In the 1980s I got a call from somebody who said they worked for a particular large and long established financial services company and wanted to sell me all sorts of financial advice. I said no and when he finally got the message he directed an attack at me signing off with “Ah well, nothing ventured, nothing gained”. In other words he said I was an idiot for not taking up the opportunity. I was furious at him but missed the point that I actually made the right decision.

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About two years later I found out that I had received a call from an organisation that got leads for people by making high pressure cold calls and enough people said yes for them to make a very good living on the commissions from that financial services company. The only trouble is that the company has subsequently become famous for its underperforming investments, i.e. I would have lost a lot of money following the hard pressure sale.

 

Today we have another epidemic of cold calling regarding people’s superannuation funds.

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It is actually illegal for financial institutions and financial advisers to make cold calls, so they hire cold calling organisations (a cold call is when somebody calls you to offer a good or service where they have had no prior connection to you) that generate the leads and sell them to the financial institutions and advisers. A breach of the spirit of the law but not the letter.

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The people who cold call have no financial understanding whatsoever, they just have scripts that are displayed to them on a screen and have learned to say those scripts very forcefully and convincingly.

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These tactics work because a lot of people have money in their super but consider that money almost worthless as it will be decades until they can access that money, so they neglect their super balance and may have multiple accounts and may be wrongly invested. Such people in their 20s, 30s and early 40s simply don’t know about their super and there are a lot of them and they gladly hand over the management of their super to that nice, authoritative chap on the phone. Doing that is dangerous for your wealth – and typically costs a lot of money.

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Even ASIC (the government regulator of the Australian financial system) has recently put out a circular warning people about these cold callers and the ‘small number of financial advisers’ who are profiting from the cold callers and are undermining the reputation of financial advisers. That is very true and reprehensible.

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ASIC has also launched a consumer awareness campaign, encouraging consumers to ‘just hang up’ when contacted by cold calling operators, and to ‘just scroll past’ social media click-bait advertisements.

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Typically the investments people are put in by that cold calling process are high risk property investments, often via a self managed super fund that take out loans. Those high risk property investments can and often do go broke and even if they don’t go broke, the exorbitant fees and costs usually eat up much or all of the gains. There could be a very few examples where people did quite well but most of the clients are substantially worse off.

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Recently we had two young friends who had received such calls which triggered them to approach us to review what they had been offered. What was presented to them by these crook cold callers in an enticing way was actually criminal in our book in terms of the excessive fees and harmful advice.

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If you get such a call and are AT ALL tempted by that call to follow their ‘advice’, take it as a strong hint that it is time for you to look at your super and to call either your existing fund or a financial adviser that you call – not one who calls you out of the blue – and ask for support and advice.