ASIC expects AFS licensees to systematically identify common conflicts of interest arising from remuneration structures, in-house or related-party products, volume-based incentives, adviser personal interests, and competing client duties. These conflicts must be identified across all business activities where there is a risk that advice outcomes could be influenced to the detriment of clients.
Expanded Answer
ASIC’s guidance in RG 181 and general licensee obligations under the Corporations Act indicate that conflicts of interest are broad and often structural. AFS licensees are expected to identify conflicts not only at the adviser level, but across business models, ownership structures, and remuneration frameworks. Common categories include financial incentives that may influence advice, relationships with product issuers, and situations where competing duties or loyalties arise.
In practice, this requires a structured identification process embedded within compliance systems. Remuneration conflicts may arise from commissions, bonuses, or performance-based incentives linked to product sales or revenue. Product conflicts commonly occur where advisers recommend in-house or related-party products. Personal conflicts include adviser ownership interests, external directorships, or close relationships that may influence recommendations. Duty-based conflicts arise when advisers act for multiple clients with competing interests, or when the licensee’s commercial interests conflict with client outcomes.
Regulatory scrutiny increases where these conflicts are not systematically identified or are treated as isolated issues. ASIC expects AFS licensees to demonstrate that conflict identification is comprehensive, regularly reviewed, and integrated into advice processes and governance frameworks. Failure to do so is a common weakness in AFSL applications and ongoing surveillance.
Why it matters
Failure to identify common conflict types exposes AFS licensees to breaches of general obligations and undermines the effectiveness of all downstream controls. ASIC enforcement frequently focuses on systemic conflicts, particularly those linked to remuneration and related-party products, where client detriment risk is highest.
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Practical guidance
- Map all remuneration, product, and ownership structures to identify potential influence on advice
- Document adviser personal interests, external roles, and relationships within compliance systems
- Review client engagement models to identify and manage competing duties or conflicts between clients
Further reading