Updated RG 97 fee disclosure rules will leave consumers more confused

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ASIC has released new rules for how super funds will have to disclose fees and costs in PDSs and statements, but an industry group says the changes will leave consumers more confused.

ASIC has released an updated version of Regulatory Guide 97 Disclosing Fees and Costs in PDSs and Periodic Statements (RG 97).

ASIC Commissioner Danielle Press said the updated guide would give product issues and platform operators greater clarity on their disclosure obligations, “which should result in more transparent and useable fees and costs information being produced”.

“Consistent and comparable disclosure helps consumers and their financial advisers to better understand the fees and costs involved, compare products more easily and make more informed assessments about whether a product is suitable for the consumer.”

ASIC highlighted the main changes as simplifying how fees and costs are shown in periodic statements, including a ‘Cost of Product’ figure in PDSs, simplifying “ongoing fees and costs into three groups – Administrative, Investment and Transaction”, and a “re-grouping of values in the re-named fees and costs summary to more clearly show fees and costs that are on-going and those that are member-activity based”.

“We expect the changes to RG 97 will help address some previous industry concerns, deal with some practical issues and offer guidance for more effective disclosure,” Press said.

“While disclosure has its limits, transparent fees and costs are important for the proper functioning of the market and product issuer accountability. Effective fees and costs disclosure supports better decision-making by consumers and the advisers who assist them.”

ASIC is allowing a transition period. The new rules will apply to all PDSs issued from 30 September 2020. Periodic and exit statements covering periods starting 1 July 2021 will have to comply with the new rules.

New RG 97 rules will “bamboozle” consumers

Industry Super Australia welcomed the changes, but also said they don’t go far enough to fix the issues with RG 97, and will “bamboozle” consumers.

“The effect is that new guidelines for the disclosure of superannuation and managed investment fees will leave consumers more confused when it comes to choosing a fund or product –not less.”

Industry Super Australia’s Head of Research Dr Nick Coates said the updated RG 97 has been a “missed opportunity for consumers”.

He is critical that the new rules don’t require a “net returns measure” – a single measure which would allow consumers to simply compare funds – and only requires platforms owned by banks to disclose the cost of accessing the product, not the fees charged by the product issuers.

“We needed to see the banks’ super fund platforms product costs all in one place so consumers could compare them against cheaper run funds–instead we have ended up with a situation where they are expected to volunteer to provide example disclosure –it’s fanciful.”

“While we welcome steps taken by ASIC to improve transparency when it comes to fees and costs, this latest guide doesn’t go far enough when it comes to providing clear and simple comparisons between the bank products and other super funds, and we worry this will impact APRA’s heatmaps that are based on RG97.”

“The only way consumers can have confidence they are comparing apples with apples is to use a net returns measure. This catch-all figure means they can see exactly what they will be earning, after fees and costs.”

FSC disappointed transition isn’t longer

Meanwhile, the Financial Services Council (FSC) – which has owners of retail super funds among its members – is not wholly satisfied with the changes by ASIC.

FSC CEO Sally Loane said the organisation was “pleased” that the rules increased the “comparability and clarity” of disclosures.

“Overall the changes are a positive step forward for Australians, who will be able to more clearly understand what they are being charged for when it comes to financial products.”

However the FSC is “disappointed” that a longer transition period doesn’t apply to the changes.

“The FSC’s submission earlier this year pressed strongly for a longer timeframe for compliance, particularly in the case of PDSs. We submitted that this was necessary to accommodate the extensive system, data gathering and disclosure changes – the shorter timeframe will create added pressure and risk for businesses implementing the new rules,” Loane said.

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