Australia to ban cold-calling for superannuation switching schemes

Australia is set to ban unlicensed telemarketers who cold-call individuals and make unsolicited approaches to convince them to switch their superannuation funds. Assistant Treasurer Daniel Mulino announced a suite of reforms designed to better protect Australians from falling victim to operators who pilfer their retirement savings.

These reforms follow the significant collapse of the Shield and First Guardian funds, which resulted in 12,000 people losing over $1 billion in retirement savings. This event exposed critical flaws in the regulation of Australia's nearly $4.5 trillion retirement savings pool.

Under the new measures, individuals who currently might click on seemingly innocent Facebook ads like "Find Your Lost Super" or "Check Your Super" will be shielded. Previously, this action could grant permission for a "lead generator" to contact them and suggest connecting with a financial adviser to switch their super. Mulino stated that these lead generators will now require a license to advertise.

While the reforms stop short of an outright ban on advertising, which some consumer groups had advocated for, they include exceptions for advocacy, educational, and employment communications. "These reforms are designed to disrupt some of the most damaging business models operating in the system today," 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."

Additionally, the government plans to strengthen the anti-hawking regime by enhancing consent requirements, limiting the existing financial advice exemption to existing client relationships, and increasing penalties for breaches. Licensees will be required to take reasonable steps to ensure lead generation activities comply with relevant regulatory and legal requirements. Michael Johnson, who lost $500,000 of his retirement savings with his wife after switching funds based on a Facebook ad and subsequent telemarketing contact, highlighted the vulnerability of consumers to such schemes.

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These reforms are designed to disrupt some of the most damaging business models operating in the system today. 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.