Under the Financial Services Legislation Amendment Bill that is before select committee, advisers will work under a duty to give priority to a client’s interests.

In the previous version of the bill, they had been required to put a client’s interest first.

In Australia, a recent court case between ASIC and NSG Services tested that country’s standard, which requires advisers to act in the best interest of clients.

Barrister Merran Keil said it proved, among other things, that advisers’ processes mattered, conflicts needed to be identified and managed, they needed a compliance programme, and, crucially, they needed to be able to consider more than one product.

Lawyer Jeremy Muir, of Minter Ellison Rudd Watts said the same considerations applied in New Zealand.

He said the question of how many products were being considered was a contentious one.

“Are advisers required to advise on all products or at least to point out the deficiencies in the universe of products they can advise on? Where does their obligation end?”

He said the FSLAB obligation was softer than the ASIC one.

“[The ‘priority’ obligation] is saying you can’t put your or your employer interest ahead of clients’, not that you have to come out with the best possible result for clients in every case.”

The new code of conduct, covering all advisers, would fill in some of the gaps in the broad brushstrokes of the legislation, he said.

His colleague, Jane Standage, said tied advisers could satisfy their obligation by informing clients that they could only advise on a limited range of products, and showing that a reasonable adviser would be satisfied it was in a client’s interests to recommend a product.

“The client-first duty has been softened but you can’t advise someone to take up your product when it’s not in their interests to do so.”

Muir said it would take time to work out what the difference was MBIE was trying to make compared to Australia. It could be that they were trying not to “tie advisers up in knots” when they could not do advice across the board.

“Even under the Australian regime, ASIC recognises there’s a way to act in the best interest of clients and still be a tied adviser,” Standage said.

An MBIE spokeswoman said the duty was amended to reflect submissions.

"This duty in the bill remains limited to conflict management, recognising that other standards of conduct and client-care sit in the Bill (e.g. to exercise care, diligence, and skill) and will sit in the new code of conduct. The duty has been amended to apply if there is a conflict between the interests of the client and the interests of the person giving advice or any associated person (as defined in the Financial Markets Conduct Act 2013). The wording in doing anything in relation to the giving of advice has been removed."

She said anyone with feedback should make a submission to the Economic Development, Science and Innovation Committee.

The standard, as it was previously worded, was queried by product providers, who said it was difficult to prove insurance advisers were not influenced by commission and that a general duty could require advisers to go outside the agreed scope, if that was in a client’s best interest to do so.