How should advisers act when the rules don’t help?

The hardest decisions in advice don’t involve breaches. They involve judgment.

Not the kind you can tie neatly to a section of the Corporations Act 2001 (Cth) or the FASEA Code of Ethics. The kind where obligations conflict, the information is incomplete, and commercial pressure is real. The kind where there is no obvious right answer—only choices and consequences.

These are the moments when advisers and licensees operate beyond regulatory boundaries, where black-letter law runs out and ethical reasoning begins.

And in a profession that too often reduces compliance to forms and procedures, it’s these decisions that expose the quality of a licensee’s culture and the maturity of its leadership.

What does the law miss—and ethics add—in advice?

Most compliance frameworks are written for ideal conditions: full disclosure, rational clients, perfect documentation, and zero conflicts. But the real world is less cooperative (unfortunately).

What happens when a client insists on a strategy that doesn’t breach the law but makes you uncomfortable? Or when a product is technically on your APL but clearly not in the client’s best interest? Or when consent has been obtained, but the client has no real understanding of what they’ve agreed to?

These are not policy questions. They are ethical ones. And the law offers limited help.

ASIC’s Regulatory Guide 175 and the Corporations Act’s best interest duty give you a framework. The FASEA Code of Ethics, particularly Standards 2 and 5, points you toward informed consent and the primacy of client understanding. Yet, when the moment comes, advisers still must interpret these principles in context.

The law tells you what not to do. Ethics asks what you should do. The law defines breaches. Ethics examines purpose. The difference determines whether a file is merely compliant or truly defensible.

How can leaders make ethical reasoning visible in files?

Ethics in financial services is not a poster in reception or a mandatory CPD module, but a leadership behaviour.

It shows in how decisions are made when rules are unclear, in how advisers respond to grey areas, and in how licensees back or abandon them.

To make ethical reasoning visible and auditable, leaders should:

• Require a short Ethical Reasoning Note in each case file outlining key facts, options, client interests, and reasons for chosen advice. This might be something already included in documents like the SOA, but approaching the task from the perspective of Ethical Reasoning and explicitly encouraging the practice is a great idea.
• Encourage advisers to record why alternatives were rejected, linking to Code Standard 7 (conflicts of interest).
• Ensure that review templates include prompts such as “Was this decision in the client’s informed best interest?”
• Recognise and share case examples of good judgment during compliance meetings.

Visible ethical reasoning builds trust between advisers, Responsible Managers and auditors—and creates defensible records.

When is consent “compliant but indefensible”?

Consider a familiar situation.

A client gives written consent to ongoing fees. The form is signed. Disclosure is made. ASIC’s INFO 256 (old RG 245) and INFO 286 guidance is followed.

But the client clearly doesn’t understand what they’re paying for. They agree out of habit or trust, not comprehension.

The letter of the law is satisfied. The Code may technically be met. But Standard 5 requires that the client understand the advice, and Standard 4 demands informed consent.

So, is the adviser acting in the client’s best interest? Is the client really informed? Is this defensible?

The best licensees don’t hide behind paperwork. They look at substance: Did the adviser explain it clearly? Did the client genuinely understand? Was the consent meaningful, or just compliant?

That is the ethical standard. And increasingly, it is the professional one.

What practical tools help in grey areas?

If you want your team to make defensible decisions when it matters, give them the tools:

• Ethical Decision Framework – A simple set of questions integrated into SOA templates: What is the client’s interest? What are the risks? What are the alternatives? Why is this the best choice?
• Case Study Workshops – Use real, anonymised cases to test reasoning, not just compliance. Encourage debate and reflection.
• Safe Escalation Channels – Establish anonymous or non-punitive reporting paths for ethical concerns. Document escalations and resolutions.
• Ethics Logs in Audit – Incorporate reflective questions into audit reports: Was the advice right as well as compliant?

Ethics can’t be trained once; it must be practised, discussed, and embedded into every compliance review. For further guidance, see Assured Support resources such as Standard 5: Best interests and appropriateness, FASEA Standard 8, or the Intent, Process and Outcome: Assessing Best Interests framework for case examples and templates.

At the Edge, Integrity Is the Only Guide

Most clients won’t remember the form they signed. They’ll remember how you made the decision that affected them.

When the law is silent and the risk is unclear, integrity is your only guide. If your firm cannot support that, it is not prepared for the environment advisers now face.

Build a culture that encourages ethical thinking, backed by systems that record, support and challenge it.

Because the decisions that define your licensee won’t be the ones that made you money, they’ll be the ones where you could have, but chose not to.

At the edge of the map, culture carries the compass. Put ethical reasoning on the record, and your file will speak when you can’t.

For tailored advice on how to improve your files and advice, contact Assured Support.

If you enjoyed this article, you might also like:

• Understanding Client Suitability: Beyond Standard 5
• A Practical Guide to High-Level File Reviews for Licensees and Advisers
• Intent, Process and Outcome: Assessing Best Interests

Frequently Asked Questions

What’s the difference between law and ethics in advice?

Law sets minimums and prohibitions; ethics guides what you should do when obligations conflict or facts are incomplete. Ethical reasoning makes files “defensible”, not just “compliant”.

What should I cite when documenting best interests?

Reference the Code of Ethics (Standards 2, 5, 6, 7), Corporations Act Pt 7.7/7.7A, and ASIC RG 175 for conduct/disclosure context. Link your SOA/ROA sections to these references.

Is RG 245 still current for fee statements?

No. RG 245 is withdrawn. Use ASIC’s information sheets and updated guidance (INFO 286/287; ongoing-fee FAQs) reflecting DBFO Act reforms from 10 Jan 2025.

How do I evidence “informed consent”?

Record the explanation given, client’s paraphrase of understanding, alternatives, costs/benefits, and renewal/opt-out steps. Attach the signed consent and cross-reference the SOA/ROA.

What belongs in an Ethical Reasoning note?

Summarise key facts, client interests, options considered, reasons for the chosen path, rejected alternatives, and conflict management (Std 7). Use prompts in review templates.