Case note: when marketing becomes personal financial product advice

In Australian Securities and Investment Commission v Westpac Securities Administration Limited [2019] FCAFC 187 the Federal Court Full Court decided that the marketing campaign by Westpac and BT to encourage customers to roll over superannuation accounts into their account held with Westpac and BT involved the provision of “financial product advice” that was “personal advice” within the meaning of section 766B(3) of the Corporations Act. Background.

The Full Court overturned the trial judge’s decision that the advice was general, not personal.

UPDATE: the High Court has given Westpac special leave to appeal.

As a result of there being personal advice, there was a contravention of the duty in section 961B to act in the best interests of the customers in making the relevant recommendations to accept the rollover service as well as a breach of the obligation to act fairly under section 912A(1)(a).

The consequences of the distinction between personal and general advice is important. If general advice only is given, the primary obligations on the provider of the advice are fewer.

ASIC’s case was principally based on sample calls by Westpac and BT to 14 customers together with their internal training material and letters and emails. Each of the customers was a member of the BT superannuation funds and was a retail client for the purposes of section 761G of the Act.

Chief Justice Allsop concluded that:

“In summary, Westpac’s attempts to have customers transfer funds from their external accounts with other superannuation funds into their BT accounts were carefully calculated to bring about this desired result by giving no more than general advice. It was marketing by telephone selling. The difficulty is that the decision to consolidate superannuation funds into one chosen fund is not a decision suitable for marketing or general advice. It is a decision that requires attention to the personal circumstances of a customer and the features of the multiple funds held by the customer. Westpac attempted, assiduously, to get the customer to make a decision to move funds to BT without giving personal financial product advice as defined in the legislation. It failed. It gave personal advice, because when the telephone exchanges are considered as a whole and in their context, including importantly the “closing” on the telephone by getting the decision made during the call, there was an implied recommendation in each call that the customer should accept the service to move accounts funds into his or her BT account carrying with it an implied statement of opinion that this step would meet and fulfil the concerns and objectives the customer had enunciated on the call in answer to deliberate questions by the callers about paying too much in fees and enhancing manageability. This was personal advice…. Perhaps Westpac could have avoided this conclusion and result by the callers ensuring that the customers had the opportunity to consider their own positions and, having done so, later communicate an acceptance, if they wished. This was, however, not the intended model of the engagement. “Closing” was to take place, if at all possible, on the call over the phone.”

In concluding that Westpac did not act fairly under section 912A Justice O’Bryan said:

“In the present case, the significant aspect of s 912A(1)(a) is the requirement to ensure that the financial services covered by the licence are provided fairly. Fairness must be assessed having regard to all relevant circumstances bearing upon the provision of the financial services in question. In my view, the facts found by the primary judge compel a conclusion that Westpac did not do all things necessary to ensure that the financial product advice given by it through the calls was provided fairly. There was an asymmetry in the knowledge held by Westpac and that held by the customer in relation to the subject of the advice, and Westpac took unfair advantage of that asymmetry. The asymmetry of knowledge arose from the facts that: Westpac knew that the decision by a customer whether to consolidate the customer’s other superannuation funds into a Westpac fund was an important decision for the customer, with potentially significant implications for the customer’s future financial position; Westpac also knew that the decision involved a range of considerations, including particularly the relative performance of the superannuation funds and the relative structure of the fees charged in the funds; and Westpac knew that a prudent customer would weigh up those matters. Westpac took unfair advantage of that asymmetry by implementing a carefully crafted telephone campaign, reinforcing in the minds of its customers an erroneous assumption that the decision to consolidate their superannuation into a Westpac fund was straightforward and was likely to generate benefits for the customer by saving fees and by reducing the burden of managing superannuation. The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer’s superannuation fund. Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters that they should consider before deciding to consolidate their superannuation. Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision. Through the campaign, Westpac pursued its own self-interest and disregarded the best interests of its customers. That conduct can rightly be described as unfair and involved a contravention of s 912A(1)(a) of the Act.”

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