In its pre-budget submission, the Australian Institute of Superannuation Trustees (AIST) has called for the extension of anti-hawking legislation to cover services as well as products.
Namely, the AIST has argued that the anti-hawking legislation, introduced in 2020 in response to the Royal Commission, does not protect consumers from advisers using cold calls to push them into poorly performing super funds.
“AIST is concerned that [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 body said in its submission.
“AIST is aware of a number of planning businesses that use intermediaries to solicit business via cold calling,” it added.
In an example provided as part of its submission, the AIST detailed a “typical experience” for a person cold called by an adviser.
Namely, after receiving a cold call and requesting material from the planning business, the consumer is emailed an FSG and a statement of advice alongside an invoice for $4,900 and a Docusign with an expiry of three days which states that all would be void if not signed immediately. The AIST explained that all of this is done despite the fact that no questions had been asked beyond “what fund are you in”.
“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,” the body argued.
Pointing to a statement given by Commissioner Kenneth Hayne relating to his recommendation that superannuation products should be subject to anti-hawking rules, the AIST argued that the same imbalance of power exists in the unsolicited sale of financial services as existing in the unsolicited sale of financial products.
“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,” Mr Hayne said at the time.
The AIST stated it believes that the same consumer vulnerabilities exist when receiving a cold call from a financial adviser.
“They are ‘unsuspecting’ and ‘very often not 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.”
The revenue impact on the budget, the body noted, would be neutral.
How about the enforcing the ban on passing lists of employees and their contact details to trade unions and industry super funds? No action on this one despite it being a breach of privacy.
This move by the AIST is designed to keep their members in the dark and hostage to union schemes.
It’s a fair call as I’ve had a few advice firms cold calling me to spruik their services to do exactly what AIST do as well as some adviser apply to work with us coming from these types of firms. Only an extremely small number of firms do it but it still happens.
Utter tripe from AIST. There is no such thing as a poor performing retail super fund. There are poor performing investment options, sometimes the default option. But few financial advisers will recommend a single investment option, let alone the default investment option. Especially if they are charging $6K for it.
As for the allegations of cold calling, and breaching of KYC rules, they should continue to report the instances to ASIC and let them do their job.
What advisers cold call clients? We dont need to they come to us! Aist again scared of people rolling out of thier funds, they will tarnish our names as a matter of course. No one I know cold calls. I want to see the proof of this cold calling. If not we need to ask the aist for a retraction and an apology.
There are a few practices which employ the use call centres to do the cold calling. These are the ones I think AIST is referencing. I have had few clients get these calls. They do charge large fees for not doing much – just a rollover. Having said that ASIC should be doing their job and investigating the advice and determining if it breaches any standards, if all these complaints have been made.
IF there is anything we DONT need it is more regulation. Why not simply use the laws that we have to prosecute the people who do the wrong thing? God knows there are more than enough of them.
It seems like the regulators have bent over backwards to get the big banks and AMP back to business as usual while offering up a series of small fry offenders to the alter of media reports.
Exactly. Just as the existing laws at the time were perfectly adequate to stop Storm financial. Most of the financial regulation introduced over the last 10 years was totally unnecessary to prevent consumer harm. If regulators had done their job properly consumers would be much better off. However the real regulatory intention has been to lobby for more and more power to persecute the majority of honest financial advisers who are perceived as competitors to the union funds AIST represents.