A report into the RG97 fee disclosure rules has found that it is difficult for consumers to compare fees for financial products, but the report has been welcomed by the superannuation and financial services industry.
Shortly after ASIC’s Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements rules came into effect in 2017 the regulator announced it had asked for a review of RG97.
ASIC this week released a report, prepared by Darren McShane, which finds that it is difficult for consumers to compare fees.
“PDS based comparison is a laborious and time-consuming exercise that most consumers would likely avoid or short-cut,” says the report.
Additionally it can be “very difficult” to find Fee Template information, and their usability is limited due to variation in presentation particularly between “platforms (such as wraps or IDPS) and superannuation products or MIS”.
The report makes a number of recommendations, including a feasibility study into a consumer portal for searching and comparing information extracted from PDSs. Also ASIC should work with industry to improve consistency in how fee information is set out in PDSs and Fee Templates.
ASIC says it welcomed the report, agreeing that “changes to the fees and costs disclosure are in the interests of consumers and industry, and is keen to ensure any changes are practicable for industry while providing transparency and useable comparability for consumers”.
ASIC said it would release a consultation paper with its proposed responses to the issues raised in the report in the first half of the 2018/19 financial year. Meanwhile ASIC’s “facilitative compliance approach to fees and costs disclosure will continue”.
Industry welcomes RG97 report
Despite the findings of the report about the usefullness of information reported to consumers it has been welcomed by industry bodies.
Financial Services Council CEO Sally Loane said: “The FSC strongly supports transparency and strong governance to deliver best outcomes for consumers and welcomes recommendations focused on simplicity and ease of comparability of products by consumers.”
Loane said the report was a “strong foundation from which appropriate and meaningful outcomes for both product issuers and consumers can be achieved”.
Australian Institute of Superannuation Trustees (AIST) CEO Eva Scheerlinck said the report vindicated many of AIST’s concerns with the fee disclosure regime for super funds.
“The report acknowledges there are challenges and inconsistencies with the existing disclosure regime and, importantly, recommends a framework that will apply more rigour to decision-making on fee and cost disclosure,” said Ms Scheerlinck.
“We welcome recognition that consumers need more tools to easily compare fees and costs.”
“Disclosure must not only be meaningful it must be accessible and not hidden in the back pages of a website.”
Industry Super Australia had called the RG97 rules “fundamentally flawed” and a ‘fee-asco’.
“A significant amount of good work has been undertaken but this report shows fee disclosure is far too complicated for experts let alone consumers,” said Matt Linden, public affairs director with Industry Super Australia, following the release of the report.
“Much of the complexity is driven by the structure of platforms which straddle both superannuation and non-super investments,” said Mr Linden
“We remain concerned that the business practices of platforms are being accommodated over comparable and understandable disclosure for consumers – but we will continue to work with ASIC as it responds to the report”.
However Mr Linden thinks it “likely” that legislation will be necessary to ensure the interests of consumers are put first.