ASIC proposes changes to RG 97 super fund fee & cost disclosure rules

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ASIC has released proposed changes to how fees and costs of superannuation funds are disclosed, under the RG 97 rules. But one industry body says these changes will further complicate the disclosure regime.

ASIC says the changes reflect its “commitment to ensuring that consumers seeking information on fees and costs receive transparent and useable information that helps them understand fees and costs, compare products, and make confident and informed choices”.

“ASIC also seeks to ensure that the proposed fees and costs disclosure regime is practicable for industry.”

Some of the changes would involve updating Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements (RG 97), while others would require amendments to Schedule 10 of the Corporations Regulations.

While it consults with industry, ASIC will be testing aspects of the proposals with consumers.

The RG 97 rules took affect on 1 October 2017. One month later ASIC announced the external review and that it would extend its “facilitative compliance approach to fee and cost disclosure”.

The details and implementation of RG 97 had been an issue prior to 2017. ASIC said that it had received “feedback from across the industry around challenges with the practical implementation of RG 97”. Industry Super Australia called on the Government to stop the “fee-asco” of RG 97, which it said was “fundamental flawed”. Part of the issue was the treatment of platforms (in retail funds) versus unlisted property and infrastructure (in industry funds).

The external report, which found that it was difficult for consumers to compare fees, was handed to ASIC in July 2018. The consultation paper, released this week, includes ASIC’s responses to the recommendations of the report.

Following the release of the report, ASIC further extended time to comply with some of the rules in CO 14/1252 until dates in 2020.

ASIC adopts most recommendations, others too resource-intensive

ASIC is proposing to implement recommendations around “simplifying how fees and costs information is presented to consumers” and “reducing data inputs, including eliminating the requirement for fees and costs disclosure to incorporate some costs categories, particularly property operating costs, borrowing costs and implicit costs”.

However other recommendations are not adopted, at least for the time being.

The first recommendation of the report was for ASIC to undertake a feasibility study into if it, or another government agency, could provide a “publicly accessible, consumer facing facility providing fee and cost information extracted from PDSs that can be searched and compared on a range of criteria”.

ASIC has not adopted this recommendation – saying that while it supports such a comparison tool its, creation would “require significant resources, so at this stage we do not propose to undertake a feasibility study into whether ASIC or another government agency could provide this tool”.

ASIC also rejected recommendations around platform disclosure because they are “a significant undertaking that would delay the implementation of the other proposals in this paper”.

“We are currently undertaking a project on platforms so we can better understand their operations. Once we have obtained further information from that project, we will consider if the regulatory settings for platforms need revision and may revisit these recommendations at that time,” says ASIC in its response to the recommendations

Proposals will further complicate disclosure regime: Industry Super Australia

Industry Super Australia (ISA) says ASIC’s proposals will “will only serve to further complicate, rather than simplify, the current disclosure regime”.

In a statement, ISA said it welcomes the “overdue” attempts to improve the disclosure of superannuation fees, but warns the proposed changes fail to address ongoing issues.

“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 into believing such products are less expensive than those with direct investments, when in fact they are likely to be more costly.”

In particular, ISA says an exemption for platforms will remain, and efforts around consumer comparability are “similarly disappointing”.

“Under the proposals, platform providers would be required to include a ‘prominent statement’ in fees and costs templates, advising that disclosed fees simply relate to “gaining access” to the underlying products, and do not factor in the actual ongoing costs of those products.”

Nick Coates, ISA director of research and campaigns, said that “the concept of including a ‘prominent statement’ is, to be blunt, a cop-out”.

“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.”

“It’s clear that a complete rethink is needed when it comes to disclosure, to ensure a net returns measure is placed front and centre.”

“Papering over the cracks isn’t good enough, especially when the proposed fix is so flawed.”

ISA also questioned the timing of the proposals, given the ongoing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“ASIC should wait for the royal commission’s findings, which may include recommendations relating to disclosure, before commencing a through revision of the regime,” said ISA.

Responses to the consultation paper are due by 2 April 2019.

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