What a compliant broker file actually needs under Best Interests Duty

What the obligation actually is

The best interests duty sits in Part 3-5A of the National Consumer Credit Protection Act 2009. It arrived through the Financial Sector Reform legislation that responded to Recommendation 1.2 of the Hayne Royal Commission, and it has applied to mortgage brokers since 1 January 2021. It came with a companion obligation, the conflict priority rule, which requires you to put the consumer's interests ahead of your own or a related party's where the two conflict.

ASIC's guidance on both is Regulatory Guide 273. It is worth reading rather than reading about, because most of what circulates in the industry as BID advice is a compressed version of it, and the compression usually drops the parts that matter.

The critical structural point is one ASIC makes early. Evidence of whether you complied will come predominantly from your own records. There is no external witness to a broker interview. Your file is the entire evidentiary record of whether you met the duty, which means the file is not documentation of the work. For compliance purposes, the file is the work.

The eight categories ASIC lists

RG 273.165 sets out what ASIC generally expects a broker's records to include. There are eight items, and it is worth checking your own file template against them one at a time.

A copy of the responsible lending assessment, or the documents and information you would use to prepare it if the consumer requested it. A copy of the credit guide you gave the consumer. The information you provided to the credit provider as part of the application. The outcome of the application. Relevant conversations with the consumer. Information showing that you acted in the consumer's best interests, including records of any effort you made to educate them. The options and the ultimate recommendation you gave, and the reasons why, including a detailed description of your decision-making process. And any potential conflict of interest you identified, together with what you did to prioritise the consumer's interests.

Most broker files handle the first four well, because they are transactional artefacts that the process generates automatically. The last four are the ones that fail. They are not by-products of doing the deal. Somebody has to sit down and write them.

ASIC also makes clear that records do not have to be paper based, and at RG 273.167 gives examples including file notes and records of conversations, correspondence, working papers, outputs of product and feature comparison tools, fact-finding documents, and audio recordings. A comparison tool's output saved to the file is a record. A comparison you ran on screen and did not save is not.

The reasoning is the part that fails

If you audit broker files at any volume you find the same gap repeatedly. The documents are all present. The rationale is a sentence long, and it would fit any client.

ASIC commissioner Alan Kirkland addressed this directly at the MFAA National Conference, saying the reasons given need to make sense in the specific circumstances of the specific client, and warning against boilerplate factors that could apply to anyone. That is the whole test in one line. If your recommendation rationale could be copied to the next file without editing, it is not doing the job the duty requires.

The practical fix is not longer notes. It is specific ones. Write down the thing about this client that drove the decision. The casual employment history that ruled out three lenders. The settlement date that made turnaround decisive. The intention to convert the property to an investment in two years that made the fixed rate break cost relevant. That sentence is the difference between a file that defends itself and one that does not.

Cost has to be prioritised, and departures need evidence

ASIC's position on cost is stronger than many brokers realise. At RG 273.51 it says it generally expects the cost of a credit product, meaning the interest rate, the fees and charges and the size of repayments, to be a factor brokers should prioritise.

It goes further at RG 273.54. A failure to consider cost and to investigate the lowest cost options available to the consumer may suggest non-compliance, and any situation where a higher cost loan is recommended will need to be supported by evidence demonstrating why that recommendation is in the consumer's best interests. At RG 273.55, suggesting a consumer apply for a loan when there is another cheaper loan that would meet their non-cost needs is unlikely to be in their best interests.

This does not mean cheapest always wins. ASIC accepts that some consumers derive greater benefit from particular features, and that the lowest interest rate is not necessarily the lowest cost product. But it puts the evidentiary burden squarely on you when you go above the cheapest option that fits. If your recommendation is not the lowest cost option you identified, the file needs to say why, in terms specific to this client.

The related trap is features. RG 273.76 gives the example of an offset account that may be irrelevant, and possibly detrimental, to a consumer with no plans to make additional repayments, if there is an extra cost attached to it. Recommending features the client will not use, at a price, is exactly the pattern the duty was written to catch.

Options, shortlists and the single-lender file

RG 273.92 says it would generally be helpful to present the consumer with a shortlist of options, with one being the recommended option. RG 273.93 says consumers should understand why the options presented were selected, why other options were not presented, and why a particular option was recommended.

Note what that second point requires. It is not enough to show what you presented. The file should support an explanation of why the shortlist looked the way it did, including why it was short or long.

There is a specific requirement worth flagging for anyone with a concentrated lender mix. RG 273.95 says that if all the options you present are products from the same credit provider, you should explain that and give the consumer reasons for it. If your last twenty files all present three products from one lender, that is a pattern an aggregator compliance review or an ASIC surveillance will notice, and each of those files needs the explanation on it.

Write it as you go, not at settlement

RG 273.169 is short and consequential. Taking notes and keeping records throughout the process may help you accurately capture your thinking and reasoning at each relevant point in time, and drafting notes and creating records at the end of the process may not be as effective.

This is the single most commonly ignored paragraph in the guide, because writing the file up at the end is how most brokers work. It is also the one with the clearest practical consequence. A note written the day you had the conversation is evidence of what you thought at the time. A note written six weeks later is a reconstruction, and it reads like one.

ASIC pairs this with a second suggestion at RG 273.170 that is genuinely useful. Because credit assistance is often not a linear process, it may help to prepare a concise narrative summary connecting the various records you have kept, outlining why particular products were recommended, what the consumer decided, and the steps you took. ASIC is explicit that this summary should be evidence based and supported by contemporaneous records.

A narrative summary is not a substitute for the underlying notes. It is a cover page that makes a file legible to somebody who was not there. If you are going to add one thing to your process after reading this, add that.

What you do not need to document

Over-documentation is a real failure mode and RG 273 addresses it. At RG 273.171 ASIC says it is unlikely you will need to provide reasons for not considering or recommending every alternative product on the market, and that distinguishing the type of product or feature, rather than exhaustively excluding individual products, is likely to be sufficient.

This matters because a lot of compliance product sold to brokers works by generating volume. Pages of comparison output attached to a file are not the same as reasoning, and they can obscure it. ASIC's example at RG 273.172 is narrower and more useful: where a product or type of product has the potential to be in the consumer's best interests and you did not recommend it, documenting why is worth doing.

So the standard is not everything. It is the live alternatives. If a competing product genuinely could have suited this client and you ruled it out, say why. If it never could have, you do not need a paragraph explaining that.

How long to keep it

There is no fixed number in RG 273, and brokers who repeat one are usually quoting a different obligation. At RG 273.168 ASIC says how long records should be kept may vary depending on factors such as the loan term, the interest-only period and whether the consumer refinances, and that you should use your judgement about the nature of the credit product. It adds a plain warning that keeping records for a short period will place you at risk of being unable to demonstrate compliance.

In practice that argues for keeping the file for the life of the loan rather than a fixed number of years, which for a thirty year term is a long time. It also argues for checking where the file physically lives, which is a question most brokers have not asked. If your file notes sit inside a CRM you have access to only while you remain a member of your aggregator, your retention position and your platform decision are the same decision.

Separately, the Privacy Act 1988 applies. Australian Privacy Principle 11 requires you to take reasonable steps to protect personal information from misuse, interference, loss and unauthorised access, and to destroy or de-identify it when you no longer need it and are not required by law to retain it. Those two obligations pull in opposite directions, and resolving the tension is a judgement you should make deliberately rather than by default.

What ASIC is looking at now

ASIC began an information-gathering exercise in June 2025 examining how large aggregators and brokers are complying with the best interests duty, issuing targeted requests to several large aggregation groups. It is the first substantial assessment of BID compliance since the obligation commenced in 2021. Commissioner Alan Kirkland has said publicly that ASIC expected to publish a report in the final quarter of that calendar year.

The review has covered loan flows, commission and clawback data, and compliance and oversight processes. ASIC has noted that reported misconduct in the channel is low, and framed the exercise as working with the industry rather than as enforcement. That is a reasonable read of the posture, but it does not change what an individual file needs to contain.

Reporting on the review has consistently landed on the same three points: contemporaneous documentation as the central evidence of how the duty was met on each file, the need to show how a recommendation aligns with the client's interests where the recommended loan is not the lowest cost option available, and an expectation that licensees hold documented processes for monitoring broker compliance. The second of those is the one most likely to catch an otherwise well-run file.

Brokers who want to prepare should do one thing rather than many. Pull five files at random from the last quarter, and on each one read only the recommendation rationale. Ask whether a stranger could tell from that paragraph which client it belongs to. If they could not on three of the five, you have found the gap, and it is the same gap ASIC has said it is looking for.