Advice firms are clinging to lead generators who use ‘super health checks’ to cold call customers
Australia’s corporate watchdog says thousands of retirement nest eggs and potentially vulnerable investors continue to be at the mercy of cold callers exploiting a legal loophole.
Financial advice firms are still using cold callers and lead generators to drum up new business under the guise of superannuation health checks, and there are no sign of laws being brought in to stamp out the practice.
This is despite the corporate cop warning of the risks to Australia’s $4.3 trillion retirement pot.
More than a year after the Australian Securities and Investments Commission began issuing warnings about dodgy superannuation cold callers, and the subsequent collapses of the Shield Master Fund and First Guardian Master Fund whose investors were targeted by such operations, a cohort of advisers are still preying on unsuspecting Australians who fear they won’t have enough saved for retirement.
While some licensees have instructed their advisers to cut out using lead generators or cold callers, others, including InterPrac Financial Planning, which is at the centre of the Shield and First Guardian scandals, have shied away from issuing such orders.
It is especially galling that InterPrac won’t stand up against such activity, when its representatives, including Venture Egg, Miller Wealth and Reilly Financial, have been accused of using these tactics to lure thousands of investors into Shield and First Guardian.
At least one InterPrac-licensed advice firm, Queensland-based Clear Sky Financial, is still using lead generators to bring in new business. Clear Sky pays a company, CheckMySuper, for each lead it sends through. The Australian understands Clear Sky gets about two dozen leads a week from this deal.
CheckMySuper is Australian-owned and based in Varsity Lakes, Queensland, but until recently the company had its office right next door to Clear Sky, in Mermaid Beach.
When approached about its use of lead generators, Clear Sky chief executive Dominic O’Regan directed The Australian to InterPrac.
A spokesman for InterPrac said: “InterPrac expects all its authorised representatives to act ethically and in line with the Corporations Act in their dealings.”
Clear Sky is just one of a number of firms still using lead generators despite recent scandals and warnings from the corporate cop.
The Australian is not alleging any wrongdoing by Clear Sky or CheckMySuper and there is no suggestion that clients are being put into risky ventures when they sign up with the advice firm.
But the persistent use of cold callers and lead generators among a cohort of the 15,000-odd advisers operating across the country is, these days, potentially reputation-damaging even when it’s all above board. The practice stems from a legal loophole in Australia’s anti-hawking legislation that prohibits cold calling for financial products but not financial services.
A carve-out in the current anti-hawking legislation was permitted for advisers as this segment of the market was already captured by the best interests duty, which requires that they act in the best interests of clients.
Industry sources say they have been warning ASIC about unscrupulous operators in this space for years, and have largely been ignored.
One adviser, who spoke to The Australian on condition of anonymity, said he warned the regulator about cold callers linked to advice firms in 2021.
“I’ve reported these firms over and over,” he said.
“I legitimately reached out to ASIC to say I’ve got contemporaneous proof that these scams are still happening and how do I pass this on effectively. And I was directed back to the ASIC report form on their website, where you can’t upload evidence.
“I’ve provided information to ASIC and the Financial Advice Association of Australia, and nothing just seems to happen.
“And then two years later we just see this explosion of people getting ripped off after we’ve reported it so many times.
“It’s horrific.”
The adviser is still reporting firms that use cold callers and high-pressure tactics to the regulator, to no avail.
The Shield and First Guardian collapses, which affected 12,000 investors and $1bn in retirement savings, have put front and centre the consequences of insufficient laws and oversight.
ASIC says that all up, 30,000 people could be caught up in dodgy investment schemes spruiked by advisers in recent years. But the regulator’s public pleas put the onus back on consumers to deal with a problem that really should be covered in the legislation.
“I think the message is incredibly simple, and powerful, and the message is, you’re talking about your life savings. Don’t move them until you are certain that they’re going to a better place than they are at the moment,” ASIC chair Joe Longo told a parliamentary joint committee on financial services last month.
“If someone calls you up and says, ‘We want you to move your 250,000 or 500,000 from one place to another’, stop. Just stop … sleep on it. There’s no rush.”
There’s no silver bullet to fix the wider problem, according to the regulator.
“The growing pot of superannuation money is attracting more and more dishonest brokers to find ways of getting their hands on those savings,” ASIC deputy chair Sarah Court said.
“There are a range of potential policy responses, such as at the front end with the lead generators … I think we have to recognise that there is not a single policy response, at least not one that we can think of or have thought of at the moment, that will fix these things,” she warned.
At the very least, the government could take the simple step of banning cold calling or lead generation in financial services.
This is a position consumer advocates, including Super Consumers Australia, are pushing hard for.
“We don’t think any legitimate business should be engaged in this type of practice,” Super Consumers chief executive Xavier O’Halloran said.
“We’ve seen it lead to too much loss and too many people subjected to high-pressure sales tactics. So we want to see the use of cold callers and lead generators banned.”
The government, largely silent on the Shield and First Guardian collapses in recent months, is understood to be contemplating a range of changes to better protect consumers.
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