Previously, we’ve addressed aspects of the advice process including Goals and Objectives and File Notes, but with ASIC’s recent focus on vertical integration (Report 562), we thought we’d discuss the perennial issue of alternate strategies.
In my experience, many advisers struggle with identifying and articulating strategies. It’s hard to generalise why but many often struggle because they only start to consider alternatives after they’ve formed their recommendation.
Cynics might suggest that alternative strategies, in these cases, are only included to make the advisers’ recommendation appear more considered, less biased and more reasonable.
I don’t believe that was the intent of the legislation, but have you ever wondered why advisers need to ‘waste time’ thinking about and recording strategies and products that are inferior to what they recommended?
Alternative strategies are not just a technical compliance exercise.
They are evidence of reasoning.
When ASIC, AFCA, or a file reviewer assesses advice, the question is rarely whether every conceivable option was discussed. The question is whether the adviser considered reasonable alternatives relevant to the client’s circumstances and can explain why the recommended strategy was more appropriate.
That distinction matters.
Because advice failures often emerge not from the recommendation itself, but from an inability to demonstrate the thinking behind it.
Brakes, mirrors or air-bags?
Sean Graham, the Managing Director of Assured Support, argues that there are three ways advisers can see their obligation to consider ‘alternate strategies’:
1. It slows down the adviser’s drive towards a (potentially inappropriate) recommendation (“brakes”). The obligation doesn’t require you, as the adviser, to change your recommendation but it does require you to pause and consider the other options before you proceed;
2. It demands that the adviser consider the recommendation they’re about to offer and reflect on the appropriateness and suitability of the recommendation and viable alternatives. (“mirrors”); and
3. It adds depth to the recommendation and provides consumers with detailed information of all the strategies and products the adviser could have recommended with the aim of protecting the adviser/licensee (“air-bags”). This type of padding is often used to legitimise a pre-determined recommendation, or when materially inadequate alternatives are presented, to validate the recommendation. ‘Cookie-cutter’ advice models tend to trivialise the need for alternatives or, more commonly, rely on mandated disclosure of often irrelevant, impractical or impossible alternatives. Self-insurance anyone?
As a former adviser, I agree with Sean’s metaphors of brakes and mirrors but, I’m sure that none of the SoA’s I provided ever contained ‘padding’. (In fact, the 90+ page documents that were prepared by the centralised paraplanning unit from lock-down templates, were in retrospect ‘clear, concise, and affective’. And I’d say that even if there wasn’t a Royal Commission into Banking).
Considering alternatives is never a waste of time. The simple truth is that the consideration of alternatives is a fundamental part of a professional advice process.
Why?
It helps to prove your advice is in the best interests of your client and that you have prioritised their interests over expediency.
Editor’s Note (2026 Update)
This article was originally published in 2018. The core principles remain relevant, however regulatory expectations following the Royal Commission have increased focus on demonstrable reasoning, appropriate advice, conflicts management, supervision, and evidencing why recommended strategies are suitable in light of reasonable alternatives.
Qualifying the duty
Importantly, advisers are not generally required to present every available product or strategy to a client.
The obligation is not an exhaustive comparison.
The obligation is to provide advice that is appropriate to the client’s relevant circumstances and supported by reasonable investigation and professional judgement.
In practice, that means the file should demonstrate:
• what alternatives were considered
• why they were unsuitable or less appropriate
• why the recommended strategy is better aligned with the client’s objectives, needs, and circumstances
The quality of the reasoning matters more than the quantity of options presented.
The continuing obligation
The advice process itself should be seen as a series of considered, tested and validated (or discarded) strategies that are likely to deliver the client’s desired outcomes. Regularly (and competently) considering alternatives not only improves the quality of the advice that is being given, it also combats the view that financial advice is synonymous with ‘churning’ and ‘product flogging’.
An agent selling a single product has no interest in alerting a prospective buyer to better alternatives, but an objective and professional adviser understands the importance of informed consent in building a sustainable and profitable business.
Mixed messages
Those of you that have read RG90 would have noted that ASIC’s example SoA did not include any alternate strategies. I appreciate that it was not an oversight and that they were consciously omitted, but personally, I think ASIC missed a perfect opportunity to guide the industry to better practices. I appreciate that their previous endorsement that “the document should…clearly state the alternative products or strategies that were considered in reaching the recommendation and why the recommendation is appropriate in light of the alternatives considered.”
So, ASIC consider ‘alternative strategies’ are both explanation and demonstration. Focused on relevancy and clarity, ASIC appreciate that this obligation should improve advice outcomes. ASIC approach the obligation from a principle-based perspective and allow Providers the flexibility to decide the appropriate approach.
The FPA, in contrast, have released a document titled Taking Other Steps to provide assistance for advisers to better manage their advice process and, address alternate strategies and products at different stages of the advice journey.
Dante De Gori, CEO of the FPA, has previously said that the FPA’s minimum expectation for compliance with the Best Interests requirements is:
1. Maintaining current strategy/product (ie: change nothing)
2. The new, and recommended strategy/product
3. An alternative but not recommended strategy/product
True Alternatives
“Those are not alternatives in any meaningful sense…A true alternative was necessarily an alternative within the scope of the advice (the adviser) had been retained to provide”
— Commonwealth Financial Planning Limited v Couper [2013] NSWCA 444. at 25
Section 961B of the Corporations Act requires the adviser to consider a range of strategies and products and to conduct a reasonable investigation into any financial products that are to be recommended and when dealing with replacement advice and this reasonable investigation includes any existing products.
Prior to researching and considering any additional or alternative products, the adviser needs to determine whether the recommended strategy can be implemented within the existing product. Only then should the additional research be done, and further consideration being given as to whether there is a better way of meeting client goals. It is also very important to note that any findings need to be documented and if there is to be a replacement, outline the specific reasons as to why it does not meet the client’s goals and objectives.
Another key area in these considerations is relevancy. The second last step of the best interests duty requires that all judgments are to be based on circumstances, so the alternate strategy should be relevant to the situation.
Documenting choices and strategies
Documentation remains critically important, but poor documentation and inappropriate advice are not always the same thing.
A file may contain deficiencies in articulation, evidence, or record keeping while the underlying advice remains substantively appropriate to the client’s circumstances.
The practical problem is evidentiary.
If the reasoning cannot be demonstrated, the adviser and licensee may struggle to prove that the advice process met legal and AFSL obligations.
Addressing Conflicts
This is also where conflicts become relevant.
Where recommendations are shaped by remuneration structures, approved product limitations, related-party influences, or operational convenience, the adviser should be able to demonstrate why the recommendation remained appropriate for the client despite those influences.
Current regulatory thinking increasingly focuses on whether conflicts are genuinely managed in practice rather than merely disclosed.
Final thoughts on alternative strategies
Generally speaking, ‘self-insuring’ is not a viable or realistic alternative strategy for parents of school-age children paying off a mortgage with minimal savings.
When breaking down the documentation of the alternate strategy, focus on its structure so that your research and considerations can be adequately explained.
When constructing and documenting, alternate strategies:
1. Always start with the client’s goals, basing all judgments on client circumstances
2. Outline What alternate strategies/products were considered
3. Explain why you considered it (Relevancy – relate back to the client goals and objectives)
4. Explain how the alternate strategy/product does not meet the client needs (there should already be enough explanation as to why the recommended strategy/product is being recommended)
5. Provide the proof in the file for any statements that are being made.
In our article “Risk Advice and Advice Risk” we referred to Commonwealth Financial Planning v Couper [2013] NSWCA 444 and the Court of Appeal’s view of alternative strategies.
It’s a worthwhile read for any adviser and I endorse the author’s view that “advice must involve the objective consideration of alternatives”. Professionalism requires advisers both to consider real, meaningful and relevant alternatives as part of their advice process and to explicitly link those alternatives to the client’s needs and objectives.
The modern compliance question is not simply: ‘Did the adviser make a recommendation?’ It is: ‘Can the adviser demonstrate why this recommendation was more appropriate than the realistic alternatives available to this client?’
That is the difference between advice that merely exists on paper and advice that demonstrates professional judgement.
Embracing this obligation will not only minimise your compliance risk but significantly improve the quality of your advice.
Good advice isn’t proven by the recommendation alone.
It’s proven by the reasoning behind it.
If your advisers can explain why a strategy was recommended, but your files can’t demonstrate it clearly, you may have an advice quality, supervision, or evidentiary risk problem hiding in plain sight.
Assured Support helps licensees and advice businesses review advice quality beyond checklist compliance, including:
- alternative strategy reasoning
- best interests evidence
- thematic file review analysis
- supervision and monitoring frameworks
- conflicts and recommendation patterns
If you want to understand whether your advice process demonstrates genuine professional judgement, not just procedural completion, speak with Assured Support about an independent review framework.
If you enjoyed this, we recommend that you read:
Ineffective Compliance, Best Interests and Supervision
Conflicting Views: Identifying Interests and Influences
Frequently Asked Questions
Not necessarily. Advisers are generally not required to present every available strategy or product. The key issue is whether reasonable alternatives relevant to the client’s circumstances were considered and whether the recommended strategy can be justified as appropriate.
Alternative strategies help demonstrate professional judgement. They show the adviser considered different approaches before making a recommendation and help explain why the final strategy better aligned with the client’s objectives, needs, and circumstances.
Yes. Even where underlying advice is substantively appropriate, weak records and poor articulation can make it difficult to demonstrate compliance with best interests and appropriate advice obligations during reviews, disputes, or ASIC surveillance.
No. ASIC’s focus is generally on the quality of the advice process, the relevance of investigations undertaken, and whether the recommendation was appropriate for the client, not whether every market option was reviewed.
Effective monitoring goes beyond checklist reviews. Licensees should assess reasoning quality, consistency of recommendations, alternative strategy consideration, conflicts influences, and thematic patterns across advisers and client cohorts.
