Defining and managing the scope of advice continues to be a critical focus area in advice audits. ASIC has been clear, including in INFO 267, that an appropriately determined and documented scope of advice is fundamental to demonstrating compliance with the best interests duty.
From an audit perspective, deficiencies most commonly arise where the scope of advice has been framed too narrowly or has been driven by client preference rather than the client’s relevant circumstances and the subject matter of the advice. While scaled advice is permitted, advisers must not exclude matters that are relevant to the advice outcome where doing so would compromise the appropriateness of the advice.
Audit findings frequently identify situations where advisers have attempted to scope out matters that are integral to the advice, such as insurance held within superannuation when recommending a superannuation replacement, or broader client circumstances including cashflow, debt, existing structures or taxation implications. Reliance on client instruction alone to justify these exclusions is not supported by ASIC and does not satisfy best interests obligations.
Where matters are legitimately agreed as being outside the scope of advice, auditors expect to see clear and contemporaneous documentation. This includes explicit identification of the excluded areas, a clear explanation of the risks and potential client impacts of not receiving advice on those matters, and evidence that these risks were explained to and understood by the client. These discussions must be supported by detailed file notes and reflected consistently in the Statement of Advice. Generic or high‑level disclosures are insufficient.
A recurring audit issue is the failure to clearly articulate out‑of‑scope risks in both file notes and the SoA, which can undermine the overall defensibility of the advice provided. Where appropriate, auditors also expect to see out‑of‑scope matters flagged for future review or referral, demonstrating that the adviser has taken a sufficiently holistic view of the client’s position.
Call To Action
Scope of advice deficiencies remain one of the most common drivers of adverse audit findings.
AICS has developed a Scope of Advice Audit Toolkit to support auditors and licensees in assessing scoping decisions, out‑of‑scope risk disclosures and advice defensibility in line with ASIC INFO 267.
The toolkit can be used as a standalone audit resource or incorporated into an AICS audit, file review or remediation engagement.
Contact AICS to access the Scope of Advice Audit Toolkit or discuss targeted scope‑of‑advice audit support.
