SMSFA warns against ‘nefarious’ cold-calling tactics

SMSF Association chief executive Peter Burgess has responded to concerns raised over the use of cold-calling tactics to convince Australians to set up an SMSF and put their retirement savings into risky investments.

“The association has a long history of warning investors about the dangers of these types of schemes, which typically involve cold calling and investors being ‘sold’ an SMSF with a promise of unrealistic investment returns,” he said.

“The sector needs to be on alert about the resurgence of this nefarious activity. Such practices are contrary to what our super sector stands for – a long-term investment approach using a diversified portfolio with the end goal of achieving a dignified and secure retirement.”

Burgess said that these schemes typically “encourage” people to establish an SMSF for the sole purpose of selling an investment product that is often associated with promises of unrealistic returns.

He added that of concern is the self-interest driving these sales, the lack of investment diversification, concentration in high risk or poorly performing assets, and the inappropriate selling of an SMSF to access their product.

“Following the 2019 Hayne royal commission, ‘anti-hawking’ laws were legislated in 2021 that prohibited unsolicited sales and cold calling, prompted by past experiences where these practices had led to poor consumer outcomes,” he said.

“This kind of behaviour is also counter to the legislated best interest’s duty and the financial adviser Code of Ethics – a code that goes above the duties and obligations imposed by law.”

Burgess continued that the code imposes certain obligations on financial advisers, including acting in accordance with applicable laws, acting in clients’ best interests and not advising where there is a conflict of interest or duty.

“In addition, all advice and recommendations must consider the broad effects arising from the advice, and must be offered in good faith, competently and must not be misleading or deceptive,” he said.

“The upsurge in cold calling highlights the need for anyone considering setting up an SMSF to get independent, professional advice from a licensed financial adviser who is a qualified SMSF specialist.

“Deciding to set up an SMSF and take direct responsibility for your superannuation is a major financial decision that should never be taken lightly. As the Association has always maintained, SMSFs are not for everyone, so the input of an SMSF specialist before embarking on this journey is critical.”

At a Senate estimates hearing last month, ASIC highlighted the issues surrounding the Shield Master Fund, with advice to set up an SMSF and invest in the fund coming under the microscope.

“We’ve been very keen to get out messages to say to potential investors in relation to their superannuation funds, be very cautious about transferring your superannuation funds into a self-managed super fund for the purposes of unrealistic property investment returns. These are industrial scale models that we are seeing,” deputy chair Sarah Court told the Senate.

In its submission to the Senate inquiry into the Dixon Advisory collapse and its impact on the Compensation Scheme of Last Resort (CSLR) late last year, the CSLR operator detailed some of the “recurring themes of misconduct” that it had identified since the scheme kicked off.

According to the CSLR, inappropriate advice to use an SMSF to borrow and/or invest in property was the top theme for the misconduct, with 90 per cent of all personal financial advice claims linked to superannuation in some way.