Longo backs ban on ‘unlicensed communications’ about super

In a speech to be delivered at the Financial Counselling Australia Conference on Thursday, Joe Longo will call for greater restrictions on unlicensed communications around superannuation.

Among a series of consultations that Financial Services Minister Daniel Mulino launched last month was one aimed at curbing lead generation activity.

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“The collapse of Shield and First Guardian has highlighted the role that lead generation can play in shaping consumer engagement with financial products and the potential for consumer harm,” the paper said.

“Typically, investors and superannuation members who transferred their superannuation monies into these funds were allegedly contacted by lead generators after seeing a social media advertisement or using an online superannuation ‘health check’, ‘find my lost super’ or ‘compare my super’ advertisement, who then referred them to financial advisers.”

Addressing this lead generation activity, Longo said that there would always be business models that “test the regulatory perimeter”.

“Most recently, we have witnessed unscrupulous actors trying to exploit the significant pot of money in our superannuation system through what we suspect is industrial-scale misconduct. Everyday Australians who signed up for a free super check have instead lost their life savings,” he said.

“We must disrupt the lead generation model that has enabled this conveyer belt of consumer harm to occur. One way to do it, from my personal view, and something the Government is consulting on, would be to ban unlicenced communications about superannuation.”

Noting that super is among the largest assets many Australians will accumulate, the regulator’s outgoing chair argued that it would make sense that people talking about this system should be “appropriately qualified”.

“We wouldn’t let someone perform heart surgery just because they’ve watched a lot of E.R. – therefore we shouldn’t let people who aren’t qualified lure Australians into losing their life savings and turn a profit from it,” Longo said.

“In my view the most effective way to address this misconduct is to stop it at the source – and a ban on unlicenced communications would certainly go a long way to achieving that.”

Speaking on a recent episode of the ifa Show podcast, FAAA general manager of policy, advocacy and standards Phil Anderson raised doubts over the necessity of changing the regulatory settings for lead generation, given there is a strong case the activity related to Shield and First Guardian was already illegal.

“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 the ifa Show podcast.

“But we need to better understand exactly what went on before we decide what needs to change.”

For Anderson, the issue was not that the laws were not effective enough, but that they were knowingly broken, such as advisers implementing advice that hadn’t actually been given to the client.

“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,” he said.

He added: “If the issue is that existing laws were breached, then changing the laws doesn’t necessarily fix that. The focus should be on enforcement and addressing the behaviour that led to these outcomes.”