Last week, the big news was the newly revised CSLR special levy, throwing the advice world into a spin and dominating headlines. However, the same day saw a quieter but equally important event shake the industry.
Namely, an amendment proposed by the Greens that focused on cracking down on lead generation practices was voted down in the Senate.
One of the goals of Treasury’s latest round of reforms was increasing accountability and strengthening rules around “unsolicited selling,” with lead generation being framed as a core issue behind the fallout of Shield and First Guardian.
However, lead generation and financial services were not included. In the Senate, Greens Senator Nick McKim noted that both ASIC and the ACCC had consistently advocated for banning unfair trading practices in financial services, pointing to a speech ASIC commissioner Alan Kirkland gave that suggested a similar reform to what the Greens suggested.
Super Consumers Australia has been loudly calling for a ban on “predatory” lead generation practices, too, saying the cookie-cutter advice arrangements that consumers were pushed into were propelled by “highly effective” lead gen schemes.
“They prey on people who are just looking to do the right thing and get on top of their super. They often start by simply offering a super health check, but can end in people losing their life savings in high fees and dodgy investments,” said SCA chief executive Xaivier O’Halloran at the time.
The consumer body then conducted an ‘experiment’, signing up for several lead generation services.
“When I signed up for one of these services the advisers built up my trust over several weeks,” O’Halloran said.
“They seemed knowledgeable and were highly complementary about the interest I was taking in my super. It is a very convincing sales pitch. If I hadn’t worked in superannuation for the last decade I wouldn’t have known the red flags.”
Since then, SCA has repeated it calls for a ban on lead generation, and ASIC has been steadily compiling a list of entities known to be engaged in lead generation.
But throughout this, many within the advice world, including several key professional associations, have suggested a narrative: perhaps lead generation practices aren’t the main villain here. And maybe more legislation on an already heavily-regulated sector will only impede better financial outcomes.
“We welcome the review that Treasury is currently doing in looking at the controls that apply to lead generation and will support sensible reforms to limit the damage from inappropriate lead generation activity,” Phil Anderson, FAAA general manager of policy, advocacy and standards, told ifa on the issue.
“We think that defining what lead generation means is important and any reforms should not limit the ability to have professional to professional referral arrangements or similar models that work in the interests of consumers.”
The Council of Australian Life Insurers (CALI) echoed similar concerns, highlighting that lead generation through insurance comparison websites is a useful and safe method to get consumers in contact with risk advisers.
Because of this, CALI chief executive Christine has called for an exclusion of the life insurance industry from any lead generation ban or clamp down.
“Life insurance lead generation plays an important role in helping customers access information, compare products and obtain life insurance protection,” Cupitt said.
“A blanket ban for life insurance risks limiting legitimate information and connections that support customers to build their financial safety net.”
The FAAA and Anderson have also frequently emphasised their belief that while predatory lead generation practices were a factor during the Shield and First Guardian debacle, individual misconduct is more to blame.
“I have no doubt that lead generation is an area that needs to be looked at, and the proposals are worthy of consideration,” Anderson told an episode the ifa Show podcast.
“But we need to better understand exactly what went on before we decide what needs to change.”
He added: “We’ve certainly seen examples where advice was being provided without the adviser actually speaking to the client, which is clearly unacceptable. That points to poor conduct rather than a gap in the rules.”
In some ways, the voting down of this amendment could be seen as a victory for the advice profession, but with the government’s DBFO reforms still being delayed and plenty of voices both in the consumer and regulatory world pushing for this change, advisers could soon be contending with yet another layer of regulation.
