In a statement on Thursday, the Australian Securities and Investments Commission (Asic) revealed it has started legal proceedings against Westpac and its subsidiary BT Funds Management for failures relating to the firm’s cold calling sales practice.
Breaches in phone advice
During these telephone campaigns, Westpac and BT provided personal recommendations to customers, urging them to switch their existing pension pots – known as super funds – from other providers into Westpac’s super accounts.
Asic said it found 15 examples where this advice breached laws introduced in 2012 as part of the Future of Financial Advice (Fofa) reforms, requiring financial advice to be given in the “best interests” of the client.
The law sets out stricter criteria on firms providing personal advice, including personal recommendations compared to just general advice.
“Westpac and BT are not permitted to provide personal financial product advice under their Australian financial services licences,” said the regulator.
Asic also accused the firms of failing to “undertake a proper comparison of the superannuation funds as required by law” or to ensure that the advice they provided was “honest and fair”.
BT rejects claims
BT Financial Group has rejected the watchdog’s findings, arguing that customers were aware it was providing general advice over the phone, which complied with all ‘best interest’ obligations.
“We reject ASIC’s legal interpretation that some customers may have thought they were receiving personal, rather than general advice,” said chief executive Brad Cooper in statement.
He added that the legal action will be an important test case for the industry.
“More and more we are finding people want to have a natural and practical conversation without having to pay for comprehensive personal advice,” said Cooper.
“Super fund consolidation is in the best interests of many Australians and along with regulators and industry, we have built programs to inform and support customers to consolidate or roll over their superannuation.”
The first hearing into the allegations will take place in Sydney on 2 February 2017.
Banks in trouble
The revelations are the latest failures to emerge against the ‘Big Four’ banks in Australia – Commonwealth Bank of Australia (CBA), ANZ, NAB, Westpac – which provide the bulk of financial advice in the country.
Earlier this year, the banks were told to repay at least A$178m (£111m, €125m, $136m) to more than 200,000 customers after charging them for financial advice they did not receive, with CBA being the worst offender.
The banks’ dubious practices in the banking and advice industry have repeatedly come under the spotlight in recent years amid scandals involving everything from misleading financial advice and insurance fraud to interest-rate rigging and failures to pass on rate cuts to mortgage customers.
As a result, the Australian government has set up a parliamentary review, known as a royal commission, to question the chief executives of the ‘Big Four’ on their conduct in the industry.
