Daniel Mulino to unveil crackdown on harmful superannuation practices at National Press Club
Cold calls and social media ads used to lure people into risky financial products are set to be stamped out under measures announced by the Federal Government.
Hawkers who use social media to lure people into putting retirement savings into risky investments will be put on notice under reforms drafted after several investment schemes collapsed.
Assistant Treasurer Daniel Mulino will unveil the long-awaited consumer protection reforms, which follow the collapse of First Guardian and Shield Master Funds, in an address to the National Press Club on Wednesday.
Among the measures is a crackdown on lead generators, who used social media, online ads and cold calls to lure people into putting their retirement savings into risky investments such as the Shield and First Guardian managed investment schemes.
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By continuing you agree to our Terms and Privacy Policy.Unlicensed real time communication about superannuation will be banned while licensees will be required to take reasonable steps to ensure lead generation activities comply with legal requirements.
The anti‑hawking regime will also be bolstered, with stronger consent requirements, limiting the exemption for financial advisors to existing clients and harsher penalties for breaches.
“These reforms are designed to disrupt some of the most damaging business models operating in the system today,” Dr Mulino said.
“They target the point at which consumers are first exposed to harm and reduce the ability of bad actors to gain access to consumers in the first place.”
The government previously floated the measures in a consultation paper published in April.
The Financial Advice Association of Australia has previously called on Labor to crack down on the practices, which can steer consumers towards inappropriate financial products.
The Shield and First Guardian collapse showed how devastating high-pressure sales tactics can be when unregulated.
“Around 12,000 Australians lost, in some cases, all their retirement savings after being targeted by sales processes that looked and felt like advice,” said FAAA chief executive Sarah Abood.
“Consumers need stronger protections against predatory lead generation, while still being able to find the right adviser for them.”
Ms Abood also called on Dr Mulino to make the compensation scheme of last resort (CSLR) sustainable, so the costs do not continue to drive up the price of advice.
In April, Treasury released a consultation paper floating the possibility of making self-managed super funds contribute to the CSLR, which is increasing in cost substantially.
“Innocent financial advisers are currently paying these bills, and in many cases are forced to pass the costs on through higher advice fees,” Ms Abood said.
She also urged Dr Mulino to finish off the financial advice reforms started by his predecessor Stephen Jones, called the Delivering Better Financial Outcomes package, and deliver the simpler, more efficient advice system that was promised..
“Australians need a financial advice system that is affordable, accessible and trustworthy,” Ms Abood said.
