One of Australia’s largest banks, Westpac, broke the law by failing to offer financial services efficiently, honestly and fairly when it rang customers and encouraged them to roll over external superannuation accounts into existing Westpac accounts, a court has found.
The federal court judge Justine Gleeson found Westpac increased its funds under management by almost $650m when it encouraged customers to roll over their superannuation, “with limited identification of customers’ personal circumstances and no consideration of customers’ best interests, explanation of risks or sufficient warning that Westpac was not considering such matters”.
While there are benefits to consumers from consolidating multiple superannuation funds, the case brought by the Australian Securities and Investments Commission argued that Westpac crossed “an important and clear line”.
Lawyers representing Asic said Westpac had “encouraged customers by employing a subtle sales technique to make a personal pitch to customers that involved asking a customer about their personal motivations and then linking that to the financial product being offered”, the judgment said. Customers were encouraged to roll their super into their BT lifetime account fund or BT business account fund. BT Financial Group is part of the Westpac group of companies.
“Based on the transcript of the various calls, staff apparently considered that they could seek to influence customers to roll over funds into their BT account by saying words to the effect that they ‘would potentially save on fees’,” the judgment said.
While Gleeson said there was a benefit to rolling super into one account, it was not necessarily in the customer’s best interest to have those funds rolled over into a BT account rather than a different account.
“Westpac did not have regard to the appropriateness of the BT account for the individual customers, including whether the rollover service might cause them to roll out of one or more external accounts which were, as a matter of fact, better suited to the customer than the BT account,” Gleeson found.
The bank told the court that its objective of increasing its funds under management was both obvious and irrelevant to the case.
“Westpac’s consultants never held themselves out as financial advisers purporting to act in customers’ best interests; nor did its consultants give any impression that they were aware of, or wished to understand, the customer’s relevant personal circumstances,” its lawyers argued.
But Gleeson found that “Westpac focused on its own interests and did not seek to act in the best interests of its customers”. This meant Westpac and BT “failed to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly, in contravention of s 912A(1)(a) of the Corporations Act 2001”.
Gleeson will make a decision on any penalties to be incurred in February.