Experienced professionals who have been doing their job for any meaningful period of time will have developed general rules of thumb that help them efficiently perform their role.

For example, GPs know that in most circumstances the best remedy for the common cold is plenty of rest and fluid.

An accountant will tell you to keep receipts for everything, however, if your record keeping is lax, there are shortcuts they can take to estimate deductions.

Similarly, financial advisers have rules of thumb too. For example, people with a mortgage and dependents probably need life insurance, young people can accept greater investment risk and retirees prioritise income and capital preservation over capital appreciation.

The human tendency to form rules of thumb is centuries-old and has a scientific name: heuristics. In ancient times, much like today, heuristics helped people navigate complex conditions and make decisions quickly such as the safest route home.

For decades, rules of thumb helped financial advisers to assess a client’s needs and determine a satisfactory course of action.

Advisers also formed views on the types of products that suited most people in most circumstances, based on their experience. They didn’t go to market and conduct due diligence for every client.

These mental short-cuts kept the cost to serve down and made professional advice affordable for the average Australian.

But today, rules of thumb can’t be used as a starting point for advice. In order to fulfil their best interest duty and related obligations, the law requires advisers to be completely open-minded. Nothing can be definitively ruled out, effectively discounting years of experience.

Under the best interest rules, advisers must research and consider a client’s existing financial strategy including any insurances and investments, in the context of their personal circumstances.

They must then research and consider alternative strategies, stress test the efficacy of each strategy against multiple scenarios, make a recommendation, document the basis of that recommendation and demonstrate why it is likely to deliver the optimal client outcome.

In short, they must justify the advice they give and the advice they don’t give. The catch-all in safe harbour creates this challenge.

This added complexity is driving up the cost of advice. It is adversely impacting the productivity and profitability of businesses, sapping the joy out of being an adviser and ensuring fewer and fewer Australians can afford the advice they need.

Sadly, that is the real cost of proving best interest; a much higher requirement than simply meeting best interest.