Ethics and professional standards
Ethics questions are behavioural: they describe a realistic pressure and ask what a competent, honest adviser does. The exam expects you to reason from the Code of Professional Conduct for Financial Advice Services rather than from personal instinct.
The Code's standards
The Code sets standards covering client care, competence, ethical behaviour, integrity and professionalism. Client care requires suitable advice delivered with care, diligence and skill. Competence requires the knowledge, skills and experience to give the advice, maintained through continuing professional development. Ethical behaviour requires honesty and fairness, and prohibits misleading or deceptive conduct. Integrity requires you to identify, disclose and manage conflicts, prioritising the client's interests where a conflict cannot be avoided. Professionalism requires compliance with the law, the licence and your FAP's processes, including complaints handling.
Conduct expectations
Regulators also expect fair treatment of customers: products that do what they say, clear disclosure, no inappropriate incentives, and proper handling of vulnerable clients. Confidentiality is a duty, but it yields where disclosure is required by law or where a client is at risk of serious harm.
Worked example
A fund manager offers an adviser a paid conference trip shortly before a recommended-listing decision. Accepting creates a conflict that a reasonable client would want to know about. The right response is to decline the inducement where it could influence the recommendation, or at minimum disclose it to the client and to the FAP and remove the adviser from the decision. Silence is the failure, not the trip itself.
Traps
Assuming New Zealand imposes an Australian-style best-interests duty; the Code's operative tests are suitability and conflict management. Treating a disclosed conflict as automatically resolved. Confusing what is legal with what is professional.