• The High Court decision in Westpac/BT and the new anti-hawking laws will impact member acquisition, engagement and retention strategies for all super funds.
  • Any real-time interactions with new or existing members that consider any of their personal circumstances and encourage them to make a decision about a financial product may be personal advice. It may also breach the new anti-hawking laws.
  • Call to action: super funds should revisit their interactive contact points with new and existing members across all channels against these new developments in the law.

Testing the waters

The test case involved a superannuation consolidation campaign targeting existing members that resulted in the rollover of an additional $650m into the BT super funds over three years.

The facts: 

  • Members were sent letters offering a free service to search for and rollover their super into their existing super fund.
  • The letters stated that members combining their super could save on fees and make it easier to manage their super.
  • The letters included a link to the trustee’s website to request a search, as well as a rollover form.
  • In most cases, members accessed the website to request a search and received a call from the call centre with the results.
  • On the calls, members were warned that the discussion would be general in nature and would not consider their personal financial needs.
  • The callers used a script to ask the member why they wanted to consolidate their super and then confirmed that the reasons given by the member were ‘two main reasons their clients liked to combine their super’. A technique referred to as ‘social proofing’.
  • The callers then offered to help the member rollover their super and encouraged the member to make that decision during the call.

The Decision:

  • The High Court held that these scripted marketing calls to members involved personal financial product advice.

Key takeaways:

  • It was accepted by the parties that the callers had used a script and had not taken a member’s circumstances into account.
  • Even so, the second limb of the test was whether a reasonable person in the member’s circumstances might expect the callers to have considered one or more of the member’s objectives, financial situation or needs. It does not require a comprehensive understanding of all the member’s circumstances. Given the trustee’s existing relationship, it was held that a member might reasonably expect that the trustee considered the objectives that had been obtained from the member during the call.
  • The use of the ‘social proofing’ technique did not prevent a finding of personal advice. The Court held that ‘personal advice’ does not cease to be so because its content is generally applicable to all or most members in the member’s position as well as to the particular member.
  • Giving a warning at the beginning of the call that the caller would not consider the member’s personal financial needs did not prevent a finding that personal advice was provided. After giving the warning, the caller asked the member why they wanted to combine their super and a reasonable person might expect the callers to have then considered those reasons in encouraging the member to use the service.
  • Finally, free advice can still be personal advice. The cost of the advice in the circumstances was at best neutral because of the other benefits flowing to the trustee.

The result:

  • As the trustees were not authorised to provide personal advice under their AFSLs, they were in breach of their licence conditions and financial services laws. The High Court also confirmed that if personal advice was given, then the trustees also failed to do all things necessary to ensure that the financial services covered by their AFSLs were provided efficiently, honestly and fairly.

Implications for super funds:

  • The decision in this case is a pause for thought for super funds that use call centres for marketing campaigns or to triage member queries and engage with members through a combination of general advice, intra-fund advice and comprehensive advice.
  • More broadly, any real-time interactions where members share their circumstances with the caller or the caller has access to the trustee’s data and plays any of that back to the member to assist them with a decision concerning their super may be personal advice.
  • It raises the question of whether it is still tenable to use a general advice model in real-time interactions with members. This is instructive given the finding in ASIC’s report on advice in super that 75 per cent of advice given by super funds to members is general advice.
  • This risk of providing personal advice in these real-time interactions would apply to telephone calls, face-to-face meetings, interactive chat bots and interactive social media channels.
  • We expect that ASIC will review the examples in its regulatory guidance after this decision but anticipate that the exemptions for calculators will continue.
  • In the meantime, it would be prudent for super funds to revisit their contact points with new and existing members across all interactive channels.
  • Finally, the decision should accelerate the need to find digital personal advice solutions that are scalable and affordable to members and, ideally, solutions that are integrated across general, intra-fund and comprehensive advice.

New anti-hawking laws for super

Member acquisition, engagement and retention strategies will also need to comply with the new anti-hawking laws that will apply from 5 October 2021 in implementation of one of the key recommendations of the Hayne Royal Commission.

Under the new laws which are designed to protect consumers from pressure selling, trustees will not be able to offer, request or invite members to apply for super products through meetings, phone calls or other real-time interactions in the nature of a discussion or conversation unless members have consented to the interaction.

Trustees will need to ensure that the consent given by prospective or existing members is:

  • given before the start of the contact
  • clear and a positive and voluntary act
  • given within six weeks before the contact occurs
  • not withdrawn before the contact occurs, and

the contact complies with the form of contact requested by the customer.

Under the new laws, each MySuper, choice and retirement product will be treated as a separate financial product. That is, trustees will need to obtain the consent of a member before offering them other super products available within the fund.

However, the insurance cover and investment options within a member’s existing super product are not separate financial products.  Accordingly, consent is not required to contact members about their existing options.

Importantly, advertising in compliance with the existing requirements under the Corporations Act is unchanged and recommending products as part of providing personal financial product advice is also permissible.

Additionally, the consent requirements under the new anti-hawking laws are more onerous than under the Spam Act, which allows the trustee to infer consent in certain circumstances and does not require the trustee to obtain new consent after six weeks has lapsed.

What next?

The High Court decision in Westpac/BT and the new anti-hawking laws will impact member acquisition, engagement and retention strategies and it would be prudent for all super funds to revisit their interactive contact points with new and existing members across all channels against these new developments in the law.

Please note that the views expressed in this article are those of the authors and not necessarily the views of ASFA.