Today's story in the New Daily (New super rules hit consumers’ returns with uneven playing field) doesn't give the full picture of ASIC's regulatory guide on funds expenses.
The requirements in Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements are based on work that ASIC has been undertaking for a number of years, and are ultimately about providing better information for the consumer.
These changes were initiated as a result of a review by ASIC that identified a significant amount of under-reporting of fees, as well as considerable inconsistency in the way fees and charges are described by funds. In particular non-disclosure of fees and costs relating to investment in underlying investment vehicles, incorrectly disclosing fees net of tax and inconsistent disclosure of performance fees (see ).
ASIC has been consulting and working with industry participants and their representative organisations (such as Australian Institute of Superannuation Trustees, Association of Super Funds Australia, Financial Services Council, Industry Super Australia, and Property Council) throughout this process, and industry has been given a number of opportunities to provide feedback on both the substance and the timeline of the changes. We have not always agreed on every issue, although this is not entirely surprising given that disclosure of costs can be complex and is an important point of competition in the industry. However, ASIC has provided extensions to facilitate the ability of industry to meet the requirements.
RG 97 provides a level playing field across the industry: there is no carve out for different investment vehicles, nor any exemptions for platform products.
Under RG 97 superannuation funds must disclose the costs incurred in the fund, and costs incurred through investments or assets that the fund makes or holds on behalf of the memberas a way of the super fund investing in underlying assets.
When a member selects a managed fund as an asset, and the member gets a separate product disclosure about the managed fund, then the managed fund is treated as the asset. This means that costs in these managed funds are separate from the super funds costs. However, the costs still need to be disclosed for each of the managed funds. When a member chooses a managed fund through a super platform, the super fund's product disclosure will need to make clear what is covered in its own costs, and that additional costs will be charged by the issuers of the products in which the member is investing. We will be monitoring the sector closely to ensure that consumers are not misled by any failures to fully disclose fees.
ASIC has made it clear that .
Investment in managed funds through platforms is offered by both retail and industry super funds.
A common line of enquiry has related to the inclusion of transaction and operational costs in the indirect costs that need to be disclosed for superannuation products. There is some concern that this will make products seem more expensive and perhaps also lead trustees to avoid investing in assets that have high or lumpy transaction costs or high operating costs. We understand the potential implications for competition between funds, but the key point is promoting transparency to reinforce consumer trust and improve accountability and decision making. We feel that if a trustee thinks a particular investment strategy is worthwhile, with returns that outweigh higher costs, then they should be able to explain that strategy to their members.
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