Insurance & Reinsurance
Westpac Securities Administration Ltd v Australian Securities and Investments Commission  HCA 3
The High Court unanimously dismissed an appeal from Westpac Securities Administration Services Ltd and BT Funds Management Ltd (Westpac) which concerned a campaign to encourage superannuation members with multiple accounts to roll their superannuation into their Westpac account. The issue on appeal was whether the campaign provided customers with general or personal financial advice.
Under s766B(3)(b) of the Corporations Act, (the Act) personal advice is given when a provider "considered one or more of the person's objectives, financial situation and needs". The High Court confirmed the Full Federal Court's decision that the advice was personal. The decision has broad consequences for financial advisors. The decision confirmed that an adviser does not need to know all of a client's circumstance or even a core minimum to give personal advice.
Between 2013 and 2016 Westpac conducted a campaign to encourage existing members to roll over superannuation accounts held with other entities into their BT account. The campaign was hugely successful, and Westpac increased its funds under management by almost $650 million.
Westpac wrote to members and encouraged them to roll over external accounts into their pre-existing Westpac accounts. They followed up their letters with a telephone call. The calls generally proceeded as follows:
At the time of the campaign, Westpac was not authorised under its AFSL to provide "financial product advice" which was personal. In the proceedings, ASIC alleged that the advice given to members was personal and as a result, Westpac breached its licence obligations.
Relevantly s766B of the Act states:
In the appeal, Westpac made three submissions concerning the proper construction of s766B of the Act.
In the leading judgment, Gordon J rejected each of Westpac's submissions. Her Honour concluded that a reasonable person might expect Westpac to have considered one or more of the member's objectives, financial situation, and needs. Therefore, the financial product advice was personal. She accepted that where an advisor urges a customer to follow a particular course of action, a reasonable person might expect the adviser to have considered the recipient's circumstances in deciding to accept the recommendation and roll over their external superannuation accounts.
In considering the factors a reasonable person might expect, Her Honour took into account the following matters:
The decision is important in terms of clarifying the person vs general advice distinction. The factors which Gordon J identifies inform whether advice is general or personal. The decision is a warning to distributors of financial products who may seek to engage in campaign selling because they may unwittingly cross the line of providing personal and not general advice. For those advisers who are engaged in day to day business of providing personal investment advice it is less of a concern.
However, given that all of the Banks are moving away from operating vertically integrated advice businesses and focusing on their core business of banking, the decision may not be so broad reaching.
Importantly the judgment confirms that "considered" in the context of s766B(3) does not require an active and comprehensive process of evaluation, as Westpac has submitted. Instead, the focused is on the provider rather than the client. The test for whether an advisor should consider something is undemanding. The decision reinforces the importance of embedding the general obligation of acting efficiently, honestly and fairly in all aspects of the licensee's business.
Where a bank or fund initiates a campaign to its customer base at large it should of course be mindful of Gordon J's conclusions regarding deemed knowledge and consider whether a reasonable person might expect that information should be passed on. The judgment should also prompt licensees to closely scrutinise marketing materials, telephone call scripts, representative training and digital tools and assess, in light of the factors identified, whether they are now providing personal advice.