An Australian government authority has announced a clampdown on high-pressure sales tactics among some rogue financial advisers.
The Australian Securities and Investment Commission (ASIC) will target what it refers to as “superannuation-switching cold-calling models” in 2024. The wider financial adviser community frowns on super-switching pressure tactics such as these.
ASIC commissioner Alan Kirkland said: “We’ve done some surveillance in this area [and] identified some operators using high-pressure sales tactics.”
Mr Kirkland said advisers used these tactics “to convince customers to move their retirement savings into high-risk schemes”.
He highlighted these concerns to attendees of the Financial Advice Association Australia Roadshow 2024 held in Sydney last Friday.
“These cold callers had lead-generation and referral arrangements with a small group of financial advisers,” he said, adding that those advisers were receiving “quite significant advice fees arising from the switch”.
Mr Kirkland stressed only a few advisers adopted tactics such as these. In fact, it was the larger financial adviser industry that had brought the matter to ASIC’s attention.
Tackling dubious super-switching tactics not just lip service
ASIC has followed up on Mr Kirkland’s words. It issued a press release yesterday reaffirming the warnings made by the commissioner last week.
Expanding on Mr Kirkland’s presentation, the release said it was closely monitoring the trend towards encouraging high-risk super switching.
“ASIC has observed considerable volumes of superannuation savings flowing into high-risk property managed investment schemes.”
The potential damage to industry and clients
Mr Kirkland said having the majority of the adviser industry on board was important for clients and advisers alike.
“I hope our work in this area will be welcome to many people in the room,” he said. “We’re talking about a small number of advisers here. Their practices are likely to do harm to sections of the rest of the profession.”
In recent years, the financial services industry has done much to restore the tattered reputation of its adviser community. This came in the wake of the 2018 banking royal commission, which revealed that a startling number of advisers did not act in clients’ best interests.
Such cases included one specific area of super switching. The commission cited one shocking example: “Ninety per cent of financial advisers who provide advice to self-managed super funds have failed to comply with the best interests of their clients”.
The commission introduced a number of legislative changes to ‘clean up’ the industry and protect clients as a result of the findings. These included the introduction of the Financial Planners and Advisers Code of Ethics 2019 and the 2021 Better Advice Act.
Mr Kirkland reminded roadshow attendees of the importance of protecting clients and their investments as well as the industry’s reputation.
“Misconduct that results in the systemic erosion of super balances is a current ASIC enforcement priority,” he said. “Where we identify significant misconduct through this work in this area, we will take action where required.”
Perhaps with the aforementioned 90 per cent failure rate in mind, Mr Kirkland also brought up the topic of self-managed super funds. “We’ll also shortly be commencing a review of advice in relation to the establishment of self-managed super funds,” he said. “I look forward to updating you on that work when it is further progressed.”
Protecting investors from super-switching ‘cowboys’
ASIC has backed up its warning with the launch of a community awareness campaign, complete with its own webpage. The campaign urges Australians to be particularly wary of cold callers promoting super switches promising high returns.
The website makes some very clear and simple recommendations.
“Don’t answer calls from numbers you don’t know. And if you feel stuck on a cold call, just hang up.”
ASIC advocates swift action in cases where customers may have provided even partial superannuation or banking details.
“Contact your existing super fund or bank immediately and ask them to not allow any withdrawals.”
Have you received a cold call from someone advising super switching? What was your response? Let us know via the comments section below.
Also read: A super start to the year
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