AIST pushes for tougher restrictions on cold calls by advice firms
The industry body has raised concerns about planning firms using cold calls to push poorly-performing super products onto consumers.
In its pre-budget submission, the Australian Institute of Superannuation Trustees (AIST) explained that while the anti-hawking legislation introduced in 2020 was a positive move to protect consumers from potential harm, the legislation should be extended to cover services as well as products.
“AIST is concerned that the [the legislation] does not cover cold calling from advisers who then go on to charge exorbitant fees of up to $6,000 to roll the consumer from their existing fund, often a high performing, low fee profit to member fund, to a poorer performing retail fund,” the submission stated.
The superannuation industry body said it was aware of a “number of planning business using intermediaries to solicit business via cold calling”.
The AIST explained that members receiving these cold calls are typically sent an email after the call that includes an FSG and a statement of advice despite the fact that no questions have been asked beyond what fund the member is in.
The email also includes an invoice for the advice, a DocuSign with an expiry of three days and an application form completed with information for the retail fund, the submission stated.
The AIST said that often the planning businesses conducting these cold calls will state that the person’s existing fund balanced option was high risk and that if they died all their money would go to the government.
“A number of these cases have been reported to ASIC and while ASIC may be able to pursue the advisers for poor advice, this is a time consuming ‘whack a mole’ approach that does not address the systemic risk to customers,” AIST stated.
The AIST stated the same imbalance of power exists in the unsolicited sale of financial services as exists in the unsolicited sale of financial products.
The submission noted Commissioner Kenneth Hayne recommended superannuation products be subject to the anti-hawking rules in his recommendations following the Financial Services Royal Commission as these practices typically “prey upon the unsuspecting”.
“The person to whom an unsolicited offer is made will very often not be in a position to judge the merit of what is offered. In particular, that person will seldom if ever be in a position to compare what he or she is offered with what he or she already has under some existing superannuation arrangement,” Commissioner Hayne stated.
The AIST stated the “same consumer vulnerabilities exist for consumers when receiving a cold call from a financial adviser, as they are unsuspecting and very often no in a position to judge the merit of what is being offered”.
“Accordingly, we strongly support extending the anti-hawking ban to the sale of financial services.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.