The Australian Securities and Investments Commission (ASIC) has been on a campaign 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 by using online clickbait.
At the time, the regulator noted that these have led to generation and referral arrangements with a small subset of financial advisers, who typically recommend consumers switch into 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 the FINSIA The Regulators event on Friday, Kirkland said that “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,” he said.
“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 into 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) 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 rollover 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”.
Wow I’m a former client of UGC and this a gross and misleading update on what happened. I never lost a dollar and was encouraged on several occasions by ASIC and AFGA to make complaints even when I had nothing to complain about. The true snake oil salesmen are ASIC who need full investigation into what they are doing to destroy small operators and keep everyone in the big super funds. This is far from a truth and really disturbing.
Tell you what would be an interesting read Keith Ford is the following sceanrio. You leave a safe paying job, you have a mortgage and wife to feed, and so you land at Dodgy Advice Firm X. Dodgy X firm provides you with some training and attempts to brainwash you. How long do you hang for around for? Well a quick look at most UAG Advisers linkedin profiles reveals they didn’t actually hang around for long. Months at most 1.3 years. Seems like Advisers are getting better at understanding there obligations.
Not sure why ASIC continue to bury the snake oil salesperson in red tape, when the head of the snake just needs to be cut off. The most dangerous job and lowest paid jobs in Financial Planning is the Financial Planner, the safest is the sales rep brainwashing cracking the whip and pressuring the Adviser. Even the Paraplanners only worked there for as 2 years.
As long as these middle men go unpunished, there will always be businessman trapping and luring Advisers willing to work in there firm for 12 months before realising this is just wrong, whilst that model exists this industry will always face over regulation. The sad thing is we’re now applying it to “Qualified Advisers”
Maybe Cbus could ask old mate John Setka to have a seat on the Board so he can clean up the mess ?
He has a certain way of dealing with things and so will undoubtedly have the member’s interests front of mind.
Hey Alan,
Whilst you are at your ASIC Commissioner role, do you reckon you could spend. Bit of time working out how ASIC continue to waste millions of taxpayer dollars on losing legal cases such as being highly criticised by the Judge in the recent abysmal failure to secure a case against Dixons ???
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”.
I’ll be very interested to see as to whether a professional financial adviser is a balance enhancer or a balance eroder.
Seems only “Qualified Advisers” are OK to remove money form product (members retirement savings) for their wages/salaries – somehow this is not erosion of superannuation? I might have just answered my question – employed Qualified Advisers will help bring in and maintain FUM – I can’t see a Qualified Adviser recommending to rollover to another product – or reduce a clients Mortgage vs contribution to the inhouse product? Is this what they mean by “erosion”? All about FUM?
Why has it taken so long for action to be commenced against these dodgy operators?
Perhaps ASIC was concentrating on the elimination of Retail Advisers move FUM from Industry Super as a priority – can now go after the smaller fish?
Perhaps they we’re worried more about as to where to find Sherlock’s pipe for the Perth pantomime?
So what do you think is going to happen when QAR unleashes thousands of backpackers employed by the Australian House of Lords, the Industry Super Funds. They will be quoting 20% pa returns, like immediately after Hayne RC, switching funds like water.
It’s terrible behaviour but they do next to nothing to stop it. The latest variation is do this on the basis of you being a wholesale investor and not being licensed. ASIC need to work out how to use a program called Google.
All Advisers must be an ‘Authorised Representative’ on the ASIC Professional Register. Anyone so registered can then deal with wholesale clients. Any AR wishing to deal with retail clients must also be a ‘Financial Planner’ on the FAR.
Kirkland cautions against ‘snake oil’ salesmen recommending super switching…
Kirkland must think Industry super salesmen are Mongooses lol
So why allow Super Funds to charge for advice when the member might not even use it?
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”.
Can’t wait to see the super fund clickbait adds when their backpacker driven call centres are allowed to give UNquailified advice as part of their sales spin, without the usual consumer protections.
Does anyone recall a Super Fund offering Qantas points?
“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.
Sure these cold callers are bad and need to be attacked.
Industry Super Funds also attemp to rollover anyone and everyone’s super to an Industry Fund, no advice just a call centre jokey telling them it will be better.
Does ASIC look at Industry Super Call Centre Rollovers ?
Of course not, Industry Super can do whatever they want as best buddies with ASIC & APRA.
That does seem to be the message?
“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 into SMSF, with most of their super then ending up being invested in, say, a high-risk property scheme.