Anti-hawking adviser exemptions on chopping block 

Minister for Financial Services Daniel Mulino will on Wednesday unveil a suite of regulatory and policy measures aimed at “strengthening protections across the superannuation, advice and investment ecosystem” in a televised address to the National Press Club.The milestone speech will signal the Albanese government’s legislative response to the disastrous collapse of the Shield and First Guardian master trusts, in which superannuants and investors lost more than $1.2 billion in savings. 

Extracts of the speech, seen by Professional Planner, say the measures are designed to “disrupt some of the most damaging business models operating in the system today”. In particular, the minister will take aim at lead generators, who played a key role in the distribution of the Shield and First Guardian funds and are believed to be a factor in heightened super fund switching activity occurring via social media. 

But the government’s plan will also capture regulated entities including the financial advice profession. It will amend the anti-hawking provisions legislated after the Hayne royal commission in order to “strengthen consent requirements”.

Specifically, the government intends to “limit the existing financial advice exemption to existing client relationships” and “strengthen penalties for breaches”. Under the FSR (Hayne Royal Commission Response) Act introduced by the Morrison government in 2020, a financial product request or offer made in the course of giving personal financial advice was exempted from the definition of “hawking”. It has pledged to consult with stakeholders to ensure “low risk” arrangements such as necessary contact with family members of existing clients are not triggered by the windback. The government will also require advice licensees to “take reasonable steps to ensure lead generation activities comply with relevant regulatory and legal requirements”. 

‘Real time communication’

The minister is expected to announce a ban on “unlicensed real time communication about superannuation” as part of the crackdown on lead generators and so-called finfluencers. The extracts did not make clear whether this would also apply to AI chatbots and large language models, which are believed to be growing exponentially as a source of unregulated financial advice to consumers.

This ban will come with some exemptions to “protect advocacy, educational and employment communications”, presumably to cover communications on super issued by unlicensed industry and consumer groups, academia, media and other elements of civil society.

However, no further details were provided and it is unclear whether lead generation businesses and social media content creators may be able to satisfy the criteria for these exemptions.

The extracts make no mention of more contentious proposals expected to be addressed by the minister such as the future of advice fee deductions from superannuation funds or a “cooling off period” for members switching their superannuation to another or a self-managed fund.

The minister is also expected to give some guidance on the pathway to legislate the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms, which was delayed by the Shield and First Guardian response project. Senior government sources have told Professional Planner that a window to reopen debate about DBFO may open following the Press Club speech and implementation of the lead generation reforms.

But Mulino has been non-committal, telling the Investment Magazine Insurance in Super Summit last month that he still supported the “intent” of DBFO to expand access to financial advice but had to be “cautious” about making promises he couldn’t keep.

The speech will be delivered ahead of Mulino’s address to the Retirement Leaders Summit at Old Parliament House, Canberra, later on Wednesday, at which he is expected to elaborate on the implications of the lead generation crackdown for Australia’s retirement savings.

Both events are being held against a backdrop of increased competition and super switching, mostly out of large profit-to-member and industry super funds to adviser-directed wealth and super platforms that offer more choice to investors.