Questions are being asked about the extent to which superannuation funds will need to more closely tailor their intra-fund advice offerings following the High Court’s decision which clearly defined the difference between “general” and “personal” advice.
The High Court provided that clarity by dismissing an appeal by Westpac against a Full Federal Court decision that the bank breached the Corporations Act by actively conducting a sales campaign aimed at rolling customers into Westpac products.
Westpac claimed the conversations between its personnel and the superannuation fund members fell within the framework of general advice. The High Court disagreed and upheld the view that it falls under the heading of personal advice.
In the words of ASIC Commissioner, Danielle Press “By clarifying the distinction between tailored, quality, personal advice in the customer’s interest, and general advice given via a sales campaign, today's judgment will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients”.
However, on ASIC’s current interpretation of intra-fund advice, the High Court’s decision may not be relevant, with the regulator having said that it regards intra-fund advice as limited personal advice. What is more, it has stipulated that Section 99F of the Superannuation Industry (Supervision) Act 1993 specifies that “intra-fund advice cannot cover advice on whether a member should consolidate their superannuation holdings into one account”.
A key finding in the High Court judgement was that there was a pre-existing relationship between each member and Westpac and that the bank already held some of the members’ superannuation.
“Westpac gave financial product advice to each member which was intended to influence them in making a decision in relation to a particular financial product, namely, membership in one of the Funds, in circumstances where a reasonable person might expect Westpac to have considered one or more of the member's objectives, financial situation and needs,” the High Court decision said.
“The subject matter of the advice, the nature of the relationship between Westpac and its members, the purpose and tenor of the calls, and the members' objectives, together with the form, content and context of the financial product advice seen in light of a number of other considerations, compel the conclusion that the financial product advice was personal advice within the meaning of s 766B(3)(b).”
“…where a provider of advice urges the recipient to follow a particular course of action, there is a greater likelihood that a reasonable person might expect the adviser to have considered the recipient's personal circumstances. This observation applies with particular force in the present case, where: the course of action concerns a subject matter of significance to most members (being the consolidation of multiple superannuation accounts); there is a pre-existing relationship of dependence between the adviser and the member (that of trustee and beneficiary),” it said.
“The adviser elicited the member's objectives; and once having been told them, the adviser confirmed those personal objectives through the use of social proofing as being common and relevant objectives.
“As has been said, those circumstances would have conveyed to a reasonable person not only that those personal objectives were considered, but that no other matters needed to be taken into account and no other advice was required before the member made a decision to accept the recommendation and roll over their external superannuation accounts.”