Industry funds accuse advice firms of hawking
In what risks reopening the battle lines between financial advisers and industry funds, the Australian Institute of Superannuation Trustees has accused some financial planning businesses of using intermediaries to cold call fund members.
The AIST’s pre-budget submission explicitly calls for the extension of the anti-hawking rules to financial services citing the “typical experience” of a super fund member being “cold called by an intermediary generating business for a financial planner”.
Commenting on the AIST submission, chief executive, Eva Scheerlinck said AIST was concerned the legislation did not cover ‘cold calling’ from advisors who charged exorbitant fees of up to $6,000 to roll consumers from high performing, low fee profit-to-member funds into poorer-performing retail funds.
Scheerlinck said the AIST was aware of a number of financial planning businesses that used intermediaries to solicit business in this way.
“The same imbalance of power exists in the unsolicited sale of financial services as in the unsolicited sale of financial products,” she said while noting that the Financial Services Royal Commissioner Kenneth Hayne had recommended that superannuation products be subject to anti hawking rules, and these laws came into effect in 2021 but the hawking of financial services such as advice was not included.
According to the AIST, a typical experience was for a super fund member to be cold called by a an intermediary generating business for a financial planner, told their fund was “high risk” and all their money would go to the government if they died, emailed documents including a completed application for a retail fund and an invoice for advice that was not provided, and told to sign immediately. They are then charged thousands of dollars in fees to roll the money over.
“A number of these cases have been reported to ASIC (the Australian Securities and Investments Commission) 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,” Scheerlinck said.
AIST believed that the same consumers were just as vulnerable when receiving a cold call from a financial adviser as they were from a product seller in that they were ‘unsuspecting’ and ‘very often not in a position to judge the merit of what is being offered’.
“We all know the feeling of receiving an unsolicited call from a number we don’t recognise and speaking to somebody we don’t know who is trying to sell us something we don’t need or even want,” Scheerlinck said.
“When they’re selling financial services like superannuation advice to skirt around a gap in the law and trying to bamboozle consumers with half-truths into signing up for a costly service that is not in their financial interests, it should be outlawed.
Show me the evidence. There are some pretty serious claims being made there. I sense they’re overreaching the truth.
The only evidence is that ‘Australian Household Research’ organisation that calls you randomly only to pass you on to a ‘advisor’ who will explain that ‘unknown’ tax-office loophole that allows you to ‘negatively gear / lose money on’ an over-priced investment property…
And what’s the difference when Unions force employers into a particular fund. I also know of a case where a union official approached a member about super entitlements and started questioning the advice provided. This happened more than once.
Grow up AIST / Union Super, the $$$ pie is so freaking huge and you have a humongous proportion yet you still whinge like a 2 year old.
Hey AIST, have you heard the one about Industry Super charging $$$$$ millions, upon millions, upon millions of $$$$ in HIDDEN COMMISSIONS across ALL members super accounts for Intra Fund Sales / Advice when 95% of those same Union Super Fund members get ZERO service for the HIDDEN COMMISSIONS charged.
AIST, how about Stop charging Hidden Commissions For NO SERVICE !!!!
AIST, please confirm exactly how much your total HIDDEN COMMISSIONS FOR NO SERVICE amounts too = $$,$$$,$$$
These are very serious allegations which need to be investigated immediately. That’s what ASIC is for. As an adviser and AFSL I was under the impression that cold calling was outlawed a while back. What I resent is what may be a couple of (potentially unlicensed) operations partaking in this activity being made to look like the entire profession has nothing better to do than to run cold calling operations. Grow up and behave like professionals, AIST.
Read RG38. Cold calling from financial advisor is not banned from ASIC perspectives unless it falls under Telecommunication and Spam act. As provision of personal advice breaks the nexus between any subsequent product accuistion and the cold call.
Really Industry funds, get a life you’ve won the war. Cold calling has been banned for years – I’m calling Bull Shit here.
Hope the industry bodies tell them to pull their heads In!!
The “industry bodies” will not tell them anything because the industry bodies have no real say in so called “Industry funds”.
“Industry funds” are really union funds. They are controlled by unions, for the benefit of unions. AIST and ISA are union controlled lobby groups.
The so called “industry representatives” are there to pick up a cushy board salary for very little effort, as long as they do what the unions tell them.
Cold calling? Really?
I would think were all too busy looking after our existing clients while selectively turning away ‘prospects’ as our practices are full.
Gather the masses and get the pitch forks out… here we go again!
Maybe it would be good for ASIC to do their job and investigate these claims before adding more regulation to the overwhelming majority of advisers doing the right thing. Maybe at the same time ASIC could investigate union funds for their breaches of the sole purpose test, misleading advertising, mislabeling of investment choices etc.
Sounds rich coming from Industry funds. Called karma.
Maybe I’m missing something here but I thought ‘Best Interest Duty’ would provide protection against moving a client from any fund, unless it was in their best interests? Whether it’s intermediaries Hawking or not, it is the adviser who is providing the advice to rollover the super, so it sounds like it’s the advisers being accused of not acting in the clients best interest? With a pre-prepared application form and, I assume, no SoA, that does ring alarm bells to me. I’m accredited to advise on several funds including AustralianSuper and AwareSuper as well as platforms such as Panorama, Hub24 and NetWealth and, as a financial adviser, I can provide advice on most products without any need to move the client to another product (the old saying: “If it ain’t broke”). The Royal Commission seemed to conclude that the solution to better advice was better education, but from my experience, a crook is a crook and all you end up with is a better educated crook. Like in any industry/profession, 99% of financial advisers are honest and ethical and it’s the 1% that cause all the problems.
Best interest duty does cover this as well as Standard 12 that requires us to correct deviant behaviour and to report the adviser or be as guilty as the errant adviser if you do not do so. So give us the names if you do indeed have any AIST…
The Silence from the FPA & AFA claiming they represent Advisers says a lot.
Absolute BS. Another smokescreen from ISF to hide their myriad of issues right now. Numero uno is unlisted asset valuations. They need to come down down down for the same reasons they were able to go up up and up to make the funds ‘outperformers’
Fair dinkum!
Numero uno is unlisted asset valuations.
Spot on!!
AIST instead of making an outrageous statement that defies the intelligence of just about everyone.
Why would any member of an Industry Fund part with $6,000 for advice and cost more ongoing than their existing industry fund with less benefits.
None of that makes any sense unless you are saying one or more of your industry fund members are that stupid.
The “clients best interest duty” requires an adviser to disclose comparative costs, benefits lost and benefits gained in the provision of any advice and the risks that the client needs to consider.
If there is one instance, where those things haven’t been part of the advice process, then tell ASIC, I’m sure they’d like to know.
For M/s Scheerlink to make an outrageous generalisation, not only belies any truth in her statement but loses credibility by any measure.
I’m an adviser and have personally received these calls and still can’t believe it is happening. For an industry with a massive shortage of quality advisers and too many clients to service, there shouldn’t be a need for advisers to be using cold calling tactics. This says more about the quality of the adviser having to do this, than anything else. I’m all for extending anti-hawking laws to make it harder for dodgy advisers. We’re trying to make the industry more respected and professional as a whole. I can’t see how any adviser doing the right thing would be opposed to this.
About as much truth to this as the fox in the hen house adverts the industry funds pushed
This has to be utter crap. There is no adviser I know that isn’t either swamped with new business or has already closed their books.
No-one needs to look for business if they are licensed.
Consequently this is probably another phising/whatever scam from unlicensed people.
Once again advisers doing the right things are being blamed because we operate in the same space, allocating capital/moving money.
The AIST are simply providing firmer evidence of their conflicted, biased and utter baseless foundation on this and many other of their claims.
If cold calling advisers are putting clients in a worse position, they are breaching the existing Best Interests Duty, and should be sanctioned accordingly. But if they are putting clients in a better position, everyone benefits except the fund they are being moved out of.
The real reason union super lobbyists want more regulatory restrictions is to avoid competition, not to protect consumers.
Trust me, it’s going on. And I can assure you ASIC has and has seen the evidence of it. Pity a small bunch of rotten apples are again trashing the whole Advice barrel
Exhibit one your honour! (Extract of the fine print of but one typical hawker currently using to disclose away its current snake oil flogging on social media apps)
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“ Comparemysuper.online and EMBR Group Pty Ltd do receive a fixed fee for providing this service and sharing your information with a relevant product or service provider. ” This statement in itself does not provide enough clarity into the situation because it all depends on who pays the fixed fee. A relevant provider is not and should not be paying any referral fees. Therefore, one could also assume this has nothing to do with advice practices and everything to do with unlicensed and unlawful practices being established to skirt the law and line their own pockets.
The openning line discloses this: “a free service that allows users to submit their information and be referred to a suitable and licensed financial advisor to provide a review of your superannuation.”
Clearly the advisor is paying a fixed fee for the referral. Are you saying this is hawking and illegal? I know our firm uses a service similar to this.
Sorry, did I wake up in the early 2000s this morning? What rubbish from the AIST! Show me the evidence please @Eva Scheerlinck