Financial Product Advice – This time it’s personal
- Whether the advice provided by Westpac was “personal advice” within the meaning of section 766B(3) of the Corporations Act 2001 (Cth).
The appellants, Westpac, ran two telephone campaigns between 1 January 2013 and 16 September 2016, which recommended that customers roll over their external superannuation funds into a Westpac-related superannuation account. As a result, Westpac increased the funds under its management by almost $650 million.
The decisions of the Federal Court
The Federal Court initially found that, while Westpac had breached its obligations to act honestly, efficiently, and fairly, it had not provided “personal advice” in its telephone campaigns. Primarily, this was because there was a disclaimer in each call advising that everything discussed was “general in nature” and “wouldn’t take into account” each member’s “personal financial needs”. The calls were also offered free of charge, and the callers plainly revealed a lack of knowledge about the member’s financial situation during the call, meaning they were unable to properly consider the member’s objectives.
The Full Court of the Federal Court overturned this decision and unanimously found that “personal advice” had been given. The Full Court found that a reasonable person in the position of the members might expect Westpac to have considered one or more of their personal objectives before advising them to roll over their external superannuation. Further, section 766B(3) only requires the provider of the advice to consider to some extent one or more of the member’s objectives for this to constitute “personal advice”; it does not require a provider to have considered all of the member’s objectives in their entirety. Chief Justice Allsop noted that Westpac could have avoided this finding if they had told members at the end of each call to consider their own circumstances and later communicate their acceptance of the rollover after they had done so.
On appeal to the High Court
The High Court upheld the Full Court’s decision, explaining that the word “considered” in the definition of “personal advice” in section 766B(3) didn’t refer to an active process of evaluation but rather simply meant that one or more of a member’s personal objectives, financial situation or needs were “taken into account” when providing the advice. In this case, a reasonable person would have expected Westpac to have taken into account at least one of these factors prior to advising that they should roll over their superannuation. This was because of the existing relationship each member had with Westpac, and indications given by the callers that this would allow the member to save on superannuation fees and improve the manageability of their superannuation. Finally, the fact that each member’s objectives (i.e. saving on fees etc.) were generic did not mean that they were not personal objectives. Therefore, the High Court upheld the finding that the telephone campaigns were “personal advice” within the meaning of section 766B(3) and that Westpac contravened section 961B(1) and breached sections 912A(1)(b) and (c), and 961K(1) of the Corporations Act.
Implications for you
This judgment cements the position that the threshold for “personal advice” is lower than what may have been anticipated by most of the financial services industry. There are now obvious risks associated with giving any kind of financial product advice as part of a telephone marketing campaign as this may be considered personal advice. Generally, if any specific information about a member’s financial situation, objectives, and needs are discussed during such a call, then the financial product advice may be considered “personal”.