Cbus calls on government to ban lead generators targeting Australian retirement savings

Superannuation giant Cbus has called for sweeping financial reforms, warning AI-enabled marketing will create ‘a far more dangerous, automated environment’ for investors.

Financial Services Minister Daniel Mulino. Picture: NewsWire / Monique Harmer

Industry super giant Cbus has called on the government to ban lead generators in financial advice and tighten up approvals for managed investment schemes in the wake of the Shield and First Guardian scandals.

It comes as Financial Services Minister Daniel Mulino prepares to sit down with industry representatives on Wednesday to outline how the government plans to spread the cost of a $50m blowout in the national compensation scheme for victims of financial wrongdoing.

Participants also expect Dr Mulino to announce reforms to the compensation scheme, as well as the broader financial system, to plug the gaps that allowed 12,000 Australians to put $1bn of their retirement savings into Shield and First Guardian, two funds that are now in liquidation and under investigation by the corporate regulator.

Super funds are among those potentially caught up in the $50m special levy needed to address the major gap in funding for the much-leaned on Compensation Scheme of Last Resort (CSLR).

That $50m is just for the 2026 financial year, with industry widely expecting to also be called on to help fund the much larger blowout in fiscal 2027 and beyond, in part due to Shield and First Guardian.

“We encourage the government to prohibit lead generators from targeting Australians about their super or other financial products,” Cbus chief executive Kristian Fok said in a letter to the Assistant Treasurer seen by The Australian.

“Australians are increasingly targeted by online digital lead generators whose operations fall outside the intent of existing hawking rules.”

Cbus chief executive Kristian Fok. Picture: NewsWire / David Geraghty

Mr Fok also called on the government to expand the definition of hawking to cover digital lead generation and targeted online marketing, and also ban adviser referral payments to lead generators.

“Without these measures, AI-enabled marketing will only amplify the gaps creating a far more dangerous, automated environment for members,” he warned.

In the same letter, Mr Fok said approval processes for managed investment schemes needed to be tightened and the thresholds for wholesale investors moved higher.

“With more than 720 schemes offering in excess of 135,000 investment options, members need confidence in product quality,” he said.

Both Shield and First Guardian were managed investment schemes and the Australians who put their money into both funds were heavily targeted by lead generators who passed them on to advisers.

These advisers then convinced the mum-and-dad investors it was in their best interest to move their retirement savings from established super funds into Shield and First Guardian.

The lead generators were paid for the successful leads they sent through, while some of the advisers were handed millions by the now-failed funds to pump investors into the schemes.

The scandals have exposed widespread alleged misconduct across the chain, from the research houses to super trustees, financial advice licensees, advisers and the funds themselves.

Regulators have also been hit with criticism for not heeding warnings on cold callers and high-pressure super-switching tactics made as far back as 2021.

Most, if not all, of the 12,000 investors caught up in Shield and First Guardian will be leaning on the Compensation Scheme of Last Report to recover a portion of their retirement funds.

The scheme provides up to $150,000 in compensation to victims of financial misconduct, acting as a safety net if an offending firm fails, funded largely by the country’s 15,000 financial advisers.

The CSLR was only brought in last year but has faced cost blowouts from the start, first due to Dixons Advisory, and now Shield and First Guardian.

The industry is widely expecting Dr Mulino will spread the excess CSLR cost far and wide for fiscal 2026 and 2027 but is pushing back against the prospect of being caught up in funding the scheme in the longer-term.

The government needs to bring in substantial reforms to better protect consumers, such as banning lead generators in financial advice, while also making changes to the CSLR to get it under control, industry participants told The Australian.

Complaints about the compensation scheme include that the $150,000 cap is too high and that the ‘but for’ provision, where investors can claim compensation even if they don’t actually lose money but could have been better off “but for” the advice received.

“Special levies are not a sustainable long-term solution,” Financial Services Council CEO Blake Briggs told The Australian.

He said the CSLR was on track for continued cost blowouts into the foreseeable future.

“Without structural reform, the scheme risks becoming increasingly unpredictable and unaffordable for industry and ultimately for consumers,” Mr Briggs said.

“To be sustainable, the CSLR must return to being a true scheme of last resort – reserved for consumers who have genuinely lost everything and have no realistic means of recovery.

“It should not be relied upon to compensate individuals who still hold significant assets.

“Without clearer boundaries, the scheme is underwriting investment risk, which is contrary to its original policy intent, and which magnifies moral hazard.”

Originally published as Cbus calls on government to ban lead generators targeting Australian retirement savings