Free ASIC Financial Adviser Practice Exam

ASIC administers the Australian Financial Adviser Exam and contracts the Australian Council for Educational Research (ACER) to develop and deliver it. The exam assesses practical application across regulatory and legal obligations, ethical and professional reasoning, and financial advice construction.

This free 70-question ASIC Financial Adviser Exam diagnostic uses the minimum question count specified by the current ASIC exam policy and includes original Finance Prep questions across the three official competency areas and 17 Finance Prep planning topics. Official forms may contain more than 70 questions.

These are original Finance Prep practice questions aligned to the current competency areas. They are not official ASIC financial adviser exam questions, copied live-exam content, or exam dumps. Use them for a fixed-form question-style and pacing check before continuing with unseen mixed sets, topic drills, and timed mock exams in Finance Prep.

Practice count note: ASIC’s current policy specifies at least 70 selected-response questions in 3.5 hours, including 15 minutes of reading time. Relevant statutory materials are supplied with questions, there is no negative marking, and results use credit-level pass/fail scoring rather than a published fixed percentage. Confirm current booking and exam-day rules directly with ASIC and ACER.

Practice questions

Questions 1-25

Question 1

Topic: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

A relevant provider recommends an otherwise suitable replacement of a retail client’s superannuation product. The Statement of Advice (SOA) accurately discloses the loss of valuable existing insurance, but the adviser deliberately places it in a dense appendix because the replacement improves the adviser’s internal sales ranking and the client usually skims appendices. Which assessment best reflects the adviser’s obligations under the Code of Ethics?

• A. The conduct is inconsistent with the Code because deliberately obscuring a material loss undermines informed consent and advances the adviser’s personal interest.
• B. The conduct is consistent with the Code because the replacement is otherwise suitable and the material loss appears accurately in the SOA.
• C. The conduct is consistent with the Code unless the client actually misses the disclosure, because foreseeable misunderstanding does not establish an integrity failure.
• D. The conduct is consistent with the Code because the sales ranking is not direct remuneration and the insurance loss remains available for review.

Best answer: A

What this tests: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Explanation: The Code requires trustworthiness, honesty and fairness in both the substance and presentation of advice. Accurately including information somewhere in an SOA is insufficient when the adviser deliberately makes a material disadvantage difficult to notice. The client’s known tendency to skim appendices makes impaired understanding foreseeable, while the internal sales ranking provides a self-interested motive for the presentation. This undermines the client’s ability to provide free, prior and informed consent. The fact that the replacement may otherwise be suitable does not cure the deliberate concealment. Ethical assessment considers purpose and foreseeable client effects, not merely technical document completeness or whether actual harm is later proven.

• Overall suitability and factual accuracy do not cure the deliberate obscuring of a material disadvantage.
• A non-monetary sales incentive can still create a personal interest that improperly affects the advice process.
• Integrity can be compromised by purposeful concealment and foreseeable misunderstanding without proof that the client actually missed the disclosure.

Formal disclosure does not cure presentation deliberately intended to conceal a material disadvantage and impair informed consent.

Question 2

Topic: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

On 15 April 2026, an ASIC-registered relevant provider gave a retail client personal advice on relevant financial products. The licensee reviews the file after implementation.

Statutory review: The provider complied with the statutory best-interests process, the priority duty and the appropriate-advice obligation.
Code review: No separate assessment has been performed.
Reviewer conclusion: Statutory compliance automatically establishes compliance with Standard 2 of the Code of Ethics.

Which assessment should the licensee make?

• A. Disregard the Chapter 7 findings because Standard 2 replaces the statutory duty, and assess the provider’s conduct under the Code alone.
• B. Treat Chapter 7 compliance as conclusive unless a conflict is identified, and assess Standard 2 only when a conflict exists.
• C. Treat Chapter 7 compliance as conclusive unless client loss is proved, and assess Standard 2 only after loss is established.
• D. Treat the Chapter 7 findings as relevant but not conclusive, and separately assess integrity and the client’s best interests under Standard 2.

Best answer: D

What this tests: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Explanation: The statutory best-interests duty and related Chapter 7 obligations prescribe legal requirements for providing personal advice to a retail client. Evidence that the provider followed the required process, prioritised the client’s interests and gave appropriate advice is relevant to an ethical review. It does not, however, conclusively establish compliance with Standard 2. Standard 2 independently requires the provider to act with integrity and in the best interests of each client. The licensee must therefore consider the provider’s conduct against that broader ethical obligation. A separate assessment does not mean the statutory findings should be ignored, nor does it imply that statutory compliance or an adverse outcome automatically determines whether the Code was satisfied.

• Client loss is not a precondition for assessing conduct under Standard 2.
• Standard 2 supplements rather than replaces the statutory duty and related Chapter 7 requirements.
• A conflict is not required before the independent ethical obligation under Standard 2 applies.

Standard 2 imposes an independent ethical obligation that is not automatically satisfied by compliance with the Chapter 7 process.

Question 3

Topic: Regulatory and Legal: Licensee, Client Assets, Distribution, Market Conduct, and Remedies

Harbour Advice Pty Ltd holds an AFS licence and provides personal investment advice to retail clients. Its board is considering a campaign that would materially increase advice files.

Internal control summary:

Campaign launch: 1 July
High-risk file backlog: 24 files overdue under the licensee's review policy
Current reviewer: one day weekly; competent in general insurance only
Required after launch: three reviewer-days weekly for normal investment-advice monitoring
Backlog catch-up: additional capacity required before normal launch monitoring begins
Replacement advice: four of ten sampled files did not meet the licensee's comparison procedure
Adviser bonus: based solely on product revenue; approval rests with the sales manager who shares the revenue target

Which course should the licensee adopt before proceeding with the campaign?

• A. Begin a reduced-volume campaign, engage a competent reviewer for three days weekly, clear the backlog alongside new-file monitoring, redesign the bonus, and strengthen replacement-advice monitoring.
• B. Defer the campaign, engage competent review capacity and clear the backlog, retain the bonus with disclosure and sales-manager approval, and strengthen replacement-advice monitoring.
• C. Defer the campaign, engage competent investment-advice review capacity to clear the backlog and provide three days weekly, redesign the bonus, and strengthen replacement-advice monitoring.
• D. Defer the campaign, expand the current contractor to three days weekly using a detailed checklist, clear the backlog, redesign the bonus, and strengthen replacement-advice monitoring.

Best answer: C

What this tests: Regulatory and Legal: Licensee, Client Assets, Distribution, Market Conduct, and Remedies

Explanation: An AFS licensee must do all things necessary to ensure that its financial services are provided efficiently, honestly and fairly. Supporting obligations include maintaining adequate competence and resources, taking reasonable steps to secure representative compliance, and having adequate conflict-management arrangements. The planned expansion should not proceed while high-risk reviews are overdue and all available future review capacity would be needed for normal monitoring. A checklist cannot substitute for demonstrated competence in reviewing personal investment advice. The revenue-only bonus also creates a conflict that is not adequately addressed by disclosure and approval from a manager subject to the same revenue target. Deferring expansion allows the licensee to correct these connected weaknesses before client exposure increases.

• Increasing the current contractor’s hours does not remedy the absence of demonstrated investment-advice review competence.
• Disclosure and approval by a manager sharing the revenue target do not adequately manage the bonus conflict.
• A reduced launch still leaves no capacity to clear the existing backlog while performing the stated level of normal monitoring.

This course aligns competence and resources with demand, restores compliance monitoring, and manages the revenue conflict before expansion.

Question 4

Topic: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Priya is undertaking her professional year. An AFS licensee has authorised her to provide personal advice to retail clients on relevant financial products only within the professional-year supervision framework. She has not completed the professional year and is not eligible for registration by ASIC as a relevant provider.

Which description correctly identifies Priya’s professional status and permitted title?

• A. She is a relevant provider and may use the title “financial adviser” while direct supervision continues.
• B. She is a supervisor and may use the title “financial planner” while completing the professional year.
• C. She is an authorised representative and may use the title “financial adviser” while her authorisation remains current.
• D. She is a provisional relevant provider and may use the title “provisional financial adviser” in that capacity.

Best answer: D

What this tests: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Explanation: A professional-year participant has the distinct status of provisional relevant provider. The person may provide personal advice to retail clients on relevant financial products only within the applicable authorisation and supervision framework. During this stage, the person cannot be registered as a relevant provider but may use the title “provisional financial adviser” or “provisional financial planner”. After the professional year, the licensee must complete the required appointment update and obtain ASIC registration before the person advises as a relevant provider. An authorised representative is a separate licensing status, while a supervisor is an eligible relevant provider appointed to oversee the provisional provider’s work and training.

• An authorised representative appointment does not itself satisfy the professional standards and registration requirements for using the unqualified restricted title.
• Direct supervision does not convert a professional-year participant into a registered relevant provider.
• The person receiving professional-year supervision is not the supervisor responsible for overseeing that work.

Her supervised professional-year authority and ineligibility for registration establish her status as a provisional relevant provider.

Question 5

Topic: Ethics and Professional Reasoning: Values, Law, and Professionalism

Role and service:

• Leila is an ASIC-registered relevant provider employed by an AFS licensee.
• She provides personal advice to retail clients about relevant financial products.

Practice facts:

• The licensee encourages flows into a related investment platform through internal performance recognition.
• Leila’s comparison identifies an independent alternative with comparable features and lower expected total costs.
• The licensee authorises either platform and confirms that applicable disclosure and conflicted-remuneration requirements have been met.
• Leila discloses the relationship and incentive to the clients.

The clients ask:

“If everything is lawful and disclosed, does that mean your ethical responsibilities have been met?”

Which interpretation best explains why the Code remains relevant and how it supports public trust and professional status?

• A. The Code applies to Leila personally as a relevant provider and requires ethical judgement beyond minimum legal and licensee processes; individual accountability helps sustain public trust in financial advice as a profession.
• B. The Code applies to Leila because the clients are retail clients, but its role is mainly to ensure complete disclosure; transparent disclosure of the incentive sustains public trust in financial advice as a profession.
• C. The Code applies to Leila only where legislation or licensee policy leaves an issue unresolved, so conduct accepted under both is presumptively ethical; regulatory certainty sustains public trust in financial advice as a profession.
• D. The Code applies to the licensee as the holder of the authorisation, so Leila satisfies it by following approved procedures; consistent organisational controls sustain public trust in financial advice as a profession.

Best answer: A

What this tests: Ethics and Professional Reasoning: Values, Law, and Professionalism

Explanation: The Code applies to Leila because she is acting as a relevant provider, giving personal advice to retail clients about relevant financial products. Its obligations are personal and operate alongside the licensee’s systems and the Corporations Act. Meeting disclosure and conflicted-remuneration rules does not establish that conduct is ethically acceptable. Leila must apply the Code’s values and standards to the incentive, product comparison and clients’ interests, rather than treating licensee approval as conclusive. This higher level of individual judgement and accountability helps distinguish financial advice as a profession. It supports public trust by assuring clients that relevant providers must consider fairness, conflicts, informed consent and professional responsibility even when minimum legal requirements have been satisfied.

• Licensee procedures support compliance but do not replace a relevant provider’s personal obligations under the Code.
• Retail-client status helps define the regulatory setting, but disclosure alone does not fulfil the Code’s broader ethical purpose.
• The Code operates alongside legislation and policy rather than serving only as a gap-filling standard.

Leila’s relevant-provider capacity attracts personal ethical obligations that are not exhausted by lawful remuneration, disclosure or licensee approval.

Question 6

Topic: Regulatory and Legal: Licensee, Client Assets, Distribution, Market Conduct, and Remedies

An AFS licensee advises Maya, a retail client, to invest through an IDPS-like platform.

Money received:

• Maya transfers $80,000 to the licensee’s ordinary operating account for investment through the platform.
• The entire amount is intended for the investment.
• A separately invoiced advice fee is due, but Maya has not authorised its deduction from the $80,000.

Platform arrangement:

• The platform’s nominee will be the registered owner of the investments, while Maya retains the beneficial interest.
• Maya must approve every purchase and sale; the adviser has no investment discretion.
• The operator provides Maya with electronic access to client-specific holding and transaction records.

Assume that money received by a licensee for onward investment is client money that must be paid promptly into a compliant client money account. Brief receipt creates no exception. A nominee arrangement in which the client controls investment decisions is a platform custody arrangement, not an MDA.

Which TWO conclusions or responses are correct?

• A. Treat the nominee-held investments as an MDA, with the adviser maintaining discretionary transaction records despite requiring Maya’s prior approval.
• B. Treat the nominee-held investments as platform custody holdings, with the operator maintaining client-specific records and electronic account access.
• C. Remit the $80,000 from the operating account directly to the platform, recording the same-day transfer as sufficient segregation.
• D. Transfer the full $80,000 promptly to a compliant client money account, then remit it to the platform only as permitted.
• E. Deduct the separately agreed advice fee from the $80,000, then place the remaining investment amount in a client money account.

Correct answers: B, D

What this tests: Regulatory and Legal: Licensee, Client Assets, Distribution, Market Conduct, and Remedies

Explanation: Money received by an AFS licensee for onward investment is subject to the client money regime. It must be segregated from the licensee’s own funds by being placed promptly into a compliant client money account. Same-day transmission does not cure its initial placement in an operating account. The licensee also cannot use money earmarked entirely for investment to satisfy a separately invoiced fee without appropriate authority.

The investments are held through a nominee custody structure. Although the nominee is the registered owner, Maya retains the beneficial interest and controls every transaction. An MDA requires discretion to make investment decisions without obtaining the client’s prior approval for each transaction. The platform operator therefore remains responsible for the applicable client-specific holding and transaction records and electronic account access.

• Direct remittance from the operating account does not satisfy the required segregation of client money, even if completed on the same day.
• Deducting the advice fee is unsupported because the entire transfer was designated for investment and no deduction authority was given.
• MDA treatment is inappropriate because the adviser cannot transact without Maya’s prior approval.

The full amount is client money and cannot remain in the licensee’s ordinary operating account.

Maya controls each investment decision, so nominee ownership creates a platform custody arrangement rather than an MDA.

Question 7

Topic: Advice Construction: Strategy Development and Suitability

An adviser is comparing an SMSF with an existing APRA-regulated superannuation fund for Priya and Daniel, who are retail clients.

Initial assessment:

• They have a combined superannuation balance of $900,000 and expect to retire in 12 years.
• Their main reason for considering an SMSF is to acquire an identified commercial property representing 30% of the proposed portfolio. Their existing fund cannot hold that property directly.
• The remaining portfolio would be diversified, with sufficient liquid assets for expenses and foreseeable cash needs.
• Both clients understand the trustee responsibilities and intend to obtain ongoing tax, audit and financial advice.
• Existing insurance would be retained through small balances in their current fund.
• They have documented an exit plan involving sale of the property and rollover to an APRA-regulated fund if they can no longer manage the SMSF.
• Estimated annual costs are $9,000 for the SMSF and $3,000 for their existing fund.

The adviser initially considers that the direct-property objective and desire for control may justify the SMSF’s additional costs and responsibilities.

Changed condition: Before the advice is finalised, Priya and Daniel abandon the property purchase and decide not to pursue any direct-property strategy. Their desired investment portfolio can now be replicated in their existing APRA-regulated fund. All other facts remain unchanged.

How should this change affect the adviser’s recommendation?

• A. Maintain the SMSF strategy based on the clients’ balance, competence and governance arrangements.
• B. Establish the SMSF with pooled investments and review whether to wind it up at retirement.
• C. Defer SMSF establishment while keeping it preferred until another direct asset opportunity emerges.
• D. Revise the strategy to retain the APRA-regulated fund and not establish the SMSF.

Best answer: D

What this tests: Advice Construction: Strategy Development and Suitability

Explanation: SMSF suitability depends on the expected benefits and risks in the clients’ actual circumstances, not on a particular starting balance or trustee competence alone. Initially, direct ownership of the identified property provided a material benefit that the APRA-regulated fund could not offer. The clients also had sufficient liquidity, diversification, competence, professional support, insurance arrangements and an exit plan.

Once the clients abandon all direct-property investment, their desired portfolio can be obtained through the existing fund at substantially lower annual cost. The main SMSF-specific benefit has therefore disappeared, while the additional costs, trustee responsibilities and ongoing-advice needs remain. The adviser should reassess the strategy using the changed objective and recommend retaining the APRA-regulated alternative.

• Balance, competence and sound governance show that the clients could operate an SMSF, but do not establish that doing so would benefit them.
• Keeping an SMSF preferred for a hypothetical future asset disregards the clients’ current decision not to pursue direct property.
• Establishing an SMSF for investments already available through the lower-cost fund creates costs and responsibilities without an identified compensating benefit.

The change removes the identified SMSF-specific benefit while leaving its higher costs and responsibilities unchanged.

Question 8

Topic: Regulatory and Legal: Best Interests and Appropriate Advice

Nina, an authorised representative, is providing personal advice to Mia, a retail client investing a $500,000 inheritance for seven years. Mia requires daily liquidity and consolidated annual tax reporting, and wants to minimise ongoing costs once those needs are met. She does not value access to an extensive investment menu.

Nina’s licensee wholly owns the operator of HarbourWrap and prefers advisers to recommend it because its administration fees increase group revenue. Nina receives no product bonus but knows about this competing interest. All costs other than those shown are equal for the same selected ETF portfolio.

Advice file comparison:

Which course of action should Nina take to best comply with her obligation to prioritise Mia’s interests?

• A. Recommend HarbourWrap for one year, rebate $750 from the advice fee, and conduct a cost review before continuation.
• B. Recommend HarbourWrap, explain its ownership and fees, and obtain Mia’s written agreement before implementation.
• C. Recommend CoastInvest, explain the comparative costs and features, and record how the related-party interest was managed.
• D. Present all three arrangements neutrally, explain the competing interest, and ask Mia to choose before implementation.

Best answer: C

What this tests: Regulatory and Legal: Best Interests and Appropriate Advice

Explanation: When a provider knows, or reasonably ought to know, that the client’s interests conflict with those of the provider, licensee or a related party, the provider must give priority to the client’s interests. Disclosure and client consent do not by themselves satisfy this obligation.

HarbourWrap benefits the licensee’s corporate group but offers no relevant client benefit over CoastInvest. Both arrangements provide the required liquidity, consolidated tax reporting and access to the selected ETFs, while CoastInvest costs $750 less each year. HarbourWrap’s wider menu is not valuable to Mia. A temporary rebate does not address the higher costs across her seven-year horizon. Nina must make and support a client-focused recommendation rather than transfer responsibility for resolving the conflict to Mia.

• Disclosure and written agreement do not cure a recommendation that favours related-party revenue without a corresponding client benefit.
• A one-year rebate leaves the higher ongoing administration cost unresolved over the investment horizon.
• Neutral presentation shifts the conflict decision to Mia instead of applying professional judgement within the agreed personal-advice scope.

CoastInvest meets Mia’s stated needs while costing $750 less annually than the related-party arrangement.

Question 9

Topic: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Maya is a relevant provider giving personal advice to a retail client.

Baseline:

• The agreed scope is a review of the client’s APRA-regulated superannuation and account-based pension.
• Maya has current, extensive knowledge and experience in that area.
• She is authorised to advise on the relevant products but has no training or practical experience in SMSFs or limited recourse borrowing arrangements (LRBAs).

Changed condition: Before the advice is completed, the client expands the scope to include whether an SMSF holding commercial property under an LRBA should be retained or wound up. Maya’s licensee has an SMSF template and an internal technical specialist available.

How should the changed condition affect Maya’s next action under Standard 10 of the Code of Ethics?

• A. Proceed with the SMSF comparison once the technical specialist has prepared the analysis and signed off the resulting recommendation.
• B. Pause the SMSF comparison while gaining sufficient knowledge and skill to advise competently, or refer that part to a competent adviser.
• C. Narrow the SMSF comparison to projected costs and returns using the licensee template, while referring only legal and tax questions externally.
• D. Proceed with the SMSF comparison after disclosing her limited experience and obtaining the client’s written consent to that limitation.

Best answer: B

What this tests: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Explanation: Standard 10 requires a financial adviser to develop, maintain and apply a high level of knowledge and skills relevant to the advice being provided. Maya is competent for the original APRA-regulated superannuation review, but the expanded scope introduces SMSF and LRBA issues outside her present competence. Authorisation, templates and access to a technical specialist may support advice, but they do not replace Maya’s responsibility to understand, evaluate and competently apply the relevant information. Disclosure and client consent also cannot cure a lack of competence. Maya should therefore pause the expanded comparison until she has the required capability. If she cannot develop it to an appropriate level, she should refer that part of the client’s needs to a suitably competent adviser.

• Technical specialist sign-off does not substitute for the knowledge and skill Maya must apply when personally providing the recommendation.
• Disclosure and written consent may inform the client, but they do not remedy an adviser’s lack of relevant competence.
• Restricting analysis to costs and returns omits material SMSF and LRBA considerations required by the expanded comparison.

The expanded scope requires Maya to develop and apply relevant SMSF and LRBA competence or refer the work if she cannot do so.

Question 10

Topic: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

A relevant provider is agreeing to act for a retail client. Under Standard 7 of the Financial Planners and Advisers Code of Ethics 2019, what must the provider ensure regarding fees and other benefits?

• A. Ensure the client gives free, prior and informed consent to all fees and monetary benefits, while non-monetary benefits are fully disclosed.
• B. Ensure the client gives free, prior and informed consent to all benefits the provider and principal will receive in connection with acting, including fees.
• C. Ensure the client gives free, prior and informed consent to all benefits the provider will receive, while the principal’s benefits are fully disclosed.
• D. Ensure the client receives prior disclosure of all benefits the provider and principal will receive, with consent required only for fees charged directly.

Best answer: B

What this tests: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Explanation: Standard 7 requires more than transparent disclosure. The client’s consent must be free, informed and given in advance. It must cover all benefits that the provider and the provider’s principal will receive in connection with acting for the client, including service fees. The requirement is not limited to cash benefits, amounts paid directly by the client or benefits received personally by the individual adviser. Consent must result from information sufficient for the client to understand what is being agreed. It cannot be inferred merely from silence, continued engagement or receipt of a disclosure document.

• Consent covering only the provider excludes benefits received by the provider’s principal.
• Consent limited to monetary benefits does not cover all benefits within Standard 7.
• Prior disclosure and limited fee consent do not establish consent to every relevant benefit.

Standard 7 requires free, prior and informed client consent covering all benefits received by both the provider and the provider’s principal, including fees.

Question 11

Topic: Advice Construction: Client Discovery and Consumer Profiles

Marita, aged 59, is a retail client seeking personal advice about her superannuation and retirement investments. She plans to retire in six years.

Community context: The advice practice has a recent regional report indicating that local residents commonly experience unreliable internet, seasonal income and significant informal family-support commitments.

Marita’s circumstances:

• She has stable salaried employment with the regional health service.
• She has reliable internet and prefers secure video meetings and electronic documents.
• She gives her mother $600 each month and expects this to continue for five years.
• She wants accessible savings for possible travel to care for her mother.

Marita tells the adviser, “People often make assumptions about everyone who lives here. Please ask me what applies to me.”

Which approach should the adviser take during the remaining discovery process?

• A. Use the regional report to set provisional assumptions about paper communication, variable income and wider family support, then confirm or revise them when presenting the draft advice.
• B. Use the regional report to frame further questions about access, income patterns and family support, then base the advice and communication plan on Marita’s confirmed circumstances and preferences.
• C. Exclude the regional report to avoid group-based assumptions, then base the advice and communication plan solely on Marita’s standard fact-find responses and stated preferences.
• D. Use the regional report to plan for possible service disruptions, but apply its typical family-support pattern when estimating the liquidity Marita will require before retirement.

Best answer: B

What this tests: Advice Construction: Client Discovery and Consumer Profiles

Explanation: Population and community information can help an adviser identify relevant questions, possible access barriers and circumstances that might otherwise be overlooked. It should be used as context for discovery, not as evidence that a particular client shares the characteristics of a group.

Here, the regional report suggests useful areas for inquiry, including communication access, income stability and family commitments. Marita’s own information then controls the analysis. She has reliable internet, stable employment, a specific support commitment and a stated need for travel liquidity. The adviser should investigate these individual facts and reflect them in the advice rather than replacing them with regional averages or assumed preferences. Respectful personal advice remains responsive to community context while avoiding stereotypes.

• Treating regional patterns as provisional defaults embeds unverified assumptions and postpones individual confirmation until after advice has been drafted.
• Disregarding the report entirely loses useful prompts for discovery; avoiding stereotypes does not require ignoring relevant contextual information.
• Applying a typical family-support pattern substitutes a group characteristic for Marita’s stated commitment and individually assessed liquidity needs.

The report can guide relevant inquiry, but Marita’s individual circumstances and preferences must determine the advice and communication plan.

Question 12

Topic: Advice Construction: Client Discovery and Consumer Profiles

An adviser is preparing personal advice for Priya, a retail client investing an inheritance. The adviser reviews this fact-find excerpt:

Objective: Have at least $180,000 available for a home settlement in 18 months.
Amount available: $200,000, with no other funds available for the settlement.
Required return: About 1.5% per year is sufficient to reach the objective.
Attitude to loss: Comfortable with a temporary decline of up to 20% for higher returns.
Experience: Seven years investing in diversified ETFs and understands market volatility.
Consequence of shortfall: The home purchase would need to be postponed.

Which assessment should most directly determine the upper limit on Priya’s growth-asset exposure?

• A. Her high risk tolerance should set the upper limit on growth-asset exposure.
• B. Her low risk capacity should set the upper limit on growth-asset exposure.
• C. Her low required risk should set the upper limit on growth-asset exposure.
• D. Her sound investment experience should set the upper limit on growth-asset exposure.

Best answer: B

What this tests: Advice Construction: Client Discovery and Consumer Profiles

Explanation: Risk capacity is the client’s financial ability to withstand losses without undermining important objectives. Priya has only an 18-month horizon, a small margin above the required settlement amount and no alternative funds. Her capacity to bear loss is therefore low, even though she is willing to accept a 20% decline.

Risk tolerance measures willingness to accept uncertainty and loss. Required risk is the level of risk needed to pursue the objective; the modest required return indicates little need for substantial growth exposure. Knowledge and experience affect understanding, communication and the complexity of suitable investments, but they do not increase the client’s financial ability to absorb loss.

• High risk tolerance reflects willingness to accept losses, but it cannot override limited financial capacity.
• Low required risk indicates that substantial investment risk is unnecessary, rather than defining loss-bearing ability.
• Investment experience supports understanding but does not provide additional funds or extend the investment horizon.

Priya cannot absorb a material loss without jeopardising her essential, near-term home purchase.

Question 13

Topic: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

During a routine file check, a financial adviser discovers that a material statement in a client’s file note is inaccurate. The note may still be used to support later advice or implementation. Which response best reflects the adviser’s ethical responsibility?

• A. Add a dated correction linked to the file note, preserve the original, and suspend reliance on the statement pending reassessment.
• B. Add a dated correction to the compliance register, leave the client file unchanged, and suspend reliance on the statement pending reassessment.
• C. Add a dated correction linked to the file note, preserve the original, and continue relying on it if the current recommendation remains suitable.
• D. Replace the original file note with an accurate version, record the amendment date, and suspend reliance on the statement pending reassessment.

Best answer: A

What this tests: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Explanation: Ethical recordkeeping requires complete and accurate records of advice and services. When a material inaccuracy is discovered, the adviser should correct it transparently rather than silently rewrite the original record. A dated correction linked to the original preserves the audit trail and ensures that future users can understand both the error and its correction. Because the note may influence later advice or implementation, the adviser should also prevent further reliance until the significance of the error has been assessed. This approach supports Standard 8’s recordkeeping obligations and Standard 9’s requirements for competent, good-faith advice that is not misleading or deceptive.

• Replacing the original removes evidence of what the file previously recorded, despite noting the amendment date.
• Recording the correction only in a compliance register leaves the working client file materially inaccurate.
• Continuing to rely on the note ignores the risk that its inaccurate statement could affect future advice or implementation.

A linked, dated correction preserves an accurate audit trail while reassessment prevents the known inaccuracy from affecting later advice or implementation.

Question 14

Topic: Advice Construction: Strategy Development and Suitability

An adviser is reviewing the superannuation portfolio of Priya, age 62, who will retire in 18 months and can then access her super.

Client circumstances:

• Her $800,000 portfolio is 50% former-employer shares, 25% diversified growth, 15% bonds and 10% cash.
• She must withdraw $100,000 for a non-deferrable renovation immediately after retiring.
• Her $20,000 emergency fund outside super is not available for the renovation.
• She has a 25-year investment horizon but cannot delay retirement or replace substantial losses through employment.
• She describes her risk tolerance as high. The former-employer shares fluctuated by 30% during the past year.
• Reallocating the shares would involve estimated one-off costs of 0.4%. A suitable diversified option would cost 0.30 percentage points more annually.

Which TWO advice elements should be central to the adviser’s recommended allocation?

• A. Treat the $100,000 renovation amount as a short-term liability and hold it in liquid, low-volatility assets before retirement.
• B. Reduce the former-employer share exposure and redistribute it across diversified assets, allowing for switching and ongoing costs.
• C. Retain the former-employer share exposure until after retirement because the switching cost outweighs diversification benefits over 18 months.
• D. Move most of the portfolio into defensive assets because the fixed retirement date outweighs the need for long-term growth.
• E. Increase growth exposure because the long investment horizon and high risk tolerance outweigh the fixed renovation commitment.

Correct answers: A, B

What this tests: Advice Construction: Strategy Development and Suitability

Explanation: A suitable allocation must distinguish short-term liabilities from assets supporting long-term retirement spending. Priya’s $100,000 renovation is fixed and due in 18 months, so that amount needs sufficient liquidity and protection from material market volatility. Her remaining assets can retain appropriate growth exposure for a 25-year horizon.

Risk tolerance is only one consideration. Priya’s inability to delay retirement or rebuild capital limits her risk capacity. Her 50% exposure to one company creates concentration and downside risk that is not removed by familiarity with the employer. Switching and higher ongoing fees must be compared with the benefits of diversification, but costs alone do not make the concentrated allocation suitable. Moving most assets to defensive investments would also be inappropriate because it could increase inflation and longevity risk.

• Deferring diversification gives excessive weight to the 0.4% switching cost while leaving substantial single-company exposure in place.
• Increasing growth exposure ignores the fixed near-term withdrawal and Priya’s limited capacity to recover from losses.
• Moving most assets to defensive investments overreacts to the retirement date and neglects the remaining 25-year horizon.

The fixed near-term withdrawal should not depend on selling volatile assets at an unfavourable time.

The 50% single-company exposure creates substantial concentration risk that diversification can reduce despite additional costs.

Question 15

Topic: Regulatory and Legal: Remuneration, Advice Fees, and Conflicts

A fee recipient proposes to continue an ongoing fee arrangement and have the fees deducted by the provider of the client’s investment account. Which statement correctly distinguishes the required consents?

• A. Consent to enter or renew governs whether the arrangement starts or continues; consent for the fee recipient to deduct, arrange deduction, or accept fees is distinct, although one form may record both.
• B. Consent to enter or renew governs whether the arrangement starts or continues; deduction consent is obtained from the account provider, while acceptance consent is obtained from the client.
• C. Consent to enter or renew governs whether the arrangement starts or continues; it also authorises the disclosed account deductions, so no distinct client consent is needed for payment.
• D. Consent to enter or renew is required when fees are paid directly; consent to account deduction replaces renewal consent when ongoing fees are paid through an account provider.

Best answer: A

What this tests: Regulatory and Legal: Remuneration, Advice Fees, and Conflicts

Explanation: An ongoing fee arrangement and its payment mechanism require distinct client authorisations. Consent to enter or renew concerns whether the client agrees to establish or continue the arrangement under which ongoing fees will be charged. It does not itself authorise the fee recipient to deduct fees, arrange for an account provider to deduct them, or accept payment. The client’s payment-related consent must cover the applicable action. Both consents may be captured in the same written form if the relevant requirements are satisfied, but using one document does not merge their separate purposes. An account provider acts on valid client authority; it does not provide the client’s consent.

• Treating renewal consent as authorisation for account deductions conflates continuation of the arrangement with payment authority.
• Account deduction authority does not replace consent to enter or renew the ongoing fee arrangement.
• The account provider processes an authorised deduction but does not supply the client’s deduction consent.

Consent to enter or renew authorises the arrangement itself, while payment-related consent separately authorises deduction, arranging deduction, or acceptance of fees.

Question 16

Topic: Advice Construction: Strategy Development and Suitability

On 20 May 2026, Jordan is preparing personal advice for Elena, a retail client.

Client circumstances:

• Elena owns listed shares worth $320,000, acquired in several parcels for a total cost base of about $110,000.
• She wants to diversify and contribute $180,000 to superannuation by 30 June. Her contribution eligibility and available cap have been verified.
• She has $22,000 in cash and requires an $18,000 emergency reserve.
• The tax effect of selling now or across two income years could materially affect the strategy. Her parcel records, taxable income and carried-forward capital losses require confirmation.
• Elena will rely on the advice when deciding the sale timing and amount to reserve for tax.

Provider circumstances:

• Jordan is a registered relevant provider authorised to advise on securities and superannuation, but his authority excludes tax financial advice and he is not a qualified tax relevant provider.
• Maya, another registered relevant provider under the licensee, is a qualified tax relevant provider authorised to provide tax financial advice.

Which action should Jordan take to construct suitable advice?

• A. Have Jordan calculate the tax effect from verified records, include a prominent disclaimer, and finalise the integrated strategy with Maya checking the calculation before implementation.
• B. Have Jordan recommend staged sales to reduce the expected tax effect, document the recommendation as investment advice, and ask Maya to confirm the calculation before implementation.
• C. Obtain Elena’s consent to involve Maya, have Maya provide the tax financial advice, and finalise an integrated strategy with Jordan limited to his authorised investment and superannuation scope.
• D. Have Jordan exclude tax effects from the recommendation, select the sale timing on diversification grounds, and ask Maya to advise Elena separately after the strategy is finalised.

Best answer: C

What this tests: Advice Construction: Strategy Development and Suitability

Explanation: Client-specific tax conclusions provided during personal advice on relevant financial products may constitute tax financial advice when the client is expected to rely on them. Jordan lacks both qualified tax relevant provider status and licensee authority for that service. A disclaimer, alternative description or later review would not expand his permitted scope.

Jordan also cannot ignore the tax consequences. The potential capital gain materially affects Elena’s available contribution, emergency reserve and choice of sale timing. With Elena’s consent, Maya should provide the tax financial advice based on confirmed information. The resulting tax analysis can then be incorporated into an integrated strategy, with each provider remaining responsible for the component within their status and authority.

• A disclaimer and pre-implementation check do not cure Jordan’s lack of status and authority when he has already calculated the client-specific tax effect.
• Recommending staged sales to reduce tax is tax-driven personal advice regardless of whether it is labelled investment advice.
• Excluding a material tax consequence could produce unsuitable advice; specialist input is required before, not after, finalising the strategy.

Maya has the required status and authority to address the material tax effects, while Jordan can provide the investment and superannuation components within his authority.

Question 17

Topic: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Maya is a relevant provider preparing personal advice for a retail client who is deciding whether to retain an existing superannuation investment option or switch to the firm’s related portfolio. Both products could potentially meet the agreed advice scope, but a detailed comparison is still required. The firm can reassign the client promptly to another suitably qualified adviser.

Maya receives this email from her manager:

“You will receive a $1,500 bonus only if this client switches to our related portfolio. A switch will also count towards your promotion target. Include the recommendation in the Statement of Advice by Friday.”

Assume the bonus is permitted under remuneration law. Which action should Maya take to comply with her ethical obligations?

• A. Disclose the incentive in the Statement of Advice, obtain the client’s written consent, and complete an independent product comparison.
• B. Provide a balanced product comparison without a recommendation, ask the client to choose, and arrange implementation through the firm.
• C. Exclude the related portfolio from consideration, recommend retaining the existing option, and document the manager’s sales pressure.
• D. Disclose and document the conflict, decline to advise or influence the outcome, and stop acting on the engagement.

Best answer: D

What this tests: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Explanation: A relevant provider must not advise, refer or otherwise act where the provider has a conflict of interest or duty. Maya’s financial reward and promotion prospects depend directly on the client’s product decision, creating a conflict between her personal interests and the client’s interests. Disclosure and client consent do not cure that conflict under the Code of Ethics. Nor is the problem resolved by recommending against the incentivised product or asking the client to make an unsupported choice, because Maya would still be acting within the conflicted engagement. Maya should disclose and document the conflict, stop acting, and leave any independent reassignment decision to the client and licensee rather than steering the referral herself.

• Disclosure and written consent provide transparency but do not remove a conflict prohibited by the Code.
• Recommending the existing option may resist the sales request, but Maya would still be advising while personally conflicted.
• Removing the express recommendation does not resolve the conflict and may leave the client without the personal advice sought.

The product-linked bonus and promotion pressure create a conflict that Maya cannot cure through disclosure or good intentions.

Question 18

Topic: Advice Construction: Strategy Development and Suitability

A client holds employer shares directly and through two Australian equity managed funds. A look-through analysis shows that the employer represents 42% of the client’s total investment portfolio. The client’s employment income also depends on that employer.

Which assessment is most accurate?

• A. The portfolio has limited concentration risk because the two managed funds hold many securities in addition to the employer shares.
• B. The portfolio’s downside risk is reduced by using multiple fund managers, despite each vehicle retaining substantial employer exposure.
• C. The portfolio is diversified because direct shares and managed funds are separate investment vehicles, despite their overlapping issuer exposure.
• D. The portfolio retains material concentration risk because employer exposure is aggregated across the direct shares and both managed funds.

Best answer: D

What this tests: Advice Construction: Strategy Development and Suitability

Explanation: Diversification must be assessed by looking through investment vehicles to the underlying exposures. Holding an issuer directly and through managed funds does not diversify the issuer-specific risk. Here, 42% of the portfolio depends on one employer, while the client’s employment income depends on the same organisation. An employer-specific downturn could therefore affect both investment wealth and income at the same time. The number of funds, securities or fund managers may reduce other risks, such as manager-specific risk, but does not remove a substantial common exposure. The adviser should evaluate the client’s total direct and indirect holdings when assessing concentration and potential downside.

• Separate legal structures do not create diversification when the underlying issuer exposure overlaps.
• Holding other securities within the funds does not make a 42% exposure to one employer immaterial.
• Multiple fund managers may diversify manager risk, but they do not remove a common issuer exposure.

The client’s direct and indirect exposure to one employer creates substantial combined investment and employment downside risk.

Question 19

Topic: Regulatory and Legal: Advice Perimeter and Client Classification

An adviser will provide Maya with personal advice on relevant financial products under Parts 7.7 and 7.7A of the Corporations Act.

Assume for this question: A qualified accountant’s certificate can establish wholesale client status for this service if it was issued within the preceding two years and confirms the applicable net-assets or gross-income threshold. No other wholesale criterion applies.

Baseline: Maya’s certificate confirms the net-assets threshold but was issued 25 months before the advice. She is therefore treated as a retail client.

Changed condition: The certificate was instead issued 18 months before the advice. All other facts remain unchanged.

How does this change affect Maya’s classification for the proposed advice?

• A. Retail for this advice unless the resulting investment reaches $500,000
• B. Wholesale for this personal advice under Parts 7.7 and 7.7A
• C. Retail for this advice until a certificate less than six months old is supplied
• D. Retail for this advice, with wholesale status limited to a dealing service

Best answer: B

What this tests: Regulatory and Legal: Advice Perimeter and Client Classification

Explanation: Client classification must be determined for the particular financial service by applying the relevant statutory criterion. For personal advice governed by Parts 7.7 and 7.7A, the supplied rule gives the accountant’s certificate a two-year validity period. The baseline certificate was outside that period, so it could not establish wholesale status. Changing its age to 18 months brings it within the applicable period. Because it also confirms the required net-assets threshold, Maya is a wholesale client for the proposed personal advice. The classification does not require a $500,000 investment or restrict the certificate criterion to a dealing service.

• Limiting wholesale status to dealing overlooks that the supplied certificate rule expressly applies to this personal advice.
• The $500,000 product-value criterion is not required when the certificate criterion is independently satisfied.
• The six-month base period does not apply because the supplied rule specifies two years for Parts 7.7 and 7.7A.

The certificate confirms the required threshold and falls within the applicable two-year period.

Question 20

Topic: Ethics and Professional Reasoning: Client Care and Informed Consent

An adviser is preparing personal advice for Mei, a retail client.

Original engagement:

• The agreed scope is limited to reviewing investment options within Mei’s existing superannuation fund.
• Mei consented to a fixed advice fee of $2,200.
• Mei authorised her daughter, Lin, to attend meetings and receive documents as a support person, but not to give instructions or make decisions.

Changes before the advice is prepared:

• Mei is made redundant and now expects to retire immediately.
• She needs $80,000 to remain accessible during the next 12 months.
• She emails the adviser asking to include pension commencement and possible replacement of her superannuation fund.
• The adviser estimates that the expanded advice will cost $3,600.
• Lin emails that she approves the additional work and fee, but Mei has not directly agreed to them after receiving an explanation.

What should the adviser do next?

• A. Meet Mei to agree on the revised scope and liquidity objective, commence the expanded work at the original fee, and seek consent to the additional fee when recommendations are presented.
• B. Use Mei’s email as consent to the expanded scope, prepare the revised advice, then explain the new fee and liquidity implications before obtaining consent to implementation.
• C. Pause the expanded work, explain the revised scope, fee and liquidity implications to Mei, confirm her understanding and voluntary consent, and clarify Lin’s authority before accepting instructions from her.
• D. Send Mei a revised engagement letter, commence the expanded work when she signs it, and continue accepting Lin’s instructions because her support-person authority covers the revised advice.

Best answer: C

What this tests: Ethics and Professional Reasoning: Client Care and Informed Consent

Explanation: Free, prior and informed consent must be maintained as an engagement changes. Mei’s original consent covered a limited superannuation investment review and a $2,200 fee. Her redundancy, immediate retirement, liquidity requirement, broader advice request and increased fee materially change both her circumstances and the service. Before undertaking the expanded work, the adviser should explain the revised scope, consequences and fee in terms Mei understands, then confirm her voluntary agreement. Mei’s email requesting additional advice does not by itself demonstrate informed consent to the revised engagement. Lin’s authority is also limited to providing support and receiving documents, so it does not permit her to approve fees or give instructions. Any broader authority must be established before the adviser relies on Lin’s decisions.

• A signed engagement does not convert Lin’s support role into authority to give instructions.
• Agreeing on scope while postponing consent to the increased fee does not provide prior informed consent to the full engagement.
• Obtaining consent only before implementation is too late if expanded advice has already been prepared outside the agreed scope.

The changed circumstances, scope and fee require Mei’s prior informed consent, while Lin’s support role does not authorise her to approve changes or give instructions.

Question 21

Topic: Ethics and Professional Reasoning: Client Care and Informed Consent

Priya, a relevant provider, has recommended that Mei, a retail client, switch from a conservative managed fund to a diversified growth fund. Priya does not speak Mandarin. Mei received an English Statement of Advice five days ago and has decision-making capacity. Her son Daniel has no authority to act for her. There is no implementation deadline, and the firm can arrange an independent Mandarin interpreter the next day.

Implementation meeting file note:

Mei: Everyday English is fine, but complex money is easier in Mandarin.
Mei: I still do not understand how much I could lose.
Daniel: Mum, just sign today. This is what you need.
Daniel answered the risk questions directed to Mei.
Mei signed after Daniel pointed to the signature line.
No transaction has been submitted.

Which action should Priya take next to comply with Standard 4 before acting on the advice?

• A. Defer implementation, use an independent Mandarin interpreter, check Mei’s understanding directly, and obtain her voluntary express consent.
• B. Defer implementation, send a professional Mandarin translation, allow Mei time to review it, and obtain a fresh signed authority without further discussion.
• C. Submit the application under the signed authority, then use an independent interpreter to confirm Mei’s understanding before settlement.
• D. Defer implementation, ask Daniel to interpret the advice, check Mei’s understanding in his presence, and obtain her express consent.

Best answer: A

What this tests: Ethics and Professional Reasoning: Client Care and Informed Consent

Explanation: Standard 4 permits an adviser to act only with the client’s free, prior and informed consent. A signature does not establish valid consent when the adviser has evidence that the client does not understand a material risk or may be responding to another person’s pressure. Mei has expressly identified a language need, stated that she does not understand the potential loss, and allowed Daniel to answer for her. Priya should therefore pause implementation, communicate through an independent interpreter, check Mei’s understanding directly and establish that her decision is voluntary. Consent must be obtained before any implementation step is taken, even if a transaction could later be cancelled.

• Using Daniel as interpreter does not adequately address the risk that his pressure is influencing Mei’s decision.
• A translated document and fresh signature do not resolve the recorded uncertainty without checking Mei’s comprehension and voluntariness.
• Confirmation before settlement would be too late because submitting the application is already acting on the advice.

This process addresses Mei’s stated comprehension needs and establishes free, prior and informed consent before implementation.

Question 22

Topic: Advice Construction: Strategy Development and Suitability

In August 2026, Liam is preparing personal advice for a retail client who wants to sell a managed fund and reduce her mortgage. The strategy compares selling the entire investment now with selling it across two financial years. The resulting capital gains tax (CGT) materially affects the client’s after-tax proceeds.

Baseline: Liam is a qualified tax relevant provider, and his AFS licensee authorises him to provide both managed-investment advice and tax financial advice.

Changed condition: Before the advice is finalised, Liam transfers to another licensee. His qualified tax relevant provider status remains substantively valid, but the new licensee authorises him to provide managed-investment advice only, not tax financial advice. Ava, another relevant provider at the new licensee, is qualified and authorised to provide both services. The client consents to Ava’s involvement.

How should the changed condition affect the next action?

• A. Have Liam remove client-specific tax calculations and finalise the strategy using general CGT information under his managed-investment authority.
• B. Have Ava provide the tax financial advice and coordinate the final strategy, while Liam acts within his managed-investment authority.
• C. Have Liam provide the tax financial advice and final strategy because his qualified tax relevant provider status remains substantively valid.
• D. Have Ava calculate the CGT amount, then let Liam provide the tax-dependent final strategy under his managed-investment authority.

Best answer: B

What this tests: Advice Construction: Strategy Development and Suitability

Explanation: Qualified tax relevant provider status and permission from an AFS licensee are separate requirements. Liam’s continuing status does not override the narrower authority granted by his new licensee. Because the timing and amount of CGT materially affect the client’s net proceeds, Liam also should not construct the strategy as though tax were immaterial. Ava can provide the tax financial advice because she has both the substantive status and the necessary licensee authority. The providers may then coordinate their work so the final strategy incorporates the material tax effects while each acts within their permitted role. Using another provider’s calculation does not allow Liam to personally provide unauthorised tax-dependent advice, and replacing tailored analysis with general information does not resolve the suitability issue.

• Continuing qualified status does not independently confer permission from the new AFS licensee.
• Receiving Ava’s calculation does not expand Liam’s authority to provide the resulting tax-dependent advice.
• General CGT information is inadequate where the client’s material tax consequences affect strategy suitability.

Ava has both the required status and licensee authority to address the material CGT effects in the strategy.

Question 23

Topic: Regulatory and Legal: Remuneration, Advice Fees, and Conflicts

On 15 March 2026, Priya accepts one-off personal advice and asks for the $1,500 non-ongoing advice fee to be paid from her superannuation account. She has signed an acknowledgement that she received the Statement of Advice and has verbally approved the fee. What authority is required before the fee may be deducted?

• A. Obtain Priya’s signature acknowledging the advice and provide the signed Statement of Advice to the trustee.
• B. Obtain Priya’s annual written consent to an ongoing fee arrangement and provide it to the trustee.
• C. Obtain Priya’s written request or consent for the specified deduction and provide it to the trustee before deduction.
• D. Obtain Priya’s verbal authority, record it in a file note and instruct the trustee in writing.

Best answer: C

What this tests: Regulatory and Legal: Remuneration, Advice Fees, and Conflicts

Explanation: A non-ongoing advice fee may be deducted from a member’s superannuation account only when the member has provided the required written request or consent for that deduction. Priya’s verbal approval does not satisfy the written-authority requirement. Her acknowledgement of receiving the Statement of Advice also does not authorise payment from superannuation unless it contains the required deduction authority. Annual consent for an ongoing fee arrangement applies to recurring arrangements and is not required merely because a one-off fee will be paid from superannuation. The relevant written authority must cover the specified deduction and be supplied to the trustee or account provider before the fee is deducted.

• A file note records verbal authority but does not convert it into the member’s written authority.
• Acknowledging receipt of advice does not, by itself, authorise a deduction from superannuation.
• Annual ongoing-fee consent is not the appropriate authority for a one-off, non-ongoing fee.

A non-ongoing advice fee requires the member’s written request or consent authorising payment from the superannuation account.

Question 24

Topic: Advice Construction: Client Discovery and Consumer Profiles

A relevant provider is preparing personal advice for Ana, a retail client, about a regular investment plan.

Baseline: A community report indicates that people from Ana’s cultural community commonly send money to relatives overseas. The report contains no information about Ana personally. Ana initially says she has no such commitments and prioritises building investments. She makes financial decisions independently.

Changed condition: Before the advice is finalised, Ana says she has committed to sending $900 each month to her parents for at least two years and ranks this commitment above building investments.

How should this change affect the provider’s approach?

• A. Revise Ana’s profile to treat $900 a month as priority cash flow, then reassess the timing and suitability of the investment plan.
• B. Revise Ana’s profile using the community report’s average remittance amount, then reassess the timing and suitability of the investment plan.
• C. Seek Ana’s consent to confirm the commitment with her family, then revise the profile only after the expected duration is independently verified.
• D. Retain Ana’s original profile and model $900 a month as a sensitivity only, then revise the plan after a payment history develops.

Best answer: A

What this tests: Advice Construction: Client Discovery and Consumer Profiles

Explanation: Population and community information can help a provider identify relevant areas for respectful inquiry, but it cannot replace information obtained from the individual client. Ana’s initial statement appropriately outweighed the general community report. Her later statement materially changes her personal circumstances: she has identified a specific amount, duration and priority. The provider should therefore update her client profile and assess how the commitment affects available cash flow, investment timing and the suitability of recommendations. The provider need not wait for payment history or family confirmation when Ana can clearly communicate her own preferences. Nor should a community average replace her stated amount.

• Treating the commitment only as a sensitivity understates Ana’s clear and current priority.
• Using an average remittance amount substitutes population data for Ana’s stated circumstances.
• Seeking independent family verification is unnecessary because Ana is making her own decisions and has clearly described the commitment.

Ana’s stated commitment is an individual priority that directly affects her cash flow, objectives and suitable investment strategy.

Question 25

Topic: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

An adviser is preparing personal advice for a retail client whose employer shares represent 55% of the client’s liquid investments. Before finalising the advice, the adviser records:

Client's initial view: The shares will recover strongly.
Requested research: Forecasts supporting a recovery.
Contrary evidence: Two negative forecasts dismissed without examining their assumptions.
Further request: Find more analysts who agree with the recovery view.
Timing: No implementation deadline.

Which safeguard should the adviser use next to most directly reduce the bias affecting the client’s evaluation?

• A. Obtain an independent adviser review of the existing evidence, then give the client the review outcome.
• B. Pause the decision for 48 hours, then ask the client to reconsider the same evidence.
• C. Develop recovery and non-recovery hypotheses, then test each against evidence that could disconfirm it.
• D. Present retaining and reducing the holding in matched gain and loss frames, then compare preferences.

Best answer: C

What this tests: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

Explanation: The client is displaying confirmation bias by beginning with a preferred conclusion, seeking supportive forecasts and dismissing contrary evidence without examining it. A targeted safeguard is to formulate credible competing hypotheses, such as recovery and non-recovery, and identify evidence that would weaken each one. This creates a disciplined search for disconfirming as well as confirming information. It also helps the client assess the assumptions and reliability of conflicting forecasts rather than selecting evidence according to the desired outcome. The safeguard supports informed decision making without overriding the client’s autonomy.

• Independent review can address an adviser’s blind spots, but it is less direct than changing the client’s selective evidence-testing process.
• Matched gain and loss presentations target framing effects, which are not the main pattern recorded.
• A pause is useful for impulsive or emotionally driven decisions, but reconsidering the same selectively assessed evidence does not correct the underlying bias.

Testing competing hypotheses directly counters the client’s selective search for evidence supporting an existing belief.

Questions 26-50

Question 26

Topic: Ethics and Professional Reasoning: Values, Law, and Professionalism

On 17 June, financial adviser Daniel reviews the file of Priya, a retail client. Priya has received no implementation update, and Daniel has not reconfirmed whether she still wants the transaction at current prices. Daniel must preserve the records and commence the firm’s incident review regardless of how he responds.

Implementation record:

3 June: Priya accepted advice to switch $80,000 between managed funds.
3 June: Daniel wrote, "I will place the switch today and confirm completion."
Order register: No order submitted for Priya.
17 June: Daniel discovers the omission after the fund prices have changed.

Which response by Daniel best applies the paramount value of trustworthiness?

• A. Contact Priya promptly, explain that the switch remains pending, outline the current market position, and confirm her current wishes while operations identifies the cause.
• B. Place the switch at current prices to implement the accepted advice, then contact Priya, explain the delayed execution, and ask whether she wants further changes.
• C. Contact Priya promptly, state that the promised switch was not placed, separate known facts from unresolved impacts, and confirm her current wishes before any transaction.
• D. Complete the incident review, calculate the financial impact and likely remedy, then contact Priya with a verified account and confirm her current wishes before trading.

Best answer: C

What this tests: Ethics and Professional Reasoning: Values, Law, and Professionalism

Explanation: Trustworthiness requires more than eventually providing accurate information. Daniel made a specific commitment on which Priya could reasonably rely. Once he discovers that the commitment was not fulfilled, good faith and candour require prompt, plain disclosure of that fact. He can distinguish confirmed facts from matters still being investigated, such as the cause, financial impact and possible remediation. This avoids speculation without withholding material information. Stewardship also requires Daniel to preserve Priya’s control over her portfolio. Because prices have changed and her current wishes are unknown, he should confirm her instructions rather than execute the original transaction unilaterally.

• Waiting for the completed review delays candid disclosure even though the implementation failure is already confirmed.
• Describing the switch as pending obscures the broken commitment and may imply that implementation is progressing normally.
• Executing before contacting Priya substitutes the adviser’s judgement for her current instructions after prices have changed.

Prompt, candid disclosure acknowledges the failed commitment while preserving Priya’s control over decisions made at changed prices.

Question 27

Topic: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Maya has reviewed a retail client’s objectives, financial situation and needs. The client asks her to recommend whether to renew a term deposit, invest in a managed fund and purchase a home contents policy.

Compliance file extract:

Maya's status: Authorised representative, but not a registered relevant provider
Written personal-advice authority: Basic deposit products and general insurance
Written general-advice authority: Managed investment schemes
RG 146 personal-advice competencies: Basic deposit products and general insurance
RG 146 general-advice competency: Managed investment schemes
Relevant-provider professional requirements: Not completed
Product classification:
- Term deposit: Basic deposit product
- Managed fund interest: Relevant financial product
- Home contents policy: General insurance product
Assume: Personal advice to a retail client on a relevant financial product requires relevant-provider capacity.

Which part of the requested personal advice may Maya provide herself under her current authorisation and competence?

• A. Personal advice on the managed fund and home contents policy, but not on the term deposit.
• B. Personal advice on the term deposit and managed fund, but not on the home contents policy.
• C. Personal advice on the term deposit and home contents policy, but not on the managed fund.
• D. Personal advice on all three products as part of the requested recommendation.

Best answer: C

What this tests: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Explanation: The applicable competence regime depends on the advice type, client status and financial-product class. Maya may provide personal advice to this retail client on the term deposit and home contents policy because her written authority and RG 146 personal-advice competencies cover basic deposit products and general insurance. The managed fund interest is a relevant financial product. Personal advice about it requires Maya to act in relevant-provider capacity and satisfy the associated professional requirements. Her authority and RG 146 competency for general advice on managed investment schemes do not permit a personalised managed fund recommendation. She must therefore exclude that personal advice from her own service and arrange for an appropriately authorised relevant provider to address it.

• Including the managed fund while excluding home contents insurance reverses the applicable regimes: Maya is competent for personal general-insurance advice but not personal managed-fund advice.
• Including the managed fund while excluding the term deposit similarly overlooks her RG 146 personal-advice competency for basic deposit products.
• Covering all three products incorrectly treats general-advice authority for managed investments as authority to provide personal advice on a relevant financial product.

Her RG 146 competencies and written authority cover personal advice on the basic deposit and general insurance products, while she lacks relevant-provider capacity for the managed fund.

Question 28

Topic: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Assume for this question: an AFS licensee is generally responsible for conduct relating to a financial service by its sole representative where a client could reasonably be expected to rely, relies in good faith and suffers resulting loss, even if the conduct exceeds the representative’s authority. The licensee is not responsible under these provisions if, before the conduct, it clearly and prominently disclosed that the conduct was outside the representative’s authority.

Original facts:

• Priya is an authorised representative of Northline Advice and represents no other AFS licensee.
• Her authority excludes personal advice about contracts for difference (CFDs).
• Priya advises retail client Lee to acquire a CFD.
• Lee reasonably relies in good faith and suffers a loss from following the advice.
• No prior disclosure identified the advice as outside Priya’s authority.

Northline would be responsible for Priya’s conduct on these original facts.

Changed condition: Before Priya gave the advice, Northline gave Lee a clear and prominent notice stating that Priya was not authorised to provide CFD advice and that any such advice was outside Northline’s authority. All other facts remain unchanged.

How does this changed condition affect Northline’s statutory responsibility?

• A. Northline remains responsible under these provisions unless Lee also signed a written acknowledgement accepting the authority limitation.
• B. Northline is not responsible under these provisions because the prior disclosure clearly covered the out-of-authority advice.
• C. Northline remains responsible under these provisions because Lee relied in good faith on the advice and suffered the loss.
• D. Northline remains responsible under these provisions because Priya represented no other AFS licensee when she gave the advice.

Best answer: B

What this tests: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Explanation: The statutory attribution rules can make an AFS licensee responsible for conduct relating to a financial service by its sole representative even when the representative exceeds actual authority. The original facts establish the financial service, reasonable and good-faith reliance, resulting loss, sole-licensee relationship and absence of prior disclosure. The changed condition activates the stated exception because Northline clearly and prominently disclosed, before the advice, that CFD advice was outside Priya’s authority. Northline is therefore not responsible under these particular representative-conduct provisions for Lee’s loss. This conclusion does not determine Priya’s own responsibility or whether Northline could face liability through another legal route.

• Priya’s relationship with only one licensee supports the original result but does not override the prior-disclosure exception.
• Good-faith reliance and resulting loss do not displace the specific exception established by the changed condition.
• A signed acknowledgement is not an additional requirement under the rule supplied; clear and prominent prior disclosure is sufficient.

The clear and prominent disclosure given before the advice activates the stated exception to Northline’s statutory responsibility.

Question 29

Topic: Regulatory and Legal: Advice Perimeter and Client Classification

A superannuation fund member calls a service centre while deciding whether to switch from the Capital Stable investment option to the Growth investment option. The fund’s product sheet confirms that all numerical and risk-label information below is current and accurate.

Applicable rule:

Financial product advice is a recommendation or statement of opinion intended, or reasonably regarded as intended, to influence a decision about a financial product. Mere factual information is not financial product advice.

Which employee response is financial product advice rather than factual information?

• A. The Growth option returned 8.2% last year, compared with 4.1% for Capital Stable.
• B. The Growth option is the better choice than Capital Stable for achieving long-term wealth accumulation.
• C. The Growth option has a high risk label, while Capital Stable has a low-to-medium risk label.
• D. The Growth option invests 80% in growth assets, compared with 35% for Capital Stable.

Best answer: B

What this tests: Regulatory and Legal: Advice Perimeter and Client Classification

Explanation: Financial product advice is determined by the substance and context of a communication. Neutral statements of objectively verifiable product features generally remain factual information, even when the recipient may use them to make a decision. Describing one investment option as the “better choice” adds an evaluative judgement and steers the member towards that option. It is therefore a recommendation or statement of opinion intended to influence a financial product decision. The absence of detailed consideration of the member’s personal circumstances does not turn the recommendation into factual information; it affects whether the advice is general or personal, which is a separate classification.

• The asset-allocation percentages objectively describe the investment options without endorsing either one.
• The risk labels neutrally report existing product classifications without suggesting a preferred choice.
• The historical returns report past data without recommending that the member switch investment options.

Describing Growth as the better choice expresses an opinion intended to influence the member’s financial product decision.

Question 30

Topic: Advice Construction: Evaluation, Implementation, and Review

Priya, a relevant provider, completes an annual review with retail clients Sam and Elise on 14 May.

Review findings:

• Their emergency reserve has fallen from the agreed $15,000 target to $8,000 after urgent home repairs.
• Their life insurance remains appropriate.
• Their superannuation growth exposure has increased from 65% to 78% following market movements.
• Their binding beneficiary nominations expire on 30 June.

Client decisions and implementation:

• Both clients accept Priya’s recommendation to pause their $700 monthly managed-fund contribution and redirect it to savings. The instruction has been lodged but not confirmed.
• Elise accepts a superannuation rebalance, which the provider has confirmed.
• Sam declines the same rebalance because he does not want to sell after a market fall. Priya discusses the additional volatility and loss risk with him.
• The clients agree to return correctly witnessed nomination forms by 21 May. Priya agrees to submit them and confirm acceptance by 28 May.
• Priya agrees to follow up the pending contribution instruction by 17 May.

Which recordkeeping action should Priya take immediately after the review?

• A. Create a dated record now covering all review findings, client decisions and reasons, departures and risk discussions, implementation status, unresolved issues, and the agreed owner and due date for each follow-up.
• B. Create a dated record now covering all review findings, accepted client decisions and reasons, implementation status, unresolved issues, and agreed follow-ups, while carrying Sam’s declined rebalance forward to the next annual review record.
• C. Create a dated record now covering all review findings, client decisions and reasons, departures and risk discussions, implementation status and unresolved issues, with the clients responsible for the nomination through provider confirmation.
• D. Create a consolidated record after both providers confirm completion, covering all review findings, client decisions and reasons, departures and risk discussions, implementation outcomes, issues encountered, and the completed follow-up actions.

Best answer: A

What this tests: Advice Construction: Evaluation, Implementation, and Review

Explanation: A contemporaneous client record should show what the review identified, what advice was given, what each client decided and why, and any departure from the advice. It should also distinguish completed implementation from pending actions and unresolved matters. Sam’s decision not to rebalance, including the risk discussion, is material even though no transaction follows from it. The record should identify responsibility and timing accurately: the clients must return the witnessed forms, while Priya must submit them and confirm acceptance. Priya also owns the follow-up on the unconfirmed contribution instruction. Waiting until every action is complete would obscure the position immediately after the review and increase the risk of incomplete or reconstructed records.

• Deferring Sam’s declined rebalance omits a material current client decision and risk discussion.
• Waiting for provider confirmations fails to document the pending implementation position contemporaneously.
• Making the clients responsible through nomination confirmation misstates Priya’s agreed submission and confirmation duties.

This creates a contemporaneous and complete record of the review, decisions, implementation progress and agreed responsibilities.

Question 31

Topic: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Priya is a relevant provider and a non-executive director of River Ltd. A retail client seeks personal advice about whether to accept a takeover offer for River shares, while River’s board is urging shareholders to reject it. Priya receives the same advice fee regardless of her recommendation.

Which circumstance gives rise to an actual conflict of duty for Priya?

• A. Her duty to investigate the offer while considering River’s published board recommendation
• B. Her duty to assess the offer while charging the same fee for either recommendation
• C. Her duty to the client while owing director duties and loyalty to River
• D. Her duty to explain the risks while the client already owns River shares

Best answer: C

What this tests: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Explanation: An actual conflict exists when a provider’s personal interests, loyalties or duties to another party compete with the duty owed to the client. Priya owes professional duties to provide advice serving the client’s interests, but she also owes director duties and loyalty to River. The client may be better served by accepting the takeover offer even though River’s board wants shareholders to reject it. These concurrent duties therefore pull Priya in opposing directions. Under the Code of Ethics, merely disclosing an actual conflict does not remove it. By contrast, receiving the same fee regardless of the recommendation does not create a competing incentive, and neither using public information nor advising a client who already owns the shares establishes a provider conflict by itself.

• A fixed fee payable for either recommendation does not create a product-dependent financial incentive.
• Considering publicly released board material is part of analysing the offer, not a competing duty.
• The client’s existing shareholding affects suitability and risk but does not create a conflict for the provider.

Advice serving the client’s interests could conflict with Priya’s separate duties and loyalty to River as its director.

Question 32

Topic: Regulatory and Legal: Best Interests and Appropriate Advice

An adviser gives personal advice to a retail client to replace an existing superannuation fund with a lower-fee fund. The advice projects annual fee savings of $1,200 and similar investment exposure, but acting on it would cancel $750,000 of life and TPD cover that cannot be replaced because of a recent diagnosis; the client has a mortgage, two dependent children and no other cover. Which conclusion best evaluates whether the replacement advice is appropriate?

• A. The advice is inappropriate because the fee saving does not justify losing cover that cannot be replaced.
• B. The advice is appropriate if the adviser clearly discloses the insurance loss before the client decides.
• C. The advice is inappropriate because similar investment exposure means the proposed fund offers no material client benefit.
• D. The advice is appropriate because the lower fees should improve the client’s retirement position despite the insurance change.

Best answer: A

What this tests: Regulatory and Legal: Best Interests and Appropriate Advice

Explanation: Appropriateness is assessed by considering the likely consequences if the client follows the personal advice, rather than focusing on one product feature. For replacement advice, the adviser must weigh benefits against costs, risks and lost features in light of the client’s circumstances. The $1,200 annual fee saving is a benefit, but acting on the advice would remove substantial life and TPD cover that meets an important protection need and cannot be replaced. The mortgage, dependent children and absence of other cover make that loss particularly significant. Clear disclosure may support informed decision making, but it does not by itself make advice appropriate when the overall expected effect is unsuitable.

• Focusing on lower fees overlooks the material and irreplaceable loss of insurance protection.
• Disclosure of the insurance loss does not substitute for providing appropriate personal advice.
• Similar investment exposure does not eliminate the stated fee benefit; the decisive concern is the greater insurance loss.

The expected loss of irreplaceable insurance protection outweighs the projected fee benefit given the client’s financial responsibilities.

Question 33

Topic: Advice Construction: Evaluation, Implementation, and Review

An adviser is providing personal advice to a retail client who wants to simplify her superannuation while maintaining at least $700,000 of life cover.

Existing position:

• Fund A holds $180,000, provides $750,000 of life cover and has higher ongoing fees.
• Fund B holds $70,000, provides $300,000 of life cover and offers suitable investments at lower cost.
• Fund A permits a partial rollover. Retaining $10,000 will keep the account open and fund premiums until the scheduled annual review.
• There are no material transaction or tax consequences from a rollover.

The initial strategy was to obtain $750,000 of accepted cover in Fund B and then roll all of Fund A into Fund B.

Changed condition: Fund B’s insurer declines the additional cover because of a recent diagnosis. Fund A confirms its existing cover remains in force.

How should the changed condition affect the recommendation?

• A. Roll all $70,000 from Fund B to Fund A, direct future contributions to Fund A and review lower-cost investment alternatives at the next annual review.
• B. Retain the full balances in both funds, direct future contributions to Fund B and reconsider consolidation at the next annual review.
• C. Retain $10,000 in Fund A, roll $170,000 to Fund B, direct future contributions to Fund B and monitor Fund A’s premiums and cover.
• D. Roll all $180,000 from Fund A to Fund B, accept the existing $300,000 cover and reconsider additional cover if the client’s health improves.

Best answer: C

What this tests: Advice Construction: Evaluation, Implementation, and Review

Explanation: Replacement and consolidation advice must consider the client’s entire position, not fees or account simplicity in isolation. The underwriting decision means a full rollover from Fund A would close the account and sacrifice life cover that currently meets the client’s stated need. However, preserving that cover does not require retaining the whole Fund A balance. A partial rollover allows most of the balance to benefit from Fund B’s lower costs and suitable investments while $10,000 remains in Fund A to maintain the existing insurance. Monitoring is necessary because premiums reduce the retained balance and the cover must remain in force. This approach balances insurance protection, costs, investment suitability and account consolidation.

• Keeping both balances preserves cover but forgoes an available partial rollover and retains avoidable higher fees.
• A full rollover to Fund B would reduce life cover below the client’s stated requirement after additional cover was declined.
• Consolidating into Fund A preserves cover but unnecessarily moves the entire position into the higher-cost fund.

This preserves the required existing cover while achieving most of the available fee and consolidation benefits.

Question 34

Topic: Advice Construction: Context, Scope, and Client Engagement

A relevant provider is giving personal advice to a retail client about an investment. The client says the opportunity may close today and pressures the provider to act while some applicable advice-process steps remain incomplete. Which response best reflects the provider’s responsibility?

• A. Agree on a limited scope, disclose its boundaries, and implement once the client confirms in writing that the investment is their preferred choice.
• B. Prioritise the remaining work, but implement only after each applicable inquiry, disclosure, consent, suitability and recordkeeping requirement has been met when due.
• C. Provide provisional advice from the available information, obtain the client’s consent, and verify any missing information at an early follow-up.
• D. Treat the request as execution-only, obtain written instructions, and implement while completing the outstanding advice records promptly afterwards.

Best answer: B

What this tests: Advice Construction: Context, Scope, and Client Engagement

Explanation: Client urgency is a practical timing consideration, not an exception to applicable legal and ethical safeguards. A provider may prioritise the engagement and complete the process efficiently, but must still make necessary inquiries, assess suitability, provide required disclosure, obtain informed consent and maintain required records at the proper stages. A client cannot waive these protections merely by accepting the risks or giving written instructions. Limited advice remains personal advice and must have a reasonable scope supported by sufficient information. Similarly, calling a transaction execution-only does not change its character when the provider’s recommendation influenced the client’s decision. If a sound basis for advice or implementation has not been established, the provider must not allow time pressure to determine the outcome.

• A limited scope does not permit implementation based merely on the client’s written product preference.
• Written instructions do not convert adviser-influenced personal advice into an execution-only service.
• Client consent does not cure insufficient information or allow suitability to be verified after implementation.

Client urgency may justify accelerating the process, but it does not displace applicable advice obligations.

Question 35

Topic: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

In March 2026, the following baseline applies:

• Southern Cross Advice Pty Ltd holds an AFS licence.
• Mei is its authorised representative and is authorised to provide personal advice to retail clients on relevant financial products.
• Mei has completed the education, exam and professional-year requirements under Jordan, an appointed supervisor and registered relevant provider.
• Southern Cross has updated Mei’s Financial Advisers Register appointment, but her ASIC registration application is pending. Her personal-advice work is paused.

Changed condition: ASIC now registers Mei. No other fact changes.

How does this change Mei’s role and authority?

• A. Mei remains both an authorised representative and a provisional relevant provider; she may advise within her authorisation only while Jordan continues professional-year supervision.
• B. Mei is both an authorised representative and a supervisor; registration itself permits her to supervise provisional relevant providers and use the title “financial adviser”.
• C. Mei remains an authorised representative only; Southern Cross is the relevant provider because its AFS licence covers the personal-advice service.
• D. Mei is both an authorised representative and a relevant provider; she may advise within her authorisation without professional-year supervision and use the title “financial adviser”.

Best answer: D

What this tests: Regulatory and Legal: Licensing, Relevant Providers, and Professional Standards

Explanation: An AFS licensee is the entity holding the licence, while an authorised representative is a person or entity authorised to provide specified financial services on the licensee’s behalf. A provisional relevant provider gives relevant personal advice within the professional-year authorisation and supervision framework. After completing that year, the individual must have the required appointment reflected on the Financial Advisers Register and be registered by ASIC before advising as a relevant provider. Mei has now satisfied those conditions. Her authorised representative status continues, but she is also a relevant provider and no longer requires professional-year supervision. Registration does not automatically make her a supervisor, because that role requires separate eligibility and appointment.

• Provisional status applies during the professional year; continued professional-year supervision is not required after the stated completion and registration steps.
• ASIC registration does not itself appoint or qualify Mei to supervise provisional relevant providers.
• Southern Cross remains the AFS licensee, but Mei is the relevant provider who is authorised and registered to give the retail personal advice.

Registration permits Mei to advise as a relevant provider following completion of her professional year and the updated appointment.

Question 36

Topic: Advice Construction: Evaluation, Implementation, and Review

An adviser is comparing retaining, replacing, varying, consolidating or adding to a retail client’s existing position. Which evaluation approach best reflects whole-of-client consequences?

• A. Assess each alternative against retaining the current position, comparing cumulative costs, benefits, risks, lost features, interactions and effects on the client’s broader objectives.
• B. Assess each alternative against comparable market products, comparing projected returns, fees, service levels, product risks and outcomes over the intended holding period.
• C. Assess each alternative independently against the client’s risk profile, comparing fees, performance, tax effects, implementation risks and projected outcomes before selecting the strongest position.
• D. Assess each alternative against the objective prompting the review, comparing costs, benefits, risks, features and outcomes within the affected advice area.

Best answer: A

What this tests: Advice Construction: Evaluation, Implementation, and Review

Explanation: Whole-of-client evaluation begins with the current position as a genuine alternative, not with an assumption that change is preferable. Retaining, replacing, varying, consolidating and adding should be compared by considering cumulative costs, benefits and risks. The adviser should also examine lost features, transaction consequences, product interactions and effects on matters such as cash flow, liquidity, insurance, tax and broader objectives where relevant. A product that appears superior in isolation may be unsuitable when its effects on the client’s complete position are considered. Likewise, lower fees or higher projected returns do not by themselves establish that replacement or consolidation is appropriate.

• Market-product comparison focuses too narrowly on product metrics and does not adequately assess the client’s existing position or broader circumstances.
• Limiting the assessment to the immediate advice area can overlook material consequences elsewhere in the client’s position.
• Independent product assessment can miss cumulative risks, duplication and interactions between existing and proposed arrangements.

This approach considers both the existing position and the combined effects of each alternative across the client’s circumstances and objectives.

Question 37

Topic: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

An Australian relevant provider is preparing personal advice for a retail client comparing two managed funds. An independent assessment finds Fund A better meets the client’s cost, liquidity and risk requirements than Fund B.

Baseline: The adviser receives a fixed salary and is assessed against service standards that are unrelated to product selection or revenue. Neither fund is affiliated with the licensee.

Changed condition: Before the recommendation is given, the adviser’s manager offers a $4,000 personal bonus, with favourable promotion consideration, if the client invests in Fund A. The bonus applies only if the investment proceeds, and the manager says it can be disclosed to the client.

How should the changed condition affect the adviser’s action?

• A. Recommend Fund B instead, documenting that no bonus was accepted and that the conflict was avoided.
• B. Recommend Fund A after disclosing the bonus and obtaining the client’s written informed consent.
• C. Decline to recommend either fund while the bonus applies and seek removal of the product-linked incentive.
• D. Recommend Fund A after an independent adviser verifies the comparison and records the client’s benefit.

Best answer: C

What this tests: Ethics and Professional Reasoning: Integrity, Best Interests, and Conflicts

Explanation: The bonus and promotion consideration create a direct personal interest in the client’s product decision. Under Standard 3 of the Financial Planners and Advisers Code of Ethics, an adviser must not advise, refer or otherwise act where the adviser has a conflict of interest or duty. Disclosure and client consent do not cure that conflict. The fact that Fund A was independently assessed as suitable does not remove the adviser’s financial interest in recommending it. The adviser should stop the recommendation process while the incentive applies and seek its removal. If the incentive is removed without any residual consequence, the adviser may reassess the circumstances and proceed on the merits of the client’s interests.

• Client consent cannot cure the conflict created by the product-linked personal benefit.
• Independent verification may reduce bias risk but does not remove the adviser’s financial interest.
• Selecting the less suitable fund still allows the incentive to distort the advice and may harm the client.

The product-linked bonus creates a conflict that disclosure cannot cure, so the adviser must not provide the recommendation while it applies.

Question 38

Topic: Regulatory and Legal: Disclosure, Advertising, and Advice Records

Jordan is a relevant provider giving further personal advice to four retail clients. Jordan provided each client’s earlier advice, and no other exception to the Statement of Advice (SOA) requirement applies.

Assume a Record of Advice (RoA) may replace a new SOA only when the client previously received an SOA and neither the client’s relevant personal circumstances nor the basis of the advice has changed significantly.

Client file summary:

For which client may Jordan use an RoA for the current advice?

• A. Chloe, for the revised investment advice
• B. Dev, for the new investment strategy advice
• C. Ben, for the portfolio rebalancing advice
• D. Amira, for the portfolio rebalancing advice

Best answer: D

What this tests: Regulatory and Legal: Disclosure, Advertising, and Advice Records

Explanation: An RoA may be used for further personal advice when it remains sufficiently connected to advice previously documented in an SOA. The client must have received that earlier SOA, the client’s relevant personal circumstances must not be significantly different, and the basis of the further advice must not be significantly different.

Amira’s rebalancing advice continues the strategy documented in her earlier SOA, with no significant change in her circumstances or the advice basis. A prior RoA without an earlier SOA does not satisfy the requirement. A material change in liquidity or risk capacity requires the adviser to reconsider suitability and generally provide a new SOA. Similarly, recommending gearing introduces a significantly different basis from an earlier diversified, ungeared strategy, even if the client’s circumstances remain unchanged.

• Ben has never received an SOA, so the earlier RoA cannot provide the required connection.
• Chloe’s materially reduced liquidity and risk capacity represent significant changes in relevant personal circumstances.
• Dev’s proposed geared strategy has a significantly different basis from the strategy documented in the earlier SOA.

Amira previously received an SOA, and neither her relevant personal circumstances nor the basis of the advice has changed significantly.

Question 39

Topic: Regulatory and Legal: Remuneration, Advice Fees, and Conflicts

Priya is a relevant provider who gives personal advice to retail clients about managed funds. On 15 August 2026, a fund issuer offers her a $275 ticket to its quarterly adviser forum. The agenda includes a market update, product workshop and networking meal. Eligibility requires at least five recommendations of the issuer’s products during the preceding quarter; Priya made six.

Assume for this question that the small non-monetary-benefit exclusion applies only when the benefit is worth less than $300 to each final recipient and identical or similar benefits are not given frequently or regularly. No other exclusion or exception applies.

Priya’s benefits register:

How should Priya treat the latest ticket?

• A. Classify the ticket as non-influential past-business recognition and accept it after obtaining licensee approval.
• B. Classify the ticket as conflicted remuneration and decline it before attending the forum.
• C. Classify the ticket under the small-benefit exclusion and accept it after recording the benefit.
• D. Classify the ticket as non-influential educational support and accept it after disclosing the sponsor.

Best answer: B

What this tests: Regulatory and Legal: Remuneration, Advice Fees, and Conflicts

Explanation: A benefit can be conflicted remuneration when it could reasonably be expected to influence the financial products recommended or the financial-product advice given. The issuer awards the ticket according to the number of recommendations made, creating a clear connection between product advice and receipt of the benefit. Although the $275 value is below $300, every condition of the supplied exclusion must be satisfied. Priya has received substantially identical tickets from the same issuer each quarter, so the benefits are given regularly. The ticket therefore does not qualify for the small non-monetary-benefit exclusion. Its educational content, retrospective eligibility period, disclosure or licensee approval does not remove the recommendation-linked influence or satisfy the failed frequency condition.

• A value below $300 satisfies the monetary threshold but not the separate restriction on frequent or regular benefits.
• Educational content does not remove the recommendation-based eligibility or create an exception under the supplied rule.
• Rewarding completed recommendations can influence future advice within an ongoing quarterly program; licensee approval does not change that classification.

The recommendation-linked ticket could reasonably influence Priya’s advice, and the quarterly benefits fail the exclusion’s frequency condition.

Question 40

Topic: Advice Construction: Consumer Behaviour and Decision Making

Maria, a retail client, wants to invest a substantial part of her portfolio in a technology ETF. She supplies articles supporting strong artificial intelligence growth but dismisses credible valuation and concentration concerns as irrelevant. She asks her adviser to rely only on her preferred sources.

Which TWO responses would most directly address Maria’s demonstrated behavioural bias before advice is provided? Select TWO.

• A. Explore with Maria how selectively accepting supportive articles reflects confirmation bias and may distort her decision.
• B. Review credible research that challenges the ETF thesis and agree what evidence would justify changing course.
• C. Pause the process for one week and then revisit Maria’s supplied articles to reassess her level of conviction.
• D. Repeat Maria’s risk-profile questionnaire and use the result to confirm whether the ETF’s volatility is acceptable.
• E. Compare several technology ETFs and use relative performance to select the strongest fund within Maria’s preferred theme.

Correct answers: A, B

What this tests: Advice Construction: Consumer Behaviour and Decision Making

Explanation: Confirmation bias involves favouring information that supports an existing belief while discounting evidence that challenges it. Maria demonstrates this bias by relying on favourable articles and dismissing credible concerns about valuation and concentration. The adviser should help her recognise the selective reasoning and deliberately test the preferred investment thesis against reliable contrary evidence. Agreeing in advance what evidence could change her view also reduces the tendency to reinterpret every new fact as support. Risk profiling, comparison and a pause may contribute to a broader advice process, but they do not directly correct the selective search for and interpretation of information unless disconfirming evidence is considered.

• Repeating the risk profile assesses risk tolerance but does not test Maria’s selective interpretation of evidence.
• Comparing only technology ETFs leaves the preferred investment theme and its underlying assumptions unchallenged.
• A pause may reduce impulsiveness, but reconsidering the same supportive material does not introduce disconfirming evidence.

Maria’s selective acceptance of supporting information while dismissing contrary evidence demonstrates confirmation bias.

Actively testing the preferred thesis against contrary evidence helps counter confirmation bias.

Question 41

Topic: Regulatory and Legal: AML/CTF, Privacy, and Tax Financial Advice

Harbour Advice is considering whether Jordan Lee may provide and advertise tax (financial) advice services.

Assume for this question that qualified tax relevant provider status depends on satisfying the substantive education and training requirements. A valid permanent exemption satisfies the specified-course requirement. An AFS licensee’s permission and ASIC notification are separate duties and do not create that status. Advertising the service while not qualified attracts a Subdivision 50-AA civil penalty.

Compliance file:

Relevant provider registration: Current
Other education and training requirements: Met
Specified course: Not completed
Permanent exemption: Valid and applicable
Licensee permission for tax advice: Pending
ASIC status notice: Not lodged
Financial Advisers Register display: Not qualified
Draft webpage: "Tax (financial) advice from Jordan Lee"

Which conclusion and next step should Harbour Advice adopt?

• A. Jordan is already qualified; Harbour may grant permission before he advises, lodge the ASIC notice and publish without awaiting the register update.
• B. Jordan becomes qualified when Harbour grants permission; Harbour may then lodge the ASIC notice and publish without awaiting the register update.
• C. Jordan remains unqualified until completing the specified course; Harbour should defer permission, advice and publication and notify ASIC after course completion.
• D. Jordan becomes qualified when ASIC updates the register; Harbour should lodge the notice but defer permission, advice and publication until the update appears.

Best answer: A

What this tests: Regulatory and Legal: AML/CTF, Privacy, and Tax Financial Advice

Explanation: Qualified tax relevant provider status is determined by the substantive statutory criteria. Jordan is a registered relevant provider, meets the other education and training requirements and has a valid permanent exemption that satisfies the specified-course requirement. He is therefore already qualified despite the pending licensee permission, missing ASIC notification and outdated register display.

Harbour must separately permit Jordan to provide the service and lodge the required notification. The public register records the status but does not create it. Once Harbour has addressed the permission requirement, publication need not wait for the register to update. The Subdivision 50-AA advertising penalty applies when a person advertising tax (financial) advice services is not qualified; an outdated register display alone does not trigger that penalty.

• Licensee permission is required before providing the service, but it does not confer qualified status.
• The Financial Advisers Register records status rather than creating it, so a delayed display is not decisive.
• A valid permanent exemption satisfies the specified-course requirement, making further course completion unnecessary for that requirement.

The valid permanent exemption satisfies the course requirement, while permission, notification and the register display remain separate matters.

Question 42

Topic: Advice Construction: Client Discovery and Consumer Profiles

Priya is a relevant provider preparing personal advice for a retail client who wants to invest a $180,000 inheritance in managed funds.

The client’s signed fact-find is 11 months old and records full-time employment, a $280,000 mortgage and $35,000 in cash reserves. During the current meeting, the client says that:

• employment recently changed to variable contract work;
• the mortgage is “about $250,000”, although a banking screenshot shows $315,000; and
• there is no planned major spending, but $50,000 of home repairs may begin within 12 months.

Which TWO actions should Priya take before concluding that a recommendation is suitable? Select TWO.

• A. Apply conservative values to each disputed figure, document the assumptions and complete the suitability assessment using the least favourable scenario.
• B. Defer the suitability conclusion until reliable information supports an assessment of the client’s cash flow, liquidity and risk capacity.
• C. Prepare provisional advice using range modelling, disclose the uncertainties and obtain the missing evidence before submitting any product application.
• D. Make reasonable inquiries into the changed circumstances, seeking proportionate current evidence and reconciling the conflicting financial figures.
• E. Retain the signed fact-find as the baseline, update the contract income and verify the remaining figures at the next annual review.

Correct answers: B, D

What this tests: Advice Construction: Client Discovery and Consumer Profiles

Explanation: When it is reasonably apparent that material client information is incomplete, inaccurate or outdated, an adviser must make reasonable inquiries before relying on it. The employment change, inconsistent mortgage figures and possible repair expense could materially affect cash flow, liquidity and capacity to bear investment losses. A previously signed fact-find does not remove the need to update these circumstances.

Conservative assumptions and range modelling can support analysis after the relevant facts have been investigated, but they do not replace reasonable inquiries. If important information remains unavailable, the adviser must not claim that advice is suitable without a sufficient basis. A warning about incomplete or inaccurate information may also be required if advice is based on it, but a warning does not make otherwise inappropriate advice suitable.

• Conservative assumptions do not resolve the client’s actual debt, income or liquidity position.
• Updating only contract income leaves other material and conflicting information stale or unverified.
• Issuing provisional advice before resolving material gaps reverses the required sequence; later verification cannot support an earlier suitability conclusion.

The stale and conflicting material facts require reasonable inquiries and proportionate current evidence to establish the client’s relevant circumstances.

Suitability cannot be supported while material uncertainties affecting cash flow, liquidity and risk capacity remain unresolved.

Question 43

Topic: Ethics and Professional Reasoning: Client Care and Informed Consent

Before recommending a personal advice strategy, an adviser considers its broad and long-term effects on a retail client. Which approach best identifies the material effects that should inform the advice?

• A. Assess material effects on future liquidity, dependants, insurance, debt, taxation, estate intentions, retirement and foreseeable changes in the client’s circumstances.
• B. Assess expected product performance, fees and investment risk over the recommended holding period, while treating other household matters as outside the advice.
• C. Assess the immediate stated objective and current affordability, while postponing foreseeable life changes and longer-term consequences until the next scheduled review.
• D. Assess completion of disclosure and consent requirements, while treating compliance with those processes as sufficient evidence that the advice serves future interests.

Best answer: A

What this tests: Ethics and Professional Reasoning: Client Care and Informed Consent

Explanation: An adviser must look beyond whether a strategy meets the client’s immediate objective. Material effects may include reduced access to cash, debt-servicing pressure, changing responsibilities to dependants, insurance needs, taxation consequences, estate intentions and retirement outcomes. Foreseeable developments such as parental leave, retirement, illness or changes in employment may alter whether the strategy remains suitable. The relevance and weight of each effect depend on the client’s circumstances; not every category will be material in every case. A limited advice scope does not justify ignoring a foreseeable consequence that could materially affect the client’s interests. Disclosure and informed consent are important but do not replace substantive consideration of broader and longer-term effects.

• Product performance, fees and risk are relevant, but a product-only assessment is too narrow when household consequences may be material.
• Focusing on immediate affordability improperly defers foreseeable consequences that should inform the current advice.
• Disclosure and consent establish procedural protections but do not demonstrate that wider client effects have been assessed.

This approach considers how the strategy could materially affect the client’s broader circumstances and long-term interests.

Question 44

Topic: Ethics and Professional Reasoning: Values, Law, and Professionalism

An Australian financial advice practice has fewer adviser appointments than client requests. Which allocation policy best reflects fairness as a paramount professional value?

• A. Prioritise expected fee revenue using transparent criteria applied consistently across clients.
• B. Prioritise documented urgency and access needs using transparent criteria applied consistently across clients.
• C. Prioritise the order requests are received using transparent criteria applied identically across clients.
• D. Prioritise equal appointment quotas for each service type using transparent criteria regardless of demand.

Best answer: B

What this tests: Ethics and Professional Reasoning: Values, Law, and Professionalism

Explanation: Fairness is not necessarily identical treatment. When access to advice is limited, relevant differences such as urgency and barriers to access can justify different priority. The criteria should be objective, transparent and consistently applied. This distributes appointments according to relevant client circumstances rather than commercial value, timing advantages or arbitrary categories. A process can appear neutral while still producing unfair access. For example, strict request-time priority may disadvantage people who encounter barriers when making an appointment. Fairness therefore involves both the allocation criteria and the procedure used to apply them.

• Request-time priority appears neutral but does not account for relevant differences in urgency or access barriers.
• Expected-fee priority allows the practice’s commercial interest to determine access rather than relevant client circumstances.
• Equal service-type quotas rely on an arbitrary category and may not reflect client need or actual demand.

Fairness permits different treatment based on relevant client needs when objective criteria are applied transparently and consistently.

Question 45

Topic: Ethics and Professional Reasoning: Client Care and Informed Consent

Mara, 55, seeks personal advice about a $180,000 inheritance and says her immediate priority is obtaining available superannuation tax concessions. She expects to reduce work to three days a week in two years to care for her father and replace her roof around the same time; she also has a mortgage with an offset account and cash equal to three months’ expenses. The agreed scope covers superannuation contributions, mortgage reduction and cash reserves. Which advice approach best evaluates Mara’s broader and likely long-term interests?

• A. Model mortgage savings through the caregiving period, retain the inheritance in the offset account, and reconsider super after work reduces.
• B. Model retirement outcomes using current work hours, divide the inheritance between super and the mortgage, and retain the existing cash buffer.
• C. Model retirement outcomes using current earnings, maximise eligible super contributions, and direct the remaining inheritance to the mortgage.
• D. Model reduced-work cash flow and roof costs, then balance super, mortgage reduction and accessible reserves against retirement adequacy.

Best answer: D

What this tests: Ethics and Professional Reasoning: Client Care and Informed Consent

Explanation: A client’s immediate objective is important, but advice should also consider its broad and likely long-term effects. Mara’s foreseeable reduction in earnings and planned roof replacement affect her future cash flow, liquidity needs and ability to service debt. Superannuation may provide tax and retirement benefits, while mortgage reduction and accessible reserves may strengthen financial resilience. These considerations should be modelled together before determining an appropriate allocation. Focusing solely on current tax concessions, liquidity or present earnings would not adequately account for Mara’s likely circumstances or the trade-offs affecting her longer-term interests.

• Maximising super based on current earnings relies on an assumption that conflicts with the planned reduction in work.
• Retaining the entire inheritance in the offset account prioritises liquidity without evaluating the potential retirement trade-off.
• Using current work hours and the existing buffer fails to account for the foreseeable income reduction and roof expense.

This approach incorporates foreseeable lower earnings and major expenditure while weighing liquidity, debt and retirement outcomes together.

Question 46

Topic: Advice Construction: Context, Scope, and Client Engagement

Priya is a relevant provider and authorised representative of Horizon Advice Pty Ltd. Horizon’s engagement letter limits her services to personal advice on superannuation and managed investments, excludes legal services and tax-return preparation, and requires Daniel’s instructions before implementation. Daniel was referred by his accountant and assumes Priya works for the accounting firm and can update his will and lodge his tax return. Which response should Priya give before proceeding?

• A. Your engagement is with Horizon for superannuation and managed-investment advice. I act as Horizon’s authorised representative; the referral creates no accounting-firm role, will and tax-return work is separate, and accepting advice authorises implementation.
• B. Your engagement is jointly with Horizon and the accounting firm for superannuation and managed-investment advice. I act as their shared adviser; will and tax-return work is separate, and implementation requires your instructions.
• C. Your engagement is with Horizon for superannuation and managed-investment advice. I act as Horizon’s authorised representative; the referral creates no accounting-firm role, will and tax-return work is separate, and implementation requires your instructions.
• D. Your engagement is with the accounting firm, which has retained Horizon for superannuation and managed-investment advice. I report through the accountant; will and tax-return work is separate, and implementation requires your instructions.

Best answer: C

What this tests: Advice Construction: Context, Scope, and Client Engagement

Explanation: An adviser should ensure the client understands who provides the service, the capacity in which the adviser acts, what the agreed scope includes and excludes, and what authority has been granted. The engagement letter identifies Horizon as the advice firm and Priya as its authorised representative. The accountant’s referral does not create a joint engagement or make Priya part of the accounting firm. Priya can advise within the stated superannuation and managed-investment scope, while updating a will and preparing or lodging a tax return remain outside it. Daniel also retains control over implementation because further instructions are required. Clear boundaries prevent mistaken expectations about responsibility, specialist services and authority.

• A referral does not create a joint engagement; the engagement letter names Horizon as the advice firm.
• The accountant has not retained Horizon, and Priya does not report through the accountant.
• Accepting advice does not replace the instructions required before implementation.

Horizon is the named advice firm, Priya acts as its authorised representative, the specialist work is excluded, and Daniel retains implementation authority.

Question 47

Topic: Ethics and Professional Reasoning: Values, Law, and Professionalism

Which statement best explains why the Financial Planners and Advisers Code of Ethics 2019 applies to relevant providers and how this supports their professional status?

• A. It is a statutory ethical standard that relevant providers must follow personally, reinforcing consistent conduct, accountability and public confidence in financial advice.
• B. It is a licensee governance standard that applies through each provider’s authorisation, reinforcing consistent supervision, monitoring and public confidence in advice businesses.
• C. It is a professional association standard that applies through membership, reinforcing peer discipline, credential recognition and public confidence in association members.
• D. It is a voluntary practice standard that providers may adopt beyond the law, reinforcing ethical aspiration, professional development and public confidence in advisers.

Best answer: A

What this tests: Ethics and Professional Reasoning: Values, Law, and Professionalism

Explanation: The Code applies to relevant providers through the statutory professional standards framework. It establishes personal ethical responsibilities based on shared professional values and standards, rather than operating merely as an employer policy or industry aspiration. The Code complements other legal obligations and may require more than technical compliance with financial services law. By requiring trustworthy, competent, honest, fair and diligent conduct, it gives clients and the wider community a consistent basis for judging adviser behaviour. Personal accountability to these standards supports public confidence and helps distinguish financial advice as a profession carrying obligations to clients, the community and fellow practitioners.

• The licensee governance framing confuses a licensee’s supervisory responsibilities with the provider’s personal duty to comply with the Code.
• Professional association membership does not determine whether the Code applies to a relevant provider.
• Treating the Code as voluntary understates its status within the statutory professional standards framework.

The Code imposes personal ethical obligations on relevant providers and promotes the trustworthy, accountable conduct expected of a profession.

Question 48

Topic: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

A relevant provider is reviewing the archived file of Mira, a former retail client who left the practice last month. The following is all the evidence located.

Standard 8: You must ensure that your records of clients, including former clients, are kept in a form that is complete and accurate.

12 March file note: "Mira declined income protection advice. No follow-up required."
13 March client email: "I have not declined. Please send the revised comparison after using my updated occupation details."
CRM record: No correction, response or revised comparison is recorded.

Which action should the provider take to comply with Standard 8?

• A. Preserve the original note, add a dated correction recording that the decision remained pending, and link the email to the client file.
• B. Preserve the original note, attach the email without a correction, and allow the two contemporaneous records to remain unresolved.
• C. Preserve the original note, add a clarification confirming that Mira declined, and link the email as evidence of her earlier uncertainty.
• D. Replace the original note with a corrected note recording that the decision remained pending, and remove the superseded note from the file.

Best answer: A

What this tests: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Explanation: Standard 8 applies to records of both current and former clients. A complete and accurate file should show what was originally recorded, the evidence revealing the error, and the subsequent correction. The client’s email directly contradicts the file note and is the latest available evidence of her decision. A dated correction should therefore record that the matter remained pending and should be linked to the email. Preserving the original note maintains the chronology and avoids concealing how the error arose. Former-client status does not justify leaving a known inaccuracy unresolved or removing part of the record.

• Merely attaching the email leaves a known contradiction unresolved and the recorded client position unclear.
• Removing the original note loses part of the file history and makes the record less complete.
• Confirming a decline is inconsistent with the client’s email and is unsupported by the available evidence.

This preserves the record’s history while correcting the inaccurate account using the available documentary evidence.

Question 49

Topic: Advice Construction: Consumer Behaviour and Decision Making

An existing client approaching retirement remains in the growth investment option selected 12 years ago, despite a substantially shorter investment horizon. The client says, “I have not compared the alternatives; leaving it unchanged is easier.” Which behavioural influence is most clearly demonstrated?

• A. Loss aversion
• B. Status quo bias
• C. Anchoring bias
• D. Recency bias

Best answer: B

What this tests: Advice Construction: Consumer Behaviour and Decision Making

Explanation: Status quo bias, or inertia, is a preference for maintaining an existing position rather than actively reconsidering it. The key indicator is not simply that the client retains the growth option, but that the client does so because leaving it unchanged is easier and without comparing alternatives after a material change in investment horizon. The existing position may or may not remain suitable; the behavioural concern is the absence of a fresh evaluation. An adviser should recognise that defaulting to the current arrangement can prevent an informed assessment of whether it still supports the client’s circumstances and objectives.

• Loss aversion would involve a strong preference to avoid losses rather than a preference for avoiding the effort of change.
• Anchoring would involve relying excessively on an initial value, forecast or reference point.
• Recency bias would involve giving disproportionate weight to recent events or performance.

The client prefers leaving the existing position unchanged without assessing whether it remains suitable.

Question 50

Topic: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

A financial adviser asks what Standard 12 of the Financial Planners and Advisers Code of Ethics requires beyond meeting ethical duties in their own client work. Which statement gives the best answer?

• A. Maintain and apply relevant knowledge and skills when providing financial advice to protect client interests.
• B. Cooperate with ASIC and applicable monitoring bodies when potential breaches of the Code are investigated.
• C. Promote ethical standards with peers and hold one another accountable to protect the public interest.
• D. Keep complete and accurate records of services and advice so professional conduct can be demonstrated.

Best answer: C

What this tests: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

Explanation: Standard 12 extends ethical responsibility beyond an adviser’s own client work. Advisers must uphold and promote the profession’s ethical standards, both individually and in cooperation with peers. They must also hold one another accountable, with protection of the public interest as the governing purpose. This means professional ethics are not treated solely as a private matter between an adviser and a client. The Standard supports an ethical professional culture in which advisers take appropriate responsibility when peer conduct threatens professional standards or public confidence. It does not prescribe one response for every concern, but silence or exclusive reliance on personal compliance does not fulfil its collective dimension.

• Maintaining and applying professional knowledge and skills concerns competence rather than collective ethical accountability.
• Keeping complete and accurate records concerns documentation of services and advice rather than promoting profession-wide standards.
• Cooperating with ASIC and monitoring bodies concerns regulatory investigations rather than the broader duty to hold peers accountable.

Standard 12 imposes a collective responsibility to uphold and promote professional ethics and hold peers accountable in the public interest.

Questions 51-70

Question 51

Topic: Advice Construction: Evaluation, Implementation, and Review

An adviser has recommended an income protection policy to a retail client. The client has:

• received the Statement of Advice, Product Disclosure Statement and required remuneration disclosures;
• given informed consent and signed an instruction authorising implementation on the quoted terms; and
• provided complete application and payment details.

The adviser has confirmed that the recommended policy remains available and that the application is operationally ready.

Changed condition: Before issue, the insurer offers cover at a premium 18% above the quote and adds an exclusion for claims arising from the client’s existing back condition. The offer remains open for 10 days.

How should the adviser adjust the implementation process?

• A. Accept the revised offer under the existing authority, then explain the changed premium and exclusion to the client.
• B. Arrange issue of the revised policy using the cooling-off period, then seek the client’s confirmation of the changed terms.
• C. Decline the revised offer and apply to a comparable insurer, then disclose the replacement policy details to the client.
• D. Pause implementation, assess and explain the revised terms, then obtain the client’s informed instruction before acceptance.

Best answer: D

What this tests: Advice Construction: Evaluation, Implementation, and Review

Explanation: Implementation authority applies to the terms the client authorised. A materially higher premium and a new exclusion change the product’s cost and protection, potentially affecting whether it remains suitable for the client’s objectives and needs. The adviser should assess the revised offer, explain its practical effect in understandable terms and obtain the client’s informed instruction before accepting it. The 10-day deadline should be communicated, but it does not permit the adviser to act beyond the existing authority. Implementation should proceed only when the product details, disclosures, consent, instructions, timing and operational arrangements are aligned.

• Existing authority covers the quoted terms, not materially different underwriting terms disclosed after consent.
• Applying to another insurer would involve a different product decision requiring suitability assessment and client authority.
• A cooling-off period does not replace informed client instructions required before arranging issue on changed terms.

The higher premium and new exclusion materially differ from the authorised terms, so suitability and informed instructions must be confirmed before acceptance.

Question 52

Topic: Advice Construction: Context, Scope, and Client Engagement

An adviser gave a retail client personal advice to invest $80,000 in a managed fund while retaining $30,000 in cash for a home purchase expected in 18 months. Before implementation, the client says the purchase is now three months away and asks the adviser whether the additional $30,000 should also be invested, with the adviser to implement whatever is suitable. How should the adviser classify the client’s request?

• A. Revised personal advice covering the changed investment amount and liquidity need.
• B. Dealing to execute the client’s instruction without a further advice process.
• C. General advice about increasing exposure to the same managed fund.
• D. Implementation of the existing advice using the originally recommended managed fund.

Best answer: A

What this tests: Advice Construction: Context, Scope, and Client Engagement

Explanation: Implementation occurs when a client instructs an adviser to carry out existing advice without seeking a new recommendation or materially changing its basis. Here, the existing advice preserved $30,000 for a home purchase expected in 18 months. The purchase is now only three months away, and the client asks whether that money should instead be invested. This changes both the proposed investment amount and the client’s liquidity timeframe. The client is also asking the adviser to determine what is suitable, rather than giving an unconditional execution instruction. The adviser must therefore treat the request as revised personal advice and reassess the recommendation using the client’s current circumstances before implementation.

• Using the same managed fund does not make the request implementation when the amount and liquidity circumstances have changed.
• Advice based on the client’s changed home-purchase timeframe and cash needs is personal, not general.
• Dealing alone would require a clear transaction instruction rather than a request for the adviser to decide what is suitable.

The client is seeking a suitability judgement based on circumstances that materially differ from those supporting the existing advice.

Question 53

Topic: Regulatory and Legal: Advice Perimeter and Client Classification

Baseline: An authorised financial adviser presents a webinar to retail clients about a managed fund. The adviser does not consider any attendee’s objectives, financial situation or needs and gives the required general advice warning with the recommendation.

Changed condition: After the webinar, a client privately explains her investment objective, financial position and liquidity needs. The adviser considers that information and recommends the same managed fund as suitable for her. This is the adviser’s first personal advice to the client, and no Statement of Advice exemption applies. The Financial Services Guide and Product Disclosure Statement requirements are being addressed separately.

How does the changed condition affect the advice disclosure required before the adviser arranges the investment?

• A. Classify the follow-up as personal advice and provide a Statement of Advice before arranging the investment.
• B. Classify the follow-up as personal advice and provide a Record of Advice before arranging the investment.
• C. Classify the follow-up as general advice and repeat the general advice warning before arranging the investment.
• D. Classify the follow-up as general advice and rely on the Product Disclosure Statement before arranging the investment.

Best answer: A

What this tests: Regulatory and Legal: Advice Perimeter and Client Classification

Explanation: General advice is given without considering the retail client’s objectives, financial situation or needs, and it requires a general advice warning. The private follow-up changes the classification because the adviser considers the client’s circumstances when recommending the fund as suitable for her. It is personal advice even though the recommended product is unchanged and the earlier communication was general advice.

A general advice warning does not satisfy the disclosure requirements for personal advice. Because this is the first personal advice and no exemption applies, the adviser must provide a Statement of Advice within the required timing, including before arranging the resulting investment. A Product Disclosure Statement serves a separate product-disclosure purpose and does not replace advice disclosure.

• Repeating the warning is insufficient because the recommendation now reflects the client’s personal circumstances.
• A Record of Advice does not replace the required Statement of Advice for this initial personal advice under the stated facts.
• A Product Disclosure Statement explains the product but does not satisfy the disclosure requirements applying to personal advice.

The adviser considered the client’s circumstances, making the recommendation personal advice that requires a Statement of Advice in the stated circumstances.

Question 54

Topic: Regulatory and Legal: Disclosure, Advertising, and Advice Records

On 20 May 2026, an authorised representative plans to rely on website disclosure instead of giving a paper Financial Services Guide to a new retail client before providing personal advice and dealing to implement that advice.

A compliance review finds:

• The licensee has given written authority to publish and update the disclosure.
• The public website links to the disclosure, but opening it requires a free account and password.
• The disclosure is dated 1 May 2026 and is current, clear, concise, effective and not misleading.
• It describes the authorised services and products, fees and commissions, material associations and conflicts, internal dispute resolution and AFCA access.
• It states that the practice is not independent because it receives life insurance commissions.
• It contains no information about the licensee’s compensation arrangements.

Which TWO changes are required before the website disclosure can satisfy the FSG obligation?

• A. Replace the disclosed fee calculation methods with exact future dollar amounts.
• B. Add the required information about the licensee’s compensation arrangements.
• C. Make the disclosure accessible without requiring account creation, a password or payment.
• D. Obtain fresh licensee approval whenever the disclosure is provided to a client.
• E. Give a paper FSG because personal advice cannot use website disclosure.

Correct answers: B, C

What this tests: Regulatory and Legal: Disclosure, Advertising, and Advice Records

Explanation: Website disclosure can satisfy the FSG obligation for financial product advice and dealing to implement that advice if the applicable requirements are met. It must be readily accessible without a password, account or payment. Requiring account creation therefore prevents reliance on the webpage in its present form.

The disclosure must also contain the required FSG information, including relevant services, remuneration, conflicts, dispute-resolution processes, compensation arrangements and independence status. The page omits compensation information, so that content must be added. Its remuneration disclosure may use appropriate amounts or calculation methods, and its statement that the practice is not independent is consistent with receiving life insurance commissions. The page is current and dated, and the representative already has the licensee’s authority to publish and update it.

• Exact future dollar amounts are not invariably required where remuneration is adequately disclosed through amounts or calculation methods.
• Personal advice and related implementation dealing can use compliant website disclosure instead of a paper FSG.
• Standing authority to publish and update the page does not require fresh approval for each client.

Website disclosure must be readily accessible without an account, password or payment.

Compensation arrangements form part of the information required in the disclosure.

Question 55

Topic: Regulatory and Legal: Advice Perimeter and Client Classification

An adviser is providing Priya with personal advice about listed shares.

Assume for this question that, for Parts 7.7 and 7.7A, a client satisfies the supplied wholesale-client wealth test if a qualified accountant’s certificate issued within the preceding two years confirms either:

• net assets of at least $2.5 million; or
• gross income of at least $250,000 in each of the preceding two financial years.

Priya provides a certificate issued 18 months ago confirming net assets of $2.8 million. No information about her income is available.

How should the adviser classify Priya for this personal advice service?

• A. Classify Priya as a retail client until she provides a certificate issued within six months.
• B. Classify Priya as a retail client unless she also satisfies the gross-income criterion.
• C. Classify Priya as a wholesale client based on the existing certificate.
• D. Classify Priya as a retail client unless the proposed share investment is at least $500,000.

Best answer: C

What this tests: Regulatory and Legal: Advice Perimeter and Client Classification

Explanation: Client status must be determined by applying the statutory criterion relevant to the particular financial service. For personal advice obligations under Parts 7.7 and 7.7A, the supplied rule allows a qualified accountant’s certificate issued within the preceding two years. Priya’s certificate is only 18 months old and therefore remains within that period. It confirms net assets of $2.8 million, exceeding the stated $2.5 million threshold. The net-assets and gross-income criteria are alternatives, so evidence of income is unnecessary. The amount Priya may invest does not alter the conclusion reached under the supplied wealth test.

• The six-month base period does not apply to the specified personal advice obligations under the supplied rule.
• The net-assets and gross-income criteria are alternatives rather than cumulative requirements.
• A minimum transaction amount is not required when the client already satisfies the supplied certificate test.

The certificate confirms the alternative net-assets criterion and remains within the applicable two-year period.

Question 56

Topic: Advice Construction: Consumer Behaviour and Decision Making

A retail client says, “I can consistently select shares that outperform the market, so diversification would only dilute my returns.” Which approach would most directly test whether this belief reflects overconfidence rather than demonstrated skill?

• A. Compare documented successful share selections and returns, net of costs and adjusted for risk, with a suitable diversified benchmark over a representative period.
• B. Compare all documented share selections and returns, net of costs and adjusted for risk, with a suitable diversified benchmark over a representative period.
• C. Compare all documented share selections and returns, net of costs and adjusted for risk, with a cash benchmark over a representative period.
• D. Compare all documented share selections and returns, net of costs and adjusted for risk, with a suitable diversified benchmark over the most recent quarter.

Best answer: B

What this tests: Advice Construction: Consumer Behaviour and Decision Making

Explanation: Overconfidence involves placing more faith in personal knowledge, forecasting ability or control than the available evidence supports. The client’s claim of consistent market outperformance should be tested objectively rather than accepted from confidence or recent successes. A sound assessment uses the complete record, deducts trading costs, accounts for risk and compares performance with an appropriate diversified benchmark over a representative period. This reduces the effects of chance, selective memory and favourable short-term market conditions. If persistent risk-adjusted outperformance is not evident, the belief in superior share-selection ability lacks support, and rejecting diversification on that basis would be unsound.

• A single recent quarter may reflect market conditions or chance rather than persistent investment skill.
• Cash is not an appropriate benchmark for assessing the relative performance of a share-selection strategy.
• Reviewing only successful selections creates selection bias by excluding decisions that produced weaker results.

A complete, risk-adjusted comparison against an appropriate benchmark tests whether the client’s claimed skill is supported by persistent evidence.

Question 57

Topic: Regulatory and Legal: AML/CTF, Privacy, and Tax Financial Advice

An Australian financial advice firm is preparing personal advice on trauma insurance for a retail client. All information collected is reasonably necessary for the advice. A Singapore paraplanning provider will independently handle and retain the full identifiable file, making the transfer an overseas disclosure under APP 8. The firm will rely on APP 8.1 rather than seek consent for APP 8.1 not to apply.

File extract:

Identity details: Name, date of birth and passport number
Financial details: Income, debts and superannuation balance
Medical details: Diabetes diagnosis and current medication
Client consent: I consent to collection of these details for preparing my advice.
Privacy notice: The firm may use the details for advice preparation and may disclose the file to service providers in Singapore.

Which classification and action before disclosure best complies with the Privacy Act?

• A. Treat all listed details as personal but not sensitive because the client supplied them voluntarily; apply APP 8 reasonable steps to the full file.
• B. Treat the medical details as sensitive information and the remaining details as personal information; regard the signed consent and Singapore notice as satisfying APP 8.
• C. Treat the medical details as sensitive information and the remaining details as personal information; apply APP 8 reasonable steps only to the medical details.
• D. Treat the medical details as sensitive information and the remaining details as personal information; apply APP 8 reasonable steps to the full file.

Best answer: D

What this tests: Regulatory and Legal: AML/CTF, Privacy, and Tax Financial Advice

Explanation: Medical information, including a diagnosis and medication, is sensitive information and also personal information. Identity and financial details are personal information but are not sensitive information merely because they appear in a financial advice file. Voluntary provision does not change these classifications.

Consent and reasonable necessity support the collection of the medical details. The privacy notice also informs the client of the likely Singapore disclosure. However, a collection consent and overseas-disclosure notice do not themselves satisfy APP 8.1. Because the firm is relying on APP 8.1, it must take reasonable steps before disclosure to ensure the Singapore recipient does not breach the Australian Privacy Principles in relation to the information. This requirement applies to the full identifiable file, not only its sensitive components.

• Limiting APP 8 protections to medical details overlooks that identity and financial details are also personal information.
• Voluntarily supplied health information remains sensitive information.
• Collection consent and notice of the destination do not replace the reasonable steps required under APP 8.1.

APP 8 applies to all personal information disclosed overseas, while the medical details also require treatment as sensitive information.

Question 58

Topic: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Priya is a relevant provider. ASIC is investigating whether her replacement advice involved a potential breach of the Code of Ethics. ASIC lawfully requests the complete client file and a factual explanation by a stated deadline.

An applicable Code monitoring and disciplinary process also requests records and an interview about the same conduct. Both requests are within authority, no requested material is privileged, and Priya can meet both deadlines.

Which TWO actions best apply Standard 11?

• A. Provide ASIC with the complete client file but defer the factual explanation until ASIC identifies a likely Code breach.
• B. Attend the disciplinary interview but decline questions overlapping with ASIC’s inquiry until the regulator has completed its investigation.
• C. Provide ASIC with the complete responsive client file and an accurate factual explanation by the deadline stated in its request.
• D. Refer both requests to the licensee and rely on its responses unless either body later requires Priya to participate personally.
• E. Attend the disciplinary interview, answer authorised questions candidly, and correct any material error discovered in information already supplied.

Correct answers: C, E

What this tests: Ethics and Professional Reasoning: Benefits, Records, Competence, and Cooperation

Explanation: Standard 11 requires a relevant provider to cooperate with ASIC and an applicable monitoring or disciplinary process investigating a breach or potential breach of the Code. Cooperation must not be postponed until wrongdoing has been established. In this situation, Priya should provide ASIC with the requested records and accurate factual explanation within the deadline. She should also participate candidly in the applicable disciplinary process, even though it concerns the same conduct.

Parallel inquiries do not permit Priya to impose her own limits on authorised questions or delay one process until the other concludes. The licensee or a lawyer may assist with responses, but that assistance does not displace Priya’s responsibility to cooperate, ensure information is accurate, and correct material errors.

• Deferring overlapping questions imposes an unauthorised limitation merely because parallel inquiries are occurring.
• Waiting for ASIC to identify a likely breach ignores that Standard 11 also applies to investigations of potential breaches.
• Relying solely on the licensee does not satisfy Priya’s own responsibility to cooperate with requests directed to her.

Standard 11 requires timely and accurate cooperation with ASIC investigating an actual or potential Code breach.

Candid participation and correction of errors constitute cooperation with the applicable monitoring and disciplinary process.

Question 59

Topic: Regulatory and Legal: Licensee, Client Assets, Distribution, Market Conduct, and Remedies

On 14 May 2026, Maya, a financial adviser authorised to arrange listed-share transactions, speaks with a retail client who is the CFO of a company planning to acquire ASX-listed CoastLink Ltd.

The client says:

“Our board approved the acquisition last night. The offer will be at a 35% premium and will be announced in two days. Buy CoastLink shares for my SMSF today. I only want execution, not advice.”

• CoastLink has made no announcement about the acquisition.
• Maya considers the information credible and likely to affect CoastLink’s share price materially.
• The firm’s policy requires suspected market misconduct to be escalated immediately to compliance and prohibits arranging the affected order pending compliance direction.

Which action should Maya take immediately?

• A. Classify it as a potential insider-trading matter, hold the order until the ASX announcement, and then arrange it under the existing authority.
• B. Classify it as potential market manipulation, decline to arrange the order, and immediately escalate the facts to compliance.
• C. Classify it as an execution-only instruction, arrange the order without advice, and immediately escalate the facts to compliance.
• D. Classify it as a potential insider-trading matter, decline to arrange the order, and immediately escalate the facts to compliance.

Best answer: D

What this tests: Regulatory and Legal: Licensee, Client Assets, Distribution, Market Conduct, and Remedies

Explanation: Inside information is information that is not generally available and would be likely to have a material effect on a financial product’s price or value if it became generally available. The board-approved acquisition, 35% premium and absence of an ASX announcement satisfy those indicators. Maya possesses that information before the proposed share purchase and must not facilitate dealing based on it. Calling the request execution-only does not change the market-conduct risk associated with arranging the transaction. Maya should decline to arrange the order, maintain appropriate confidentiality and follow the firm’s required compliance escalation process. Market manipulation instead concerns conduct that creates or maintains an artificial price or false appearance of trading, which is not established by these facts.

• Treating the request as execution-only does not permit arranging a transaction while possessing potential inside information.
• Waiting for the announcement bypasses the required immediate escalation and assumes the existing instruction may later be used without compliance direction.
• Market manipulation is not established because there is no artificial trading activity, price creation or false appearance of market demand.

The credible, non-public and materially price-sensitive information creates a potential insider-trading matter that requires refusal and immediate escalation.

Question 60

Topic: Advice Construction: Strategy Development and Suitability

Assume for this question: A member who has reached preservation age but has not retired may use preserved benefits to commence a transition-to-retirement (TTR) income stream. Annual payments are capped at 10% of the account balance, and the income stream cannot be commuted to an unrestricted lump sum until another condition of release is met.

A member has reached preservation age and remains employed. Which access conclusion follows?

• A. The member may start a TTR income stream within the annual cap but cannot make unrestricted lump-sum withdrawals.
• B. The member may make lump-sum withdrawals within the annual cap but cannot start an income stream while remaining employed.
• C. The member may start a standard account-based pension without an annual cap but cannot make unrestricted lump-sum withdrawals.
• D. The member cannot access preserved benefits through income payments or lump-sum withdrawals until employment ends.

Best answer: A

What this tests: Advice Construction: Strategy Development and Suitability

Explanation: A TTR income stream provides limited access to preserved superannuation after the member reaches preservation age but before satisfying a condition of release that gives unrestricted access. It can supplement employment income through pension payments, subject to the stated annual maximum of 10% of the account balance. The TTR rules do not convert preserved benefits into unrestricted non-preserved benefits, so the member cannot treat the payment cap as authority to withdraw lump sums. A standard account-based pension with unrestricted access generally requires a condition of release that removes the relevant cashing restrictions. Continuing employment does not prevent all access once preservation age has been reached, because the TTR pathway specifically permits limited income payments.

• A standard account-based pension is not available merely because preservation age has been reached while the member remains employed.
• The 10% limit applies to TTR income payments, not to lump-sum withdrawals from preserved benefits.
• Ending employment is not required for limited TTR income payments under the supplied rule.

Reaching preservation age while still employed permits capped TTR income payments but does not provide unrestricted lump-sum access.

Question 61

Topic: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

An authorised relevant provider is preparing personal advice for a retail client who wants to invest $250,000 in an unlisted property fund and complete the investment this week.

• Client information: The client wants regular income but may need up to $150,000 for a business purchase within 18 months. The amount and timing remain uncertain.
• Product information: An issuer email promotes an 8% target distribution and monthly withdrawals. The current PDS states that distributions are not guaranteed and withdrawals may be suspended during stressed markets. The fund is on the licensee’s approved product list, but no other current research has been completed.
• Conflict: The adviser is also a director of the fund manager and has duties relating to its capital raising. No other adviser at the licensee has this connection.

Which TWO actions should the adviser and licensee take before giving advice or implementing any recommendation? Select TWO.

• A. Have a replacement adviser clarify the client’s cash need, then rely on approved-list status and issuer confirmation to assess the fund’s liquidity.
• B. Complete the client and product inquiries, disclose the directorship and obtain written consent, then let the original adviser recommend and implement the fund.
• C. Have a replacement adviser review the current product material but treat the maximum cash estimate as complete client information without further inquiry.
• D. Cease the original adviser’s involvement and have the licensee assign an appropriately authorised adviser with no connection to the fund manager.
• E. Require the replacement adviser to clarify the liquidity need and test distribution and withdrawal assumptions using current, reliable product evidence.

Correct answers: D, E

What this tests: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

Explanation: Due diligence requires both reliable product investigation and sufficiently complete client information. The uncertain business purchase materially affects the client’s investment horizon and liquidity needs, so the adviser must make reasonable inquiries rather than treating the maximum estimate as settled. The target distribution must be distinguished from a guaranteed return, and the withdrawal suspension risk must be tested using current disclosure and other reliable evidence. Approved product list status and issuer statements do not replace the adviser’s investigation.

The adviser’s directorship also creates a conflict between duties to the client and the fund manager. Under the Code of Ethics, disclosure and client consent do not cure such a conflict. The original adviser should cease involvement, and the licensee should assign an appropriately authorised adviser who is not affected by it before advice or implementation proceeds.

• Treating the maximum cash estimate as complete skips reasonable inquiries into a material and unresolved liquidity need.
• Approved-list status and issuer confirmation do not provide sufficient evidence of liquidity under stressed conditions.
• Written disclosure and consent do not cure the original adviser’s conflict of duty under Standard 3.

The directorship creates a conflict of duty that disclosure alone cannot cure, so an unaffected adviser must handle the matter.

The unresolved client need and conflicting product claims require further inquiries and reliable research before advice or implementation.

Question 62

Topic: Ethics and Professional Reasoning: Client Care and Informed Consent

Before presenting personal advice, an adviser reviews its implications for the client. Which assessment best demonstrates applying Standard 6 of the Financial Planners and Advisers Code of Ethics 2019?

• A. Assess whether all benefits and fees have informed consent and provide fair value to the client.
• B. Assess whether the client understands the advice’s benefits, costs and risks before consenting to proceed.
• C. Assess whether the advice records completely document inquiries, recommendations and instructions before implementation.
• D. Assess effects beyond the immediate transaction, including the client’s broader long-term interests and likely circumstances.

Best answer: D

What this tests: Ethics and Professional Reasoning: Client Care and Informed Consent

Explanation: Standard 6 requires an adviser to look beyond the immediate recommendation or product transaction. The adviser must consider the broad effects of the client acting on the advice and actively consider the client’s broader, long-term interests and likely circumstances. Depending on the advice, this may include effects on cash flow, dependants, insurance needs, retirement plans, future flexibility or foreseeable changes. A narrowly scoped engagement does not permit an adviser to disregard material broader consequences. If such consequences reveal that the scope is inappropriate, the adviser may need to reconsider the scope or address the issue through an appropriate referral. Client understanding, consent to benefits and fees, and recordkeeping remain important but are governed by other Code standards.

• Client understanding of benefits, costs and risks is primarily addressed by Standard 5.
• Informed consent and fair value for benefits and fees are primarily addressed by Standard 7.
• Complete and accurate advice records are primarily required by Standard 8.

Standard 6 requires consideration of broad effects arising from acting on the advice, including the client’s broader long-term interests and likely circumstances.

Question 63

Topic: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

An Australian relevant provider is completing a peer review of a colleague’s personal advice file for a retail client.

Baseline:

• The advice was suitable, and the client suffered no loss.
• A file note was created three business days after the client meeting and accurately displayed its creation date.
• The reviewer planned private coaching on timely recordkeeping.

Changed condition:

The colleague admits deliberately altering the date so the note would appear to have been created on the meeting date.

All other facts remain unchanged. Assume no reportable situation or client notification duty arises, and no law or licensee policy prescribes the internal response. Under every available response, the reviewer will preserve the system history and document the action taken.

How should the changed condition affect the reviewer’s action?

• A. Recommend immediate suspension and notify the client while management conducts its ethical assessment.
• B. Require the colleague to self-report at the next supervision meeting and verify that this occurs.
• C. Continue with private coaching and add targeted checks of the colleague’s future files.
• D. Promptly refer the conduct to the firm’s ethics lead for a fair assessment.

Best answer: D

What this tests: Ethics and Professional Reasoning: Frameworks, Bias, Diligence, and Accountability

Explanation: Virtue ethics considers what an honest, trustworthy, fair, and diligent professional should do, even when minimum legal requirements do not determine the response. A delayed but accurately dated file note may indicate a diligence or process problem suitable for coaching. Deliberate backdating is materially different because it involves conscious deception and undermines confidence in the provider’s professional character and records. The reviewer should not treat this solely as a technical error or leave escalation under the control of the person involved. Prompt referral permits independent fact-finding and a proportionate response. Fairness also requires avoiding premature conclusions about suspension or client harm before that assessment is completed.

• Continued coaching treats intentional falsification as though it were merely an accidental delay.
• Deferred self-reporting leaves the timing and control of escalation with the person whose integrity is being assessed.
• Immediate suspension and client notification presume risks and consequences not established by the facts.

Deliberate backdating raises an integrity concern that warrants prompt, independent, and proportionate assessment.

Question 64

Topic: Advice Construction: Client Discovery and Consumer Profiles

A financial adviser is preparing personal advice for Mei, a new retail client who wants guidance on investing an inheritance and planning for retirement.

Fact-find excerpt:

Age: 60
Employment: Four days a week on a fixed-term contract ending in 18 months
Health: Osteoarthritis may require reduced working hours if symptoms worsen
Caring duties: Provides weekly care for her father and contributes $600 a month
Retirement intention: Hopes to work until 65 but may retire earlier if circumstances change
Financial position: $120,000 inheritance, $30,000 cash savings and no debt
Risk profile: Moderate tolerance for investment risk

Which approach should the adviser use when constructing Mei’s advice?

• A. Model retirement at 65 using current earnings and caring costs, allocate the inheritance to her moderate risk profile, then review the assumptions when her contract ends.
• B. Model retirement at 65 using typical spending for clients of Mei’s age, allow for reduced working hours, then divide the inheritance between cash and growth assets.
• C. Model retirement when the contract ends with no further earnings, increase the projected caring costs, hold the inheritance in cash, then reassess if her employment continues.
• D. Model both retirement at 65 and a plausible earlier work exit, test reduced earnings and higher caring costs, then determine required liquidity before investing.

Best answer: D

What this tests: Advice Construction: Client Discovery and Consumer Profiles

Explanation: Advice construction should translate the client’s individual circumstances into realistic assumptions and contingencies. Mei’s intended retirement age is relevant, but it should not be treated as certain. Her fixed-term employment, osteoarthritis and caring duties could reduce her earnings or bring retirement forward. Conversely, the end of her current contract does not establish that she will retire immediately. Comparing the intended path with a plausible earlier work exit allows the adviser to test cash-flow resilience and determine how much of the inheritance may need to remain accessible. Mei’s moderate risk tolerance informs investment selection only after her liquidity needs, time horizon and capacity to withstand loss have been assessed. Age-based population assumptions may provide background context but should not replace her actual circumstances.

• Using age 65 as the sole retirement date overlooks the combined uncertainty arising from employment, health and caring duties.
• Assuming retirement when the contract ends turns a possible outcome into a fixed conclusion and may create unnecessary conservatism.
• Using typical spending for people of the same age substitutes population assumptions for Mei’s individual cash-flow and caring needs.

This approach incorporates Mei’s intended retirement and the employment, health and caring uncertainties affecting her liquidity and investment capacity.

Question 65

Topic: Advice Construction: Consumer Behaviour and Decision Making

A client wants to abandon a diversified investment strategy after repeatedly seeing vivid news reports about last week’s market fall. The client’s circumstances and long-term objectives have not changed.

Which behavioural influence and adviser response best fit these facts?

• A. Anchoring bias; compare current market values with several independently supported valuation reference points.
• B. Availability or recency bias; compare the recent fall with representative evidence across multiple market periods.
• C. Loss aversion; compare the emotional impact of losses with the client’s capacity to absorb investment volatility.
• D. Confirmation bias; examine credible evidence that both supports and challenges the client’s existing market view.

Best answer: B

What this tests: Advice Construction: Consumer Behaviour and Decision Making

Explanation: Availability bias occurs when information that is vivid or easily recalled receives disproportionate weight. Recency bias similarly gives excessive importance to recent events. Here, repeated news coverage and the timing of the market fall dominate the client’s judgement even though the client’s circumstances and long-term objectives remain unchanged. An adviser should not dismiss the concern or simply insist on the existing strategy. The appropriate response is to broaden the evidence considered, using representative information from different market periods and a balanced range of outcomes. This helps the client assess whether the recent event materially changes the strategy’s suitability rather than treating one memorable episode as typical.

• Anchoring involves excessive reliance on an initial reference point, which is not the stated influence here.
• Confirmation bias involves favouring evidence that supports an existing belief, rather than overweighting vivid recent information.
• Loss aversion concerns feeling losses more strongly than equivalent gains, but the decisive facts concern recall and recency.

The client is overweighting a vivid, easily recalled recent event, so broader evidence should be considered.

Question 66

Topic: Advice Construction: Context, Scope, and Client Engagement

Leila signs engagement terms limiting personal advice to her retirement-income strategy. During the meeting, she discloses that her income-protection policy expires soon but asks the adviser not to expand the current scope; the adviser considers the limited scope reasonable, explains the potential protection gap, and Leila confirms her decision. They agree to schedule a separate insurance review next month. Which file note most appropriately records the engagement?

• A. Retirement-income advice is paused under the engagement; income protection is addressed first; the protection-gap warning and Leila’s confirmation are recorded; retirement work resumes after next month’s review.
• B. Retirement-income advice remains the agreed scope; income protection is excluded for now; the protection-gap warning and Leila’s confirmation are recorded; a separate review is scheduled next month.
• C. Retirement-income and income-protection advice form the agreed scope; Leila’s timing concern and the protection-gap warning are recorded; revised engagement terms will cover both matters.
• D. Retirement-income advice remains the agreed scope; income protection is excluded for now; the expiry and Leila’s preference are recorded; a separate review is scheduled next month.

Best answer: B

What this tests: Advice Construction: Context, Scope, and Client Engagement

Explanation: Complete and accurate records should capture both the service initially agreed and material developments affecting its scope. Retirement-income advice remains the current engagement, while income protection is temporarily excluded. Because the expiring policy prompted a warning about a potential protection gap, the record should include that warning and Leila’s confirmation of her decision. It should also document the agreed separate review next month. Recording only the expiry and client preference would omit a material part of the communication. The record must not expand or reorder the engagement when the client did not agree to those changes.

• Expanding the current scope misstates Leila’s decision to consider insurance separately.
• Recording the expiry and client preference omits the material warning about the protection gap.
• Pausing retirement advice and prioritising insurance misstates the agreed scope and sequence of work.

This accurately records the agreed scope, temporary limitation, material warning, client confirmation, and follow-up action.

Question 67

Topic: Regulatory and Legal: Best Interests and Appropriate Advice

A relevant provider and a retail client agree on limited personal advice about investing a $200,000 inheritance for a home upgrade expected in seven years. The fact-find records stable income, known expenses and debts, an adequate emergency reserve, no planned withdrawals, and the client’s risk profile.

Before the recommendation is prepared, the client says:

“My daughter may buy a home within 18 months, and I might contribute up to $120,000 towards her deposit, but we have not agreed on an amount.”

How should this changed circumstance affect the adviser’s inquiries?

• A. Continue the recommendation, model a $120,000 withdrawal at 18 months as certain, and reassess the remaining sum, liquidity allocation and seven-year horizon.
• B. Replace the limited engagement with a comprehensive fact-find covering insurance, retirement and estate planning, and defer investment advice until every area is assessed.
• C. Pause the recommendation, clarify the contribution’s amount, timing, likelihood and alternative funding, and reassess the investable sum, liquidity need and investment horizon.
• D. Restrict the recommendation to $80,000, reserve $120,000 in cash for 18 months, and assess the remaining sum under the existing seven-year assumptions.

Best answer: C

What this tests: Regulatory and Legal: Best Interests and Appropriate Advice

Explanation: An adviser must make reasonable inquiries to obtain complete and accurate information relevant to the agreed subject matter. The client’s possible contribution creates uncertainty about how much of the inheritance is available, when funds may be required, and the appropriate investment horizon and liquidity level. The adviser should clarify the likely amount, timing, probability, flexibility and other potential funding sources before recommending a strategy. These are targeted inquiries within the limited investment engagement. A comprehensive advice engagement is not automatically required, but the adviser cannot rely on the earlier assumption that the full $200,000 will remain invested for seven years.

• Modelling the maximum contribution as certain replaces reasonable inquiry with an unsupported assumption.
• Automatically reserving the maximum amount may produce an unsuitable allocation because the actual need remains uncertain.
• Expanding into every advice area is unnecessary when targeted inquiries can address the material change within the agreed subject matter.

The possible contribution materially changes the client’s liquidity needs and requires targeted inquiries before suitable investment advice can be given.

Question 68

Topic: Regulatory and Legal: AML/CTF, Privacy, and Tax Financial Advice

On 20 August 2026, an Australian AFS licensee is a reporting entity providing a designated service through investment accounts.

Eighteen months ago, initial customer due diligence identified and verified Coral Pty Ltd and its founder, who then owned and controlled the company. Coral now requests a $900,000 transfer from a high-risk foreign jurisdiction.

Current facts:

• Atlas Pty Ltd now owns 60% of Coral.
• Mei and Noah each own 50% of Atlas, giving each a 30% indirect interest in Coral.
• The remaining Coral shares are dispersed, with no other person owning or controlling 25% or more.
• New CEO Asha can appoint most directors and direct Coral’s financial policy.
• Coral describes the transfer as consulting proceeds but provides no supporting evidence.

Assume customer due diligence covers natural persons with at least 25% direct or indirect ownership and natural persons exercising control. Material changes require ongoing due diligence. The licensee’s program requires enhanced due diligence for high-risk customers, including corroboration of source of funds, beneficial owners’ source of wealth, transaction purpose and senior approval.

Which TWO actions should the licensee take now?

• A. Verify Atlas Pty Ltd as Coral’s beneficial owner and retain its company extract because its direct 60% interest establishes the relevant ownership.
• B. Apply enhanced due diligence by corroborating the transfer purpose, source of funds and beneficial owners’ wealth, then obtain senior approval before proceeding.
• C. Continue standard ongoing monitoring after recording Coral’s explanation because enhanced due diligence applies only after a suspicious matter report is lodged.
• D. Use ongoing due diligence to update the profile and identify and verify Mei, Noah and Asha in their respective ownership and control capacities.
• E. Identify and verify Mei and Noah as beneficial owners, but omit Asha because control without a 25% ownership interest falls outside customer due diligence.

Correct answers: B, D

What this tests: Regulatory and Legal: AML/CTF, Privacy, and Tax Financial Advice

Explanation: Initial customer due diligence establishes the customer’s identity, ownership, control and risk profile before the designated service begins. Ongoing due diligence must keep that information current when material changes or unusual transactions arise. Mei and Noah each indirectly own 30% of Coral, so both meet the supplied beneficial-ownership threshold. Asha must also be identified and verified because her authority over the board and financial policy constitutes control despite her lack of shares.

The incoming $900,000 transfer is inconsistent with the known profile, originates from a high-risk jurisdiction and lacks supporting evidence. These facts require the program’s enhanced measures, including corroborating the transaction purpose, source of funds and beneficial owners’ source of wealth, and obtaining senior approval before proceeding.

• Atlas is a corporate shareholder, but identifying it does not replace tracing ownership to the natural persons who indirectly meet the threshold.
• Asha’s lack of shares does not exclude her because customer due diligence separately covers natural persons exercising control.
• Enhanced due diligence responds to the assessed high risk; it does not depend on first lodging a suspicious matter report.

The material ownership and control changes require Mei and Noah to be verified as beneficial owners and Asha as a control person.

The high-risk jurisdiction, unexplained transaction and missing evidence trigger the enhanced measures required by the licensee’s program.

Question 69

Topic: Regulatory and Legal: Best Interests and Appropriate Advice

An authorised representative is giving personal advice to a retail client choosing between two managed funds. The funds have equivalent material features and suitability, but the external fund costs $1,200 less each year; the other fund is issued by an entity related to the licensee and would increase group revenue without an offsetting client benefit. Which action best satisfies the obligation to prioritise the client’s interests?

• A. Present both funds without a preferred recommendation and ask the client to choose after disclosure.
• B. Recommend the related-party fund after disclosing the relationship and higher annual cost.
• C. Recommend the related-party fund because the extra revenue benefits the licensee rather than the adviser.
• D. Recommend the external fund and disclose the related-party interest in the advice.

Best answer: D

What this tests: Regulatory and Legal: Best Interests and Appropriate Advice

Explanation: When the client’s interests conflict with those of the provider, licensee or a related party, the provider must give priority to the client’s interests when giving the advice. The related-party fund generates additional group revenue but provides no offsetting benefit to the client. Because the external fund offers equivalent material features at a lower cost, it better serves the client. Disclosure is relevant but does not permit the provider to favour the related party. The provider also cannot avoid the priority obligation by shifting an otherwise clear recommendation decision back to the client.

• Disclosing the relationship and additional cost does not justify favouring the higher-cost related-party fund.
• The priority obligation covers competing interests of the licensee and related parties, not merely the adviser’s direct financial interests.
• Asking the client to choose does not make materially unequal alternatives equivalent or discharge the provider’s obligation.

The external fund provides equivalent material benefits at a lower cost, placing the client’s interests ahead of the licensee group’s revenue.

Question 70

Topic: Regulatory and Legal: Disclosure, Advertising, and Advice Records

An adviser gives a retail client personal advice in a Statement of Advice (SOA) to switch two investments. After discussing the SOA, the client accepts one switch, rejects the other and gives implementation instructions by telephone; the adviser implements only the accepted switch. Which client file provides the strongest evidence that the advice process and resulting instructions were completely and accurately recorded and can be readily retrieved?

• A. An indexed client file containing the SOA, fact-find, research and transaction confirmation, with a note stating only that the client was contacted
• B. An indexed client file containing the SOA, fact-find, research and transaction confirmation, with a dated call note of the partial acceptance and instructions
• C. An indexed client file containing the SOA, fact-find, research and transaction confirmation, with a dated call note recording acceptance of both switches
• D. A client file containing the SOA, fact-find, research and transaction confirmation, with a detailed call record stored in an unlinked adviser-only folder

Best answer: B

What this tests: Regulatory and Legal: Disclosure, Advertising, and Advice Records

Explanation: Advice records should enable the advice process to be reconstructed, including the client’s relevant circumstances, the basis of the recommendations, the client’s decision, resulting instructions and implementation. Here, the client’s telephone instructions differed from the original SOA because only one switch was accepted. A dated call note should accurately capture that partial acceptance and the instructions given, while the transaction confirmation records what was implemented. Keeping these records indexed together makes them readily retrievable. A contradictory note, a vague contact entry or an unlinked record prevents the file from providing complete, accurate and accessible evidence.

• Recording acceptance of both switches conflicts with the client’s actual partial acceptance and the transaction performed.
• Merely recording that contact occurred does not establish the client’s decision or implementation instructions.
• Keeping the detailed call record in an unlinked adviser-only folder prevents ready retrieval from the client file.

The file records the advice basis, the client’s final decision and instructions, the resulting transaction and a retrievable link between them.

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