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NZ CFS L5 Core study materials
NZ CFS L5 Core study resources

NZ CFS L5 Core: Professional and ethical conduct, including conflicts of interest

NZ CFS L5 Core · Work through your exam, one topic at a time.

All guide sections

Professional and ethical conduct, including conflicts of interest

What the exam tests

Ethics questions test whether you can identify a conflict, decide how to manage it, and show that client interests were not overridden by remuneration, relationships or convenience.

Core rules

  • Code Standard 1 requires fair treatment of clients; Standard 2 requires integrity - honesty, accuracy and no misleading conduct.
  • A conflict exists where an adviser's interest (commission, trail, bonus, ownership, referral fee, gift, outside business interest) could influence advice.
  • Manage conflicts in this order: avoid where the conflict is too great; otherwise disclose clearly, put controls in place (for example, replacement-business analysis or second review), and keep records. Disclosure alone does not cure an unsuitable recommendation.
  • Soft-dollar benefits, hospitality and personal trading can be conflicts; many FAPs keep a gifts and hospitality register and set thresholds.
  • Vulnerable clients need extra care: plain language, no pressure, checking understanding, and involving support people with consent.

Worked example

An adviser recommends replacing an existing trauma policy with a new one from an insurer that pays 20% upfront commission and is hosting the adviser at a conference. The conflict is real but manageable. The adviser discloses the commission and the conference in writing, compares definitions, exclusions, waiting periods and premiums on a like-for-like basis, documents why the replacement is in the client's interest, and considers retaining the existing policy. If the new policy is only marginally better and costs more, the right answer is not to recommend it merely because of the incentive.

Traps

Thinking disclosure is enough; ignoring trail commission and soft-dollar benefits; recommending replacement business without a comparison; accepting gifts that could reasonably influence advice; failing to record the conflict analysis. Ethics marks are lost by vague statements such as "I always act professionally" rather than specific controls.