Superannuation switching schemes and investment scams: what to look out for

The Australian Securities and Investments Commission (ASIC) has issued an urgent warning to consumers to remain vigilant against high-pressure sales tactics and deceptive online advertisements used by certain cold calling operations to offer unsuitable superannuation switching advice.

ASIC has also raised the alarm about a new wave of sophisticated scams involving fake bonds and term deposits.

Beware of “cold callers” offering to switch your super

Following an extensive review, ASIC has uncovered a worrying trend where cold callers, after procuring personal details from third-party data brokers or through online baiting techniques, have been aggressively pushing consumers to switch their superannuation funds. These cold callers have been found collecting the details of people who use certain online comparison websites, or running competitions for prizes such as phones or gift cards and subsequently misusing the entrants’ details.These operations often have ties to a minority of unethical financial advisers who then suggest moving the consumers’ funds into superannuation products that carry hefty fees.

ASIC has expressed particular concern about these practices, noting that individuals aged between 25 and 50 – typically the primary targets of these operations – are at risk of significant retirement savings depletion due to reduced super value from unsuitable investments and excessive fees and other charges. The types of high-pressure sale tactics being used have been a blight on the superannuation and financial services landscape since 2020 when ASIC first started taking action against various Australian financial services (AFS) licensees. 

In addition, ASIC has observed a substantial flow of super savings into high-risk property managed investment schemes. These schemes are either channelled through super products offered by Australian Prudential Regulation Authority (APRA) regulated funds or self managed super funds (SMSFs), with subsequent kickbacks going to the cold calling entities.

ASIC has reiterated its commitment to safeguarding consumers, and is urging financial advice licensees and superannuation trustees to intensify their efforts in rooting out the nefarious elements that are targeting people’s super. ASIC will continue to take appropriate action, including enforcement action, to deter cold calling. 

For financial advice licensees, ASIC suggests improving their monitoring and supervisory systems to identify and address any concerning behaviours, ensuring their advisers are prioritising their clients’ best interests. It also expects super trustees to be proactive in preventing the erosion of superannuation balances and mandating the implementation of stringent systems to oversee the deduction of financial advice fees from member accounts.

In its ongoing efforts to combat these unscrupulous practices, ASIC has reviewed how trustees oversee advice fee charges and plans to publish a report detailing its key findings. 

To raise public awareness, the regulator has launched a campaign advising consumers to hang up on cold callers and scroll past social media click bait offers to compare and switch super funds. 

ASIC notes that a typical super cold calling experience does involve receiving a statement of advice (SOA) prepared by a financial advice firm – often one that the cold caller has an existing arrangement with – but it is usually “cookie cutter” advice that is expensive, unnecessary and does not consider a consumer’s individual needs, and may eventually leave the individual in a worse financial position. It reminds consumers that quality financial advice takes weeks, not days, to prepare. 

Consumers who believe they have received financial advice that was not appropriate for their circumstances can initiate a complaints process, which includes contacting the business that gave the advice, then contacting the Australian Financial Complaints Authority (AFCA). Consumers who believe they have been a part of a scam should report it to their super fund at the first instance, as well as reporting it to Scamwatch and ASIC.

Bond and term deposit scams on the rise

ASIC is also concerned about the recent increase in sophisticated scams that encourage people to invest in fake bonds and term deposits. These scams are particularly insidious as they involve the impersonation of legitimate financial services businesses, many of which may not have a significant online presence of their own.

According to ASIC, scammers have been meticulously mirroring the details of real businesses, including their addresses, Australian business numbers (ABNs) and Australian Financial Services (AFS) license numbers. These elements are being used in scam advertisements and communications to lend an air of authenticity to the fraudulent schemes.

The scammers’ strategy involves using online advertisements and social media posts to lure consumers with fake offers to invest in well-known companies. These ads and posts often redirect to an online enquiry form designed to harvest personal information. Consumers who show interest are provided with counterfeit investment materials and disclosure documents that appear professional and convincing.

ASIC has noted that these scammers are particularly cunning, often presenting themselves as knowledgeable and personable without pressuring potential victims into making quick decisions. The returns advertised are also crafted to sound reasonable, avoiding the typical “too good to be true” offers that are easier to spot as fraudulent.

Once they have gained the trust of their targets, scammers request personal identity documents and the completion of application forms. They then direct consumers to transfer funds into bank accounts that, while seemingly legitimate, are actually controlled by the scammers. These accounts are often held by reputable banks that are not associated with the supposed investment opportunity, further complicating the detection of the scam.

To help consumers identify these fraudulent schemes, ASIC has highlighted the following red flags:

• use of phrases like “guaranteed”, “secure”, and “free” in investment offers – these terms are often misused by scammers to entice victims;
• impersonation of financial services businesses that have no digital footprint (eg no business website), making it difficult for consumers to find legitimate online information for comparison;
• offers of bonds or term deposits in large, well-known companies – this is a large warning sign, since these companies would typically issue such financial products directly;
• the presence of fake online reviews, which may be hosted on content-generating websites that lack a focus on investments;
• false investment documentation that may include stolen business details, imitated bond details and misuse of government agency logos; and
• requests for consumers to transfer funds to third-party accounts or accounts in individual names – the scammers may explain this away as using a “client segregated account”. 

It’s important to remember that legitimate financial services businesses are required to hold client money for investments in a trust account, client segregated account or cash management trust that is held in the name of the licensee. ASIC also notes that consumers can confirm bank account details (including whether the bank account details match the name of the financial services business) via the Australian Payments Network or by independently contacting the bank directly using the details on the Australian Financial Complaints Authority (AFCA) website. 

People who may have fallen victim to this type of scam are urged to contact their banks immediately and not to send any further money. If you’re concerned your ID may have been compromised, you can contact IDCARE, a free government-funded service which can help develop individualised plans to respond to such incidents. ASIC advises that these scams should also be reported to Scamwatch to help stop scammers from entrapping more people, and that you should always be wary of follow-up scams that may promise to “get your money back”.

Source: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2024-releases/24-092mr-asic-issues-warning-over-dodgy-cold-calling-operators-and-online-baiting-tactics/ 
https://asic.gov.au/about-asic/news-centre/news-items/scam-alert-scammers-are-changing-the-way-they-impersonate-financial-services-businesses-in-sophisticated-bond-and-term-deposit-scams/