ASIC warns advice firms over high-risk super switching in Australia

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ASIC warns on super switching

Highlights

ASIC reports that 15 licensees acquired 7,639 new clients via unqualified lead generators, with over $678 million switched or invested, 90 per cent from superannuation.
Licensees deducted $9.8 million in upfront advice fees and clients agreed to $4.5 million in annual ongoing fees as part of these superannuation switching arrangements.
ASIC warns five licensees lacked adequate controls against high-risk super switching, and enforcement actions will intensify following evidence of consumer harm and legislative changes.

Review finds broad use of telemarketing networks

As reported by ABC News, citing ASIC, unqualified and unlicensed lead generators helped 15 Australian financial services licensees bring in about 7,639 new clients over the 17-month period, equal to roughly 35 per cent of their total new clients. The regulator says more than $678 million was switched or invested through these arrangements, with about 90 per cent of the money coming from superannuation savings.

The review examines how telemarketers use social media advertising and phone calls to identify consumers and pass them to licensed financial advisers. ASIC says some of these lead generators moved beyond simple referrals into lead qualification, appointment setting, fact-finding, product research and discussions about investment performance or Statements of Advice, while one case involved assistance with implementing advice.

Licensees deducted $9.8 million in upfront advice fees from clients, while clients also agreed to a further $4.5 million in annual ongoing fees. ASIC says the collapses of Shield and First Guardian show the potential consequences when financial services providers fail to act in investors' best interests.

Enforcement risk grows for super switching practices

ASIC says some lead generators used potentially misleading statements, fear-based claims and non-like-for-like performance comparisons to persuade people to move their super. The regulator says this kind of lead generation is likely to be inconsistent with advisers' legal obligations, including acting in clients' best interests and giving personal advice only when properly authorised.

According to the review, five licensees did not have controls or standards that prohibited, or were likely to detect, high-risk superannuation switching by authorised representatives. A further four licensees were operating businesses with some features of high-risk superannuation switching.

ASIC commissioner Alan Kirkland says lead generators use slick sales tactics that can expose Australians to serious financial harm, and he warns the regulator will continue enforcement action under current laws where it finds evidence of major consumer damage. Earlier this year, Assistant Treasurer Daniel Mulino announced unlicensed telemarketers who cold call and make unsolicited approaches to persuade people to switch their super will be banned.

Super Consumers Australia chief executive Xavier O'Halloran says the findings expose the commercial incentives behind high-risk super switching schemes. He says businesses that cold call savers can profit from moving retirement balances regardless of whether the advice benefits the client.

Our earlier article on Chariot Claims’ $10 million Series A looked at how the legal-tech startup uses advertising and an intake questionnaire to identify and screen large volumes of consumer complaints—such as privacy allegations, hidden fees and hard-to-cancel subscriptions—before routing eligible cases to partner law firms. It also outlined how Chariot is expanding AI-driven review to process claims at scale, while noting the pushback it has faced over claimant advertising and use of company names in ads.

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