Lead Generators and Cold Calls: The Compliance Minefield
Key Takeaways
- You Can’t Outsource Compliance Risk: Your AFS licence is ultimately responsible for the actions of any third-party lead generator you hire. Their mistakes become your liability.
- High-Risk Models: Many lead generators are paid based on volume, not quality. This creates a high risk of pressure tactics and misleading claims that can breach the law.
- Anti-Hawking is a Major Trap: The law bans unsolicited real-time offers for financial products. If your lead generator even mentions a specific product in a cold call, they (and you) could be in breach.
- ASIC is Actively Watching: The regulator has explicitly named lead generation and cold calling—especially for superannuation switching—as a key enforcement priority.
Why Are Lead Generators a Compliance Risk for Financial Advice Firms?
Using a third-party lead generator can seem like a fast way to grow your client base, but it’s an area filled with significant regulatory risk. The core problem is that the commercial goals of many lead generators are misaligned with your legal duties as an adviser. Their models often reward setting a high volume of appointments, which can encourage high-pressure sales tactics or misleading claims.
When a potential client arrives at their first meeting already “pre-sold” on a product or strategy, your ability to conduct an objective, client-first advice process is immediately compromised. This puts your duties, like the best interests duty, at risk from the very start.
What Are the Five Biggest Legal Traps?
Engaging a lead generator without extreme care can lead you into a minefield of legal breaches. Here are the five most common traps you need to be aware of.
1. The Anti-Hawking Prohibition
The anti-hawking rules (s992A of the Corporations Act) ban unsolicited, real-time offers or invitations to apply for a financial product. This is a huge risk with cold calling. If a lead generator calls someone and even suggests they should consider a particular product or type of product, it can easily cross the line into illegal hawking. As ASIC’s Regulatory Guide 38 (RG 38) explains, licensees are responsible for the conduct of their agents.
2. Misleading or Deceptive Conduct
If a lead generator makes false or misleading statements to secure an appointment, you can be held liable. This could include exaggerating potential returns, misrepresenting the services you provide, or downplaying risks. These actions can breach both the Corporations Act (s1041H) and the ASIC Act (s12DA). A disclaimer buried in the fine print won’t save you if the overall message is misleading.
3. Unlicensed Financial Services
A lead generator’s role must be strictly limited to appointment setting. If they start to “arrange” for a client to acquire a financial product or provide any form of financial product advice (even general advice), they are likely providing a financial service. Doing so without an AFS licence is a serious offence under s911A of the Corporations Act. As ASIC’s Information Sheet 282 clarifies, this is a very easy line to cross.
4. Breaching Your Licensee Obligations
As an AFS licensee, you have a duty to provide services efficiently, honestly, and fairly and to have adequate compliance arrangements (s912A). Using a lead generator significantly increases your supervision burden. You must have robust systems to approve their scripts, audit their calls, and manage any conflicts of interest that arise.
5. Conflicted Remuneration
How you pay your lead generator matters. If their payment is linked to product sales or the amount of funds invested, it could be considered conflicted remuneration, which is banned. As outlined in Regulatory Guide 246 (RG 246), any benefit that could reasonably influence the advice provided is a major red flag. Disclosure cannot fix a banned payment structure.
What is ASIC’s Current Stance?
ASIC is highly focused on this area. The regulator has issued public warnings about dodgy cold-calling operators and online baiting tactics, particularly those targeting consumers for superannuation switching. In recent speeches, the ASIC Chair has highlighted that the regulator is actively scrutinising licensees who use lead generation services. This isn’t a theoretical risk; it’s a live enforcement priority.
What Should I Do Before Hiring a Lead Generator?
If you decide to engage a third-party marketer, you must conduct and document rigorous due diligence. Their failures are your failures. Here is an essential checklist:
✅ Approve All Scripts and Ads: You must review and approve every script, advertisement, landing page, and email they use. Prohibit any mention of specific products in initial, unsolicited contact.
✅ Check the Payment Model: Avoid any payment structure linked to product sales or funds under management. Use fixed-fee arrangements and assess them for conflicted remuneration risks.
✅ Verify Their Training: Ensure they have regular training on anti-hawking, the boundaries of financial advice, and misleading conduct.
✅ Demand Records: Require access to call recordings, consent records, and lead source data so you can conduct your own compliance audits.
✅ Control the Narrative: Limit their outreach to describing your practice and services in general terms. Strictly prohibit them from discussing specific strategies, rollovers, or performance figures.
✅ Implement Strict Monitoring: Mandate call sampling, regular compliance checks, and have immediate termination clauses in your contract for any breaches.
✅ Ensure Privacy Compliance: Confirm their processes comply with the Privacy Act, the Do Not Call Register, and anti-spam laws.
How Should I Handle a Lead from a Third Party?
Treat every referred prospect as a brand-new engagement. Your first meeting is a clean slate.
- Record the source of the lead clearly in your files.
- Run a complete fact-find from scratch to reset any assumptions the client may have.
- Test any “pre-sold” ideas against the client’s actual objectives, financial situation, and needs, as required by the best interests duty (s961B).
- Document everything. If the client was steered towards a specific product, explicitly document why that product is or is not appropriate and what alternatives you considered.
The Bottom Line
While lead generators can fill your calendar, they create a compliance minefield. You cannot afford to take a “set and forget” approach. Sustainable growth for an advice practice is built on reputation and compliant marketing. If you use a third party, you must keep them product-neutral, supervise them strictly, and ensure every action they take is aligned with the law and your client’s best interests.
