Westpac convinced customers to move $646.7 million into the superannuation accounts of its BT subsidiary as part of a campaign the Australian Securities and Investments Commission claims was illegal, court documents have revealed.
The phone campaign, run from 2013 to 2016, was orchestrated by the bank to convince clients to roll over multiple super funds with different providers into one BT fund.
ASIC has taken the bank to the Federal Court, claiming it breached “best interests” obligations and provided personal financial advice when they were permitted only to give “general advice”.
The two parties are due in court this week for a second directions hearing.
ASIC’s statement of claim goes into detail on the bank’s telephone campaign to convince customers to switch, explaining the methods the bank encouraged its salespeople to use to win business. Westpac CEO Brian Hartzer told a parliamentary committee last week that the salespeople received commissions for successful sales.
The campaign, which also used mail to contact customers, offered to search for multiple super accounts free of charge and roll them into BT. In 37 different campaigns, nearly one-third of those customers contacted agreed to move their accounts.
The staff were trained to use a three-step sales technique to win business. Stage one involved questions designed to “gather, uncover” and “clarify” information on the customers’ needs and motivations.
Stage two involved using this information to provide an offering to the customer that tallied with their needs and the third stage, known as “objection handling/closing”, saw the deal closed.
ASIC claims staff were encouraged to use methods like asking open-ended questions and a scoring system was put in place to see how closely the sales guidelines were followed.
ASIC claims the bank provided “personal advice to customers to roll over their external accounts into their BT account and did so regardless of the appropriateness of that advice to the customer, and with the primary purpose of generating FUM (funds under management), thus preferring their own interests to those of their customers”.
Mr Hartzer told the parliamentary committee: “We disagree and are fighting it in court for that reason”.
The bank denies giving clients personal advice, saying each client contacted was given a warning that the advice was general in nature. Under the Future of Financial Advice legislation, passed in 2015, personal advice can only be given by financial advisers.
Earlier this month, ASIC also took action against Westpac over what it says were breaches of the responsible lending laws for home loans.
ASIC alleges that in the period between December 2011 and March 2015 Westpac failed to properly assess whether borrowers could meet their repayment obligations before entering into home loan contracts.
Westpac’s customer banking chief executive, George Frazis, said in a statement: “Westpac takes its responsible lending obligations seriously and has confidence in its lending standards and processes. Our objective is to help more Australian families into their homes in a responsible way.”
The bank’s policies “include a consideration of customers’ specific circumstances, including income and expenditure, previous repayments history and the overall customer relationship”.
“We build into our processes a range of conservative inputs, including the addition of buffers to take into account possible future interest rate increases,” he said.