Choosing a financial adviser is as much about trust and governance as it is about returns. For Australian investors, especially those with larger portfolios, understanding how conflicts of interest work, and how they influence product recommendations, is critical before you sign an engagement letter or move your capital.

Key takeaways

  • Australian law requires licensees and advisers to manage conflicts of interest, but you still need to ask direct questions about incentives.
  • Focus on licensing, ownership, fee structures, and how the adviser selects and compares products.
  • Ask how they handle in house or related party products, approved product lists, platforms, and any third party payments.
  • For digital assets, dig into custody, exchanges, product issuers, and any revenue sharing or referral arrangements.
  • Cross check what you are told using ASIC’s public registers, and the detail in your Statement of Advice.

Why conflicts of interest matter in financial advice

A conflict of interest arises when the adviser or their licensee has interests that are different from, or in tension with, your interests as the client. ASIC explains in its guidance on managing conflicts of interest that these situations must be managed effectively to protect clients and maintain trust in the financial system.

The Corporations Act 2001 requires Australian Financial Services (AFS) licensees to maintain adequate arrangements to manage conflicts that may arise when they provide financial services. The legislated Code of Ethics for financial advisers requires advisers to act in the client’s best interests and not advise, refer, or act where a conflict of interest or duty could reasonably be expected to influence them.

Despite these requirements, ASIC reviews have found cases where advice that directed clients into in house products or complex structures did not meet best interests obligations. This is why it is useful to take a structured list of questions into any first meeting with a potential adviser.

The Australian regulatory backdrop in brief

Before you sit down with an adviser, it helps to understand the framework they operate in.

AFS licensing and conflicts management

Section 912A of the Corporations Act requires AFS licensees to have adequate arrangements for managing conflicts of interest. ASIC explains these expectations in Regulatory Guide 181, which sets out principles for identifying, controlling, and disclosing conflicts at the licensee level.

Conduct, disclosure, and Statements of Advice

Regulatory Guide 175 covers conduct and disclosure for financial product advisers, including how fees, costs, and benefits should be presented to clients. It also explains what should appear in a Statement of Advice, including information about conflicts that might reasonably be expected to influence the advice.

Code of Ethics

The legislated Code of Ethics applies to relevant providers of personal financial advice to retail clients. Standard 3 states that advisers must not advise, refer, or act where they have a conflict of interest or duty that could reasonably be expected to influence their advice or service.

Consumer tools

ASIC’s MoneySmart website provides plain language guidance on choosing a financial adviser and working with a financial adviser, including suggested questions and red flags. The Financial Advisers Register and ASIC’s banned and disqualified registers allow you to check an adviser’s status and history.

These rules and tools are strongest for retail clients. Wholesale and sophisticated investors often experience different disclosure obligations, so transparent discussions about conflicts become even more important for that segment.

Core questions about conflicts of interest and product recommendations

You can use the following as a checklist when you meet a potential adviser.

1. Licensing, independence, and client focus

a. “Who holds your Australian Financial Services (AFS) licence, and what is your role under that licence?”

 This tells you whether the adviser is an authorised representative, an employee of a larger group, or part of a boutique firm. The AFS licensee is responsible for conflicts management arrangements, so you should know who that entity is.

b. “Who is your typical client, and where do I fit?”

 Ask about the kinds of clients they usually work with, such as high net worth individuals, SMSFs, family offices, or treasuries. This helps you see whether your needs match their experience.

c. “Do you provide personal advice, general advice, or both, and which will I receive from you?”

 ASIC distinguishes between personal advice that takes your circumstances into account and general advice that does not. Knowing which service you will receive sets expectations about the depth of their recommendations.

2. How the adviser is paid

a. “Exactly how are you and your licensee paid for the advice you give me?”

 Ask for a breakdown of initial advice fees, ongoing service fees, and any other payments. Good practice is to show these amounts in dollars so you can see what you are paying.

b. “Do you receive any commissions, volume bonuses, or other benefits from the products or platforms you recommend?”

 Many forms of conflicted remuneration for retail investment products have been banned, but exceptions and legacy arrangements still exist in some areas, such as certain insurance products. Ask for a clear explanation of any commissions or third party benefits that may still apply.

c. “Are there any referral fees or marketing payments between you, your licensee, and product issuers or platforms?”

 Referral arrangements and “marketing support” payments can be significant sources of conflict. A transparent adviser should be able to describe these relationships and how they are managed, or confirm that they do not exist.

3. Product lists and how recommendations are made

a. “Do you work from an approved product list, and who sets that list?”

 Most advisers research and recommend products from a licensee controlled approved product list. Ask how wide that list is, how often it is reviewed, who makes changes, and whether the adviser can recommend suitable products that are not on the list.

b. “How do you compare different products before making a recommendation?”

 Ask them to describe their process for comparing cost, risk, features, tax treatment, and alignment with your goals and risk profile. Their answer should refer to a structured process rather than a single preferred product.

c. “Can you explain why you would recommend this product over similar alternatives?”

 You want a clear, client specific explanation, not generic marketing points. If an in house or related party product is recommended, ask them to compare it with at least one external alternative and explain why it is preferred.

4. Ownership, related parties, and in house products

a. “Who owns your practice and your licensee, and do they manufacture or distribute any of the products you might recommend?”

 Vertical integration, where advice and product manufacturing sit in the same group, can create structural conflicts. Law firms and commentators, such as in this Clayton Utz summary of ASIC’s conflicts work, have noted that these models have generated poor outcomes when not properly managed.

b. “Do you or your related entities receive any benefit if I use particular platforms, funds, or structures?”

 This includes in house managed accounts, model portfolios, investment platforms, and administration services. Ask how different options would change what you pay and what the adviser or licensee earns.

c. “How do you deal with conflicts that arise from these relationships in practice?”

 ASIC encourages clients to ask advisers how they manage conflicts that may limit objective advice. Look for a practical answer that refers to documented policies, oversight, and examples of situations where they have refused to act because of a conflict.

5. Digital asset and specialist product recommendations

If you are considering digital assets or other specialist exposures, add more targeted questions.

a. “What relationships do you, your licensee, or related parties have with any digital asset platforms, custodians, or product issuers?”

 Ask specifically about equity stakes, revenue sharing, flow rebates, white label structures, or distribution agreements. These arrangements can shape where trades are executed and which funds or products are put forward first.

b. “How are custody, trading, and execution handled, and who is responsible at each step?”

 Digital asset structures often involve multiple entities, including advisers, product issuers, custodians, and exchanges. Ask who holds legal title, who controls keys or sub custody, what happens if something goes wrong, and how any execution arrangements are monitored.

c. “What is your process for assessing whether a particular digital asset or fund is appropriate for a client like me?”

 Sophisticated and wholesale investors may access products with lighter disclosure. Ask how the adviser assesses volatility, liquidity, leverage, counterparty risk, regulatory status, and concentration before recommending a product.

6. Documentation, monitoring, and changes over time

a. “Where will I see all conflicts of interest and relevant benefits documented?”

 Your Statement of Advice should include information about conflicts and benefits that might reasonably be expected to influence the advice, together with costs and product comparisons. Confirm that this detail will be set out in one place in clear language.

b. “How often will we review my strategy and your product recommendations, and what would trigger a change?”

 This helps you understand whether ongoing fees fund real monitoring or a largely static set of products. Ask what would prompt them to switch platforms or products, especially if an in house solution stops being competitive.

c. “If a conflict becomes too significant to manage, what will you do?”

 Good practice is to decline to act or refer the client elsewhere where a conflict cannot be adequately managed. A credible adviser should be able to explain when they would step back rather than proceed.

How to cross check what you are told

Even if the adviser’s answers sound reasonable, it is useful to check them against independent sources.

  • Use ASIC’s Financial Advisers Register to confirm the adviser’s authorisations, employment history, and any disciplinary information.
  • Review ASIC’s MoneySmart pages on choosing a financial adviser and working with a financial adviser for more suggested questions and warning signs.
  • Read your Statement of Advice carefully and make sure the fees, conflicts disclosures, and product comparisons match what you discussed in your meetings.

If anything is unclear, ask for a written explanation in plain language before you sign or transfer assets.

Where regulated digital asset advisers can help

For Australian wholesale and sophisticated investors, digital assets often sit at the intersection of traditional advice rules, emerging regulation, and operational risk. Working with a specialist digital asset adviser that operates under an AFSL and is integrated with your broader wealth strategy can help align structures, custody, and product selection with your overall objectives and risk profile.

Investors who prefer regulated structures can explore options with Alpha Node, which focuses on research driven, compliant access to digital assets for wholesale clients. Through Alpha Node, wholesale investors can consider managed accounts, funds, or bespoke mandates that are designed to sit alongside existing SMSF, family office, or treasury portfolios, with clear attention to conflicts, governance, and reporting.

FAQ

Are advisers still allowed to have conflicts of interest?

Some conflicts may exist in practice, for example where licensees also manufacture products or operate platforms. AFS licensees are required to maintain adequate arrangements to manage those conflicts, and the Code of Ethics requires advisers not to act where a conflict could reasonably be expected to influence their advice. The key is whether the adviser can explain those arrangements clearly and show how your interests remain the priority.

Where can I check if an adviser has been banned or disciplined?

You can use ASIC’s Financial Advisers Register to search for individual advisers. ASIC also maintains banned and disqualified registers that list people who have been prohibited from providing financial services, which are accessible through its main website and MoneySmart pages.

Do wholesale or sophisticated investors get the same protections as retail clients?

No, wholesale and sophisticated clients do not receive all of the same disclosure and conduct protections that apply to retail clients under the Corporations Act and ASIC guidance. This usually reflects their greater financial resources and experience, but it also means that careful questioning about conflicts, governance, and product selection is particularly important for this group.

Conclusion

Knowing the right questions to ask a potential adviser about conflicts of interest and product recommendations gives you a clearer view of whose interests are driving the advice. In the Australian context, this includes probing licensing, ownership, fee structures, product lists, and relationships with product issuers and platforms, including in the digital asset space. By combining targeted questions with independent checks and careful review of your Statement of Advice, you can make more informed decisions about both your portfolio and your choice of adviser.

If you are a wholesale or sophisticated investor considering regulated digital asset exposure, you can explore options with Alpha Node or speak with your existing licensed adviser about how they manage conflicts and product recommendations in this part of the market.

Sources