A review into the way super funds and managed investment schemes disclose their fees to consumers is a positive step for the industry, but the current proposals for improving transparency have been described as a “cop out” by some experts.
In a bid to make financial institutions’ fees more transparent, the corporate watchdog ASIC (itself the subject of growing criticism) launched an industry consultation into fee disclosures on Tuesday.
ASIC intends to use the consultation to guide its efforts in “simplifying how fees and costs information is presented to consumers” – a goal that Industry Super Australia (ISA) and the Association of Superannuation Funds of Australia (ASFA) have welcomed.
“Given the desired policy outcome of transparent and consistent disclosure to consumers, ASFA supports ASIC’s stated intention to perform consumer testing to determine the extent to which consumers comprehend the proposed form of disclosure,” ASFA chief executive Dr Martin Fahy told The New Daily.
The ISA also welcomed ASIC’s “overdue attempts to improve superannuation fee disclosure”, but cautioned that the current proposals failed to address another problem that could further complicate fees for consumers.
“Under the current regime, platforms – typically owned by banks and wealth management groups – are not required to disclose all costs relating to underlying investment products. As a result, consumers may be misled,” the organisation said.
This exemption for platforms – which effectively bundle together multiple kinds of investments into a single product – won’t come to an end under the current proposals.
Instead, platform providers will have to include a ‘prominent statement’ which explains to investors that the fees they’re seeing are just for gaining access to the investments held on the platform, and not the ongoing costs of those products, ISA said.
“The concept of including a ‘prominent statement’ is, to be blunt, a cop out,” ISA director of research and campaigns Nick Coates said.
“It’s essentially just a warning to members that what you see is not what you get when it comes to platform fees. This simply continues to place consumers at risk, rendering it almost impossible to make meaningful comparisons between products.”
A spokesperson for ISA separately told The New Daily that “net returns, with absolutely no carveouts, would be the most straightforward and useful measure for consumers”.
“Transparency is critical for instilling trust in the system.”
ASFA is still in the process of “reviewing the detailed proposals” made by the regulator.
“ASFA and the industry are keen to ensure that the final requirements are clear, able to be applied easily, keep additional costs to a minimum and, most importantly, produce consistent disclosure outcomes for consumers,” Dr Fahy said.
The New Daily is owned by Industry Super Holdings