ASIC taking ‘significant action’ against super switching promotions

ASIC commissioner Alan Kirkland has described the problem of telemarketers encouraging people to switch their superannuation as “the worst behaviour”, and one where the regulator is taking significant action. 

Speaking at FINSIA’s The Regulators event, he discussed the regulator’s priorities and referenced superannuation switching. 

“The worst behaviour that we see is practices that start with telemarketing or clickbait ads on social media that encourage people to review their superannuation," he said.

“They are often in a well-performing, prudentially regulated superannuation fund and are told it’s terrible and they should tip their money into a platform product or into an SMSF where their money ends up invested in a high-risk property scheme.

“We have significant action underway against those practices, and they are an enormous concern because people’s super is at stake. In the worst cases, if it’s in cryptocurrency, then it can disappear overnight.”

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Action against these cases has been identified as one of ASIC's strategic priorities for 2024-25, he said: "[A priority is] to pursue better retirement outcomes and member services – which is not limited to our work on member services in super; it also includes work on models of financial advice that result in erosion of superannuation."

In October, Federal Court documents detailed how a conflicted advice model run by United Global Capital (UGC) enticed clients with a competition to win an iPhone before offering a superannuation health check. 

“UGC ran promotional campaigns offering prospective clients the opportunity to win an iPhone or similar prize. UGC’s representatives used the contact details provided to contact the prospective clients to offer a ‘free general superannuation health check’. The prospective clients were asked certain questions to ascertain if they were suitable to be referred to UGC. 

“Under the UGC advice model, the CARs called prospective clients to ascertain their superannuation balance, the fund it was held in, whether they were working and their age. Next, a ‘super specialist’ gave a presentation to prospective clients, the effect of which was to recommend that the prospective clients transfer their retirement savings from their regular superannuation accounts into a self-managed superannuation fund and invest in related entities, such as GCPF, through the SMSF.”

ASIC actions

In May, a Melbourne-based financial adviser was permanently banned by ASIC after making false and misleading statements to clients in an effort for them to transfer their superannuation.

Kudzanai Philip Dzawo has been permanently banned from providing any financial services, performing any function involved in the carrying on of a financial services business, and from controlling an entity that carries on a financial services business.

The regulator said that Dzawo “dishonestly attempted to induce clients to transfer their superannuation into a bank account he controlled by making false and misleading statements to the clients”.

Secondly, in a Financial Services and Credit Panel (FSCP) outcome in February 2024, it stated the relevant provider gave advice to two clients in relation to insurance and superannuation, having been referred by a third-party superannuation switching cold calling operation, for which they received soft benefits under a commercial agreement. 

This operator made unsolicited telemarketing calls to individuals, offering them a superannuation review.
The FSCP sitting panel determined the advice given to the clients contravened the Corporations Act as it did not adequately consider the clients’ objectives, needs and financial situation, or base all judgements on their relevant circumstances. Nor was the advice given to the clients appropriate in the circumstances.

In June 2023, a Brisbane financial adviser was banned for five years after recommending his clients roll their superannuation into self-managed superannuation funds (SMSFs) and borrow to invest in residential property. 

Speaking in Parliament last week, ASIC deputy chair Sarah Court discussed how the regulator is taking action on unlicensed advisers. 

Appearing before the Parliamentary Joint Committee on Corporations and Financial Services on 1 November, Court said: “Who are the people or companies that are effectively providing unlicensed or unregistered advice that is allowing companies to phoenix or dispose of assets?

“We do a lot of proactive work with our data streams and with other agencies to try to systematically pick out those problematic entities. Unfortunately, they keep reinventing themselves, and it’s a whack-a-mole approach where as soon as we remove them from the system, then others emerge, but we are very active in that area.”