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ASIC victory over Westpac has 'major implications' for financial marketing


A Federal Court judgment against Westpac yesterday has significant implications for the ways in which firms market financial products to their customers, Adelaide financial law experts have told InDaily.

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In a unanimous judgment, the Federal Court upheld an appeal by the Australian Securities and Investments Commission (ASIC) against Westpac, which had run a campaign encouraging customers to take funds, held in external superannuation accounts, and roll them over into their existing Westpac accounts.

The campaign included telephone calls to customers in which the Westpac callers “failed to obtain the most basic information that would have been required … to act in the best interests of the customers,” the judgment says.

Banking and financial services partner at Piper Alderman Shannon Adams told InDaily it was “probably the most detailed judgment to date” clarifying firms’ obligations to their customers when giving advice and trying to sell financial products.

He said the judgment would have a significant impact on firms selling financial products and services using a “no advice or a general advice model” on the basis that those sales methods freed them of requirements to take consumers’ personal financial circumstances into account.

“The case confirms the view that… in telephone or face-to-face interactions with customers, it’s virtually impossible not to give (what is legally categorised as) ‘advice’,” he said.

Following the judgment, “if a financial services provider is trying to sell (customers) a product, they can be expected to be given more information and for it to be a more detailed conversation”.

“The court is saying this particular (Westpac) campaign was carefully designed in a way that meant Westpac didn’t have to provide warnings and detailed information.

“All that was predicated on the assumption that Westpac weren’t giving ‘advice’ and ‘personal advice’, as defined by the court.”

He said the use of “no advice or general advice models” in marketing campaigns is not rare – although major financial institutions generally avoided them – and “there are providers in the (Australian) market and probably quite a number of them that adopt” them.

“They are going to have to carefully look at those models and assess them against the principles in the judgment,” he added.

Audrey Amour, special counsel in the banking and financial services team at Adelaide law firm Wallmans, told InDaily the ruling meant financial institutions could no longer rely on disclaimers made within a particular letter or phone call to a customer to ensure they stay within the bounds of “general advice” under the law.

Rather, they would have to consider the full “context” of the firms’ relationship with those customers, and whether a reasonable consumer would expect the banks to consider their individual financial circumstances when offering them product recommendations or advice.

“This judgment will have a significant impact, particularly in training (and) compliance,” she said.

“The main argument that Westpac made is that (the campaign was) just a very, very aggressive advertising campaign.

“(But) the campaign was carefully crafted to enforce a really wrong assumption… that consolidating your superannuation funds was really straightforward.

“It (did) not take into account the performance of the fund, your insurance and other things.”

She said the judgment suggested Westpac “pursued its own self-interest, not the interests of its customers” and that it failed to suggest that customers take time to consider their circumstances, rather urging them to make a major change to their superannuation arrangement during a single phone call.

InDaily contacted several banks and credit unions operating in South Australia this morning for comment, but they did not respond by deadline.

Spokespeople for the Australian Securities and Investments Commission and Westpac told InDaily their organisations were still considering the court judgement.

Neither have indicated whether they intend to appeal.

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