is not easily reversible, so the adviser will potentially benefit for years to come, because the client is a “sticky client”.

Ongoing advice is therefore typically necessary, and the client will have many additional fees (e.g. accountancy, ongoing advice, insurance premiums) on an ongoing basis.

• The advice process needs to demonstrate that clients are aware of this reality: that fees will be heavy for the initial transactions, but will also continue on an ongoing basis.

‘Bomber’:

Meeting compliance obligations, especially under the Best Interests Duty (BID) and receiving fees/benefits, hinges on proper client consent. It ensures clients are fully aware of the services they’re receiving and the associated costs.

Standard 7 has two parts: Informed Consent and Fairness and Reasonableness of the fees.

In providing your advice, informed consent needs to be obtained, but the fees also need to be fair and reasonable and provide value.

This highlights the importance of ensuring the broader advice process is appropriate and, ultimately, in the best interests of the client.

So, how do advisers get this right?

• Maintaining written consent records, outlining agreed services and fees. Do this at the outset and highlight specific parts of the FSG when needed.
• Ensure clients fully understand what they’re agreeing to before signing. Provide education and explanations if required.

• Periodically review client consent agreements, renewing and updating when necessary.
• Confirm that fees match services rendered and that consent remains valid.

• Implement digital consent tools for secure (and easy) management.
• Automate reminders for consent renewals to avoid compliance lapses.

The takeaway? Strong consent practices don’t just mitigate compliance risk—they build trust.

For support building strong consent practices in your business, contact Assured Support today.

If you enjoyed this article, you might like:

• Standard 4: Free, informed and prior consent
• Standard 5: Best interests and appropriateness
• Standard 7: Reasonable fees
• INFO292 – Clear, captured and client-centric

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Frequently Asked Questions

1. What is “informed consent” in financial advice, and why does it matter?

Informed consent means clients understand, agree to, and are aware of the services, fees, and benefits involved before advice is provided. It underpins Standards 4, 5, and 7 of the Code of Ethics and reinforces trust and compliance.

2. What changes are coming to insurance commission consent in July 2025?

From 9 July 2025, advisers must obtain irrevocable client consent for insurance commissions, explicitly outlining the nature of services provided in relation to the product. These changes arise under the DBFO Act and are detailed in ASIC INFO 292.

3. How can advisers avoid breaching Standard 4 in joint client scenarios?

Advisers must obtain consent from all clients receiving personal advice, not just the primary decision-maker. This includes engaging passive participants and documenting efforts to confirm understanding and agreement.

4. What common missteps do advisers make under Standard 5?

Mistakes include using vague or technical language, rushing decisions, and failing to explore a client’s true objectives and preferences. These actions undermine the client’s understanding and the adviser’s best interest obligations.

5. How can advisers demonstrate compliance with Standard 7?

Maintain detailed, written consent records. Ensure fees are fair, reasonable, and represent value. Use clear disclosures, regular renewals, and digital consent tools to streamline compliance and enhance transparency.