The Australian Securities and Investments Commission (ASIC) has been campaigning against cold calling for months following a review that found a number of these operators are using high-pressure sales tactics to lure consumers with unsolicited calls after obtaining their personal information from third-party data brokers or using online clickbait.
At the time, the regulator noted that this had led to generation and referral arrangements with a small subset of financial advisers, who typically recommend consumers switch to super products incurring significant fees.
In May, ASIC commissioner Alan Kirkland said ASIC was prepared to take action to protect consumers and called on financial advice licensees and super trustees to do more to weed out unscrupulous actors and reduce consumer harm.
“Financial advice licensees and super trustees have a critical role to play in preventing this conduct, including by reporting it to ASIC if and when they become aware of the conduct,” he said.
Speaking at FINSIA’s The Regulators event on Friday, Kirkland said “challenging economic environments always create opportunities for people selling snake oil”.
“The worst behaviour that we see is practices that start with telemarketing or clickbait ads on social media that encourage people to get involved in a review of their superannuation.”
“They’re often in a well-performing, prudentially regulated fund, and they’re told it’s terrible and they should tip their money either into a platform product or SMSF, with most of their super then ending up being invested in, say, a high-risk property scheme.
“So, we’ve got some significant action underway against those types of practices, but they’re obviously an enormous concern, because it’s people’s super that’s at stake, and in the worst cases, if it’s invested in some sort of cryptocurrency investment, it often just disappears overnight.”
In his speech at the event, Kirkland added that work on “models of financial advice that result in erosion of superannuation” is one of the regulator’s strategic priorities for 2024–25 as part of a broader focus on pursuing better retirement outcomes and member services.
When the Federal Court ordered United Global Capital (UGC) to be wound up in October, Justice Neskovcin detailed the extent of the complications afflicting the firm and its “UGC Advice Model”.
This involved UGC or its corporate authorised representatives (CARs) making cold calls to consumers for a “superannuation health check” and encouraging them to roll over their superannuation into an SMSF and invest their retirement savings in related party products.
“UGC ran promotional campaigns offering prospective clients the opportunity to win an iPhone or similar prize. UGC’s representatives used the contact details provided to contact the prospective clients to offer a ‘free general superannuation health check’. The prospective clients were asked certain questions to ascertain if they were suitable to be referred to UGC,” the judgment said.
“Under the UGC Advice Model, the CARs called prospective clients to ascertain their superannuation balance, the fund it was held in, whether they were working and their age.
“Next, a ‘super specialist’ gave a presentation to prospective clients, the effect of which was to recommend that the prospective clients transfer their retirement savings from their regular superannuation accounts into a self-managed superannuation fund and invest in related entities, such as GCPF, through the SMSF.”
Earlier this year, ASIC released REP 781 Review of superannuation trustee practices: Protecting members from harmful advice charges, in which the corporate regulator called on superannuation trustees to “renew efforts to protect members from unscrupulous operators amid evidence of inadequate oversight of advice fee deductions”.
