Unlawful hawking practices re-emerge in SMSFs

SMSF Association (SMSFA) chief executive Peter Burgess has called out recent hawking practices that prompt people to transfer their retirement savings into a self-managed super fund (SMSF).

Burgess said the sector needs to be on alert about the resurgence of "nefarious" activity.

Anti-hawking laws were legislated in 2021 to prohibit unsolicited sales and cold calling, which tend to lead to "poor consumer outcomes".

"Such practices are contrary to what our super sector stands for - a long-term investment approach using a diversified portfolio with the end goal of achieving a dignified and secure retirement," Burgess said.

"In sharp contrast, these schemes typically 'encourage' people to establish an SMSF for the sole purpose of selling an investment product that is often associated with promises of unrealistic returns."

ASIC banned unsolicited cold calling in life and consumer credit insurance sales in January 2020 following the Hayne Royal Commission, intending to "stop practices that lead to poor consumer outcomes and trust in the financial system."

Subsequently, the corporate watchdog also introduced similar legislation to financial products in October 2021, opting to provide consumers greater control in making decisions and prevent them being approached by unwanted products.

Now, the resurgence of the unlawful methodology has been condemned by the SMSFA and goes against financial advisers' Code of Ethics.

"The code imposes certain obligations on financial advisers, including acting in accordance with applicable laws, acting in clients' best interests and not advising where there is a conflict of interest or duty," Burgess said.

"In addition, all advice and recommendations must consider the broad effects arising from the advice, and must be offered in good faith, competently and must not be misleading or deceptive."

Burgess warns that SMSFs are not for everyone and are a vehicle that needs to be rigorously explored with professionals.

"Deciding to set up an SMSF and take direct responsibility for your superannuation is a major financial decision that should never be taken lightly," he added.

"As the association has always maintained, SMSFs are not for everyone, so the input of an SMSF specialist before embarking on this journey is critical."