ASIC expects AFS licensees to evidence “reasonable steps” through contemporaneous records showing how client objectives were identified, relevant circumstances were investigated, and recommendations were formulated. This includes fact-finds, file notes, strategy comparisons, and documented reasoning linking the advice to the client’s needs.
Expanded Answer
ASIC’s interpretation of “reasonable steps” focuses on whether the advice process can be reconstructed and understood by a third party. This requires clear documentation of how the adviser identified the client’s objectives, financial situation, and needs, and what inquiries were made to ensure the information was complete and relevant. Records must demonstrate that the adviser actively engaged with the client’s circumstances rather than relying on assumptions or generic inputs.
In practice, this includes detailed fact-finds, file notes of client discussions, records of alternative strategies considered, and documented reasoning for the final recommendation. ASIC expects to see how the adviser filtered relevant information, why certain strategies were selected or rejected, and how the advice aligns with the client’s goals. The focus is on the decision-making process, not just the final advice document.
Regulatory scrutiny increases where files lack evidence of inquiry, rely on templated language, or do not clearly show how the adviser moved from client information to a recommendation. Practical expectations are outlined in A practical guide to high-level file reviews for licensees and advisers and Info 292: clear, captured and client-centric.
Why it matters
Failure to evidence reasonable steps can lead to findings that best interests obligations were not met, even where the advice outcome appears appropriate. This increases exposure to remediation, AFCA disputes, and ASIC enforcement.
Practical guidance
- Maintain detailed fact-finds and file notes that demonstrate active inquiry into client circumstances
- Document alternative strategies considered and clearly record why recommendations were selected
- Ensure the file shows a logical link between client information, analysis, and final advice
Further reading
Documenting the strategy and selection process