Need to know
- A ban on cold calling about financial products was introduced last year, but Super Consumers Australia says it should be extended to include financial services
- One company has already been fined $70,000 for cold calling people to sell financial products
- Cold calling is a tactic often used by scammers
"Cold calling" or "hawking" is when a company calls you to offer their products or services when you haven't asked them to contact you.
It's now illegal to cold call someone to offer a financial product, but it's still legal to offer financial services, such as a "review" of your superannuation or an offer to consolidate your super into one fund.
Why cold calling about financial products was banned
It was once common for banks or super funds to call people to offer them financial products. But in 2017, the banking royal commission heard a string of horror stories about how this practice had hurt people by selling them products they neither wanted nor needed.
In one harrowing case, a company sold multiple types of life insurance over the phone to a 26-year-old man with Down syndrome. Recordings of the call revealed long pauses when the man struggled to answer the salesperson's questions.
The ban on hawking sought to provide people with some control over how they initiated decisions to buy financial products
After the royal commission, the government introduced laws to ban banks and super funds from selling financial products through unsolicited contact. These new laws came into force in October 2021.
This ban on hawking sought to provide people with some control over how they initiated decisions to buy financial products. The law intended to allow people to choose how they were contacted and the types of products they were offered.
Further, it aimed to protect Australians from unwanted offers of financial products – a practice that often led to people buying products that didn't suit their needs.
Cold calls target the unsuspecting
It's long been illegal to sell shares through cold calling.
In the banking royal commission, Commissioner Hayne explained that allowing people to make unsolicited approaches about shares "too readily allows the fraudulent or the unscrupulous to prey upon the unsuspecting".
He also noted the buyer comes to the discussion unprepared, "often not knowing what questions to ask".
The same logic applies to superannuation, where many people don't have an in-depth knowledge of the super system or know what kind of advice or service might benefit them.
If you buy unwanted financial services from a cold call, you may be paying for a service that is free elsewhere. The service may also include transferring you to a product that doesn't suit your needs, meaning you'll have less income in retirement.
Padma's story: Unwanted calls about consolidating her super
CHOICE reader Padma* says she got a call from someone saying he was "Josh from Australian Super Centre".
"He implied he was associated with government efforts to reunite people with their super and address withdrawals from super as a result of COVID," says Padma.
Josh then deflected Padma's questions about which government agency the centre was working for. When pressed for details, Padma says he "indicated it was a series of subcontracting arrangements and implied he did not know".
Josh had made a mistake calling Padma, who already knew that the ATO offers a free service consolidating superannuation funds – a service he was apparently trying to sell to her. When she told him about this service, he said his company could review her fund costs with a financial adviser.
He implied he was associated with government efforts to reunite people with their super
CHOICE reader Padma
Australian Super Centre's website invites people to contact them to see if they have lost superannuation, but Australians can already find any lost super for free through the MyGov portal.
Australian Super Centre were contacted for comment.
The legitimate superannuation fund, AustralianSuper, published a scam alert in July 2023, warning: "There is a current scam involving phone calls from individuals claiming to represent AustralianSuper … they say they're from AustralianSuper Centre."
The alert said that the caller may ask for personal details, or offer to transfer funds to another super fund. AustralianSuper advised anyone who received a call from the AustralianSuper Centre to disconnect immediately.
ASIC takes action against companies who cold call
The regulator, Australian Securities and Investments Commission (ASIC), has identified cold calling to sell financial services as a potential harm for consumers.
In February 2023, ASIC took action against National Advice Solutions Pty Ltd. The company pleaded guilty to breaching anti-hawking laws against cold calling people about financial products, and the court fined them $70,000.
Unsolicited calls can convince consumers to make decisions on their super that they didn't plan to make or don't suit their needs
ASIC deputy chair Sarah Court
National Advice Solutions had cold called people suggesting they roll over their super into different super products. To do this they charged both an initial fee and ongoing fees.
But rolling over your super to a new fund is a free and a quick process – some funds can sign you up in as little as five minutes.
"Australians work hard to build up their super," says ASIC deputy chair Sarah Court. "Unsolicited calls can convince consumers to make decisions on their super that they didn't plan to make or don't suit their needs."
National Advice Solutions used cold calling to sell people a service that can be accessed for free.
Lawyers' association supports limitations on cold calling
Josh Mennen, spokesperson for the Australian Lawyers Alliance (ALA), says there is a good reason cold calling people to sell financial products is banned.
"The rationale for these anti-hawking laws is to protect lay people, who may have low levels of financial literacy, from being placed under 'in the moment' pressure to take an add-on product or switch to a new product that is not in their best interests," he explains.
"[The law] is founded on evidence that [hawking] is a real problem, so the ALA has supported limitations on unsolicited hawking."
It's important to distinguish the practice of cold-calling from that of a fund contacting existing members
Mennen says it's important to distinguish the practice of cold calling from that of a fund contacting existing members.
A fund may contact members approaching retirement to offer them guidance on their existing product. He says this is a different scenario from a financial services company making unsolicited contact with people to recommend a new or different product in which that company has an interest.
"The first scenario is a sensible step that will help Australians better understand and plan financially," he says.
"The second scenario has been a proven failure, resulting in devastating financial outcomes for consumers and was a major catalyst for the financial services royal commission."
Cold calling also used by scammers
Leah Sciacca, senior executive leader, financial advice and investment management at ASIC, told Super Consumers Australia that the regulator has been seeing increased reports of scams along with misleading conduct from financial services providers.
"We're also aware that, in addition to the scams, there are business models that involve cold calling and sales tactics designed to encourage consumers to switch their super in circumstances where it might not be in the interest of the consumers to do so."
Tips on avoiding scams
- Be very cautious about any contact encouraging you to change super funds or open a self-managed super fund.
- Search for the company online and call them back on a phone number that you've found yourself on their website to check the caller is who they say they are.
- While your super fund may call you for legitimate reasons, you can always call them back to make sure you're not talking to a scammer.
The National Anti-Scam Centre has some resources to help you avoid phone scams.
The super industry view
Industry group Australian Institute of Superannuation Trustees (AIST) has also been calling for the ban on hawking financial product to be extended to financial services.
Mel Birks, deputy CEO and general manager of advocacy for AIST, says the banking royal commission showed it was "pretty much impossible" for people to make good financial decisions when someone cold calls them.
"You're at a disadvantage because you're caught unawares, and you haven't had a chance to think things through. Often what's being said can be a bit bamboozling for the individual."
You're at a disadvantage because you're caught unawares, and you haven't had a chance to think things through
Mel Birks, AIST
Birks says the group has had reports of cold callers pressuring people to decide on the spot, or giving inaccurate information about super funds. Some people have been coerced into paying thousands of dollars to roll their super into a new fund.
She also says that super funds and legitimate financial advisers don't need to cold call anyone. "I don't think reputable businesses would rely on that mechanism to generate business."
Cold callers can pressure people to make important financial decisions on the spot.
Super Consumers Australia policy manager Rebekah Sarkoezy says it's time to change the law to protect people from unwanted cold calling.
"These companies are getting around the current prohibition on financial products by cold calling people and offering financial services instead," she says.
"The core problem remains the same – people are being pressured into making decisions and signing up for poor quality services, which could have a disastrous impact on their retirement."
These companies are getting around the current prohibition on financial products by cold calling people and offering financial services instead
Rebekah Sarkoezy, Super Consumers Australia
Super Consumers Australia is calling on the government to extend the ban on hawking financial products to cover services.
In the meantime, Sarkoezy says people shouldn't engage with cold callers.
If you want help with your super, you can start with the free resources at Moneysmart. The government's fund comparison tool is also a good way to see how your fund is doing. You can also call the government's Financial Information Service on 132 300.
*Name has been changed.
This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.
Stock images: Getty, unless otherwise stated.
