Extend anti-hawking to advisers, says AIST

In its pre-budget submission, the Australian Institute of Superannuation Trustees (AIST) has called for the extension of anti-hawking legislation to cover services as well as products.

Namely, the AIST has argued that the anti-hawking legislation, introduced in 2020 in response to the Royal Commission, does not protect consumers from advisers using cold calls to push them into poorly performing super funds.

“AIST is concerned that [the legislation] does not cover cold calling from advisers who then go on to charge exorbitant fees of up to $6,000 to roll the consumer from their existing fund, often a high performing, low fee profit to member fund, to a poorer performing retail fund,” the body said in its submission.

“AIST is aware of a number of planning businesses that use intermediaries to solicit business via cold calling,” it added.

In an example provided as part of its submission, the AIST detailed a “typical experience” for a person cold called by an adviser.

Namely, after receiving a cold call and requesting material from the planning business, the consumer is emailed an FSG and a statement of advice alongside an invoice for $4,900 and a Docusign with an expiry of three days which states that all would be void if not signed immediately. The AIST explained that all of this is done despite the fact that no questions had been asked beyond “what fund are you in”.

“A number of these cases have been reported to ASIC 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,” the body argued.

Pointing to a statement given by Commissioner Kenneth Hayne relating to his recommendation that superannuation products should be subject to anti-hawking rules, the AIST argued that the same imbalance of power exists in the unsolicited sale of financial services as existing in the unsolicited sale of financial products.

“The person to whom an unsolicited offer is made will very often not be in a position to judge the merit of what is offered. In particular, that person will seldom if ever be in a position to compare what he or she is offered with what he or she already has under some existing superannuation arrangement,” Mr Hayne said at the time.

The AIST stated it believes that the same consumer vulnerabilities exist when receiving a cold call from a financial adviser.

“They are ‘unsuspecting’ and ‘very often not in a position to judge the merit of what is being offered’.”

“Accordingly, we strongly support extending the anti-hawking ban to the sale of financial services.”

The revenue impact on the budget, the body noted, would be neutral.