Australia: ASIC puts spotlight on fees and costs disclosure regimes for managed investment and superannuation schemes

ASIC has released a consultation paper in a bid to simplify fees and costs disclosures for superannuation and managed investment schemes. Industry professionals are invited to provide feedback on proposed amendments to the existing disclosure regimes applicable to superannuation and managed investment products.

Consultation Paper 308 (Consultation Paper) forms the latest attempt by ASIC to get disclosure of fees and costs associated with managed investment schemes and superannuation funds right.  Broadly, ASIC is aiming to improve the ease of use and accessibility of costs and fees information, so that it is more consumer-friendly, with the end goal being that fees and costs are more comparable from product to product and between providers.

The Consultation Paper outlines ASIC’s commitment to ensuring consumers have ready access to information about fees and costs without being misled by advertising or trapped by hidden costs. The Consultation Paper acknowledges the complexity of disclosure regimes for fees and costs applicable to superannuation and managed investment products, but seeks to standardise and streamline disclosure practices so that consumers can make informed value-for-money investment decisions. After many years of continued and unsuccessful efforts to reform disclosure regimes, this Consultation Paper demonstrates ASIC’s resolve to move forward with proposed reforms to RG 97’s fees and costs disclosure requirements.

ASIC has provided a Report (REP 581) to assist industry participants in making submissions. ASIC is also seeking feedback on draft amendments to Schedule 10 of the Corporations Regulations. The chief purpose of ASIC’s inquiry is to empower consumers with full understanding of fees and costs being charged to them, while ensuring that disclosure is also practically feasible for industry participants.

Product Disclosure Statements (PDS) fees and costs disclosures are currently regulated by Pt 7.9 of the Corporations Act (2001) and Schedule 10 of the Corporations Regulations. The current regime requires issuers of superannuation and managed investment products to disclose their fees in a PDS and periodic statements. However, ASIC has identified a number of inconsistencies in the disclosure of fees and costs by many financial service providers, including incorrect disclosure or even non-disclosure in some cases.

In order to address these inconsistencies, ASIC is proposing to implement a number of significant changes to the current regime, including:

  • Simplifying periodic statements;
  • Changing the treatment of transactional and operational costs;
  • Changing the treatment of performance fees;
  • Explaining why fees and costs must be disclosed; and
  • Reducing the differences between superannuation and managed investment products in fee disclosures.

The proposed changes by ASIC would have the effect of streamlining the overwhelming amount of data provided to consumers on fees and costs, eliminating irrelevant components from disclosures, while clearly highlighting expenses deductable from their accounts. Most relevantly, consumers can expect a more organised overall presentation of fees and costs, and a focused on providing only usable information most relevant to them.

What does this mean for the superannuation and managed investment sector?

These proposed changes aim to simplify the framework surrounding fees and costs disclosures, so that consumers can fully understand the fees being charged to them under superannuation and managed investment products.

Industry professionals are invited to provide feedback up until 2 April 2019. ASIC is expected to release its findings in the second half of 2019however, it is not known when any of the proposed changes would be implemented.

Review fees and costs disclosure to ensure compliance

Issuers of superannuation and managed investment products must ensure that they continue to comply with the existing disclosure requirements under the Corporations Act and relevant Regulations. These requirements however, may undergo significant changes within the next twelve months should ASIC follow through with its proposed amendments. Financial service providers likely to be impacted by the new regime are encouraged to conduct a thorough review of their fees and costs disclosure requirements and conduct updates on how fees and costs are represented under PDS and periodic statements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Agustina Limpid
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