ASIC has released an external review into whether its Regulatory Guide 97: Fees and Costs Disclosure has been adequately meeting its objective to provide greater transparency for consumers.
ASIC first announced that it was conducting the review in November 2017, appointing regulation expert and former ASIC director Darren McShane to conduct the review.
In the report, released by ASIC on Tuesday (24 July), Mr McShane pointed out that the current disclosure regime was dense and difficult for consumers to navigate.
“PDS [product disclosure statement] based comparison is a laborious and time-consuming exercise that most consumers would likely avoid or short-cut,” the report said.
The report recommended that ASIC “undertake a feasibility study” into whether there may be resources to create 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”.
Alternatively, the report also floated the idea of “data about average ‘Cost of Product’ figures for specific investment option types that can be included as a reference figure in Fee Examples”.
There were also differences in how fee and cost disclosures were appearing in the statements of managed investment schemes and in superannuation products.
Furthermore, there were variations in the presentation of product disclosure statements, despite the requirement for standardisation laid out in Fee Templates.
“There is much diversity in practice in the way that information is presented in documents incorporated by reference that makes the comparison task for consumers even more challenging. It can be very difficult to find Fee Template information,” the report added.
In the report, Mr McShane stated that the considerations he had been asked to analyse were the “value of the information” currently provided in PDSs and whether it helped consumers make investment decisions, as well as the “extent to which the current fee and cost regime” resulted in disclosure that assisted consumers compare super and managed investment products.
“All of the observations and recommendations are directed at addressing the stated aim of the review and the policy objective of achieving disclosure outcomes that can better support consumers in making more confident and informed value-for-money decisions.
“In addressing the more technical points, it became apparent that the policy objective could not be met by merely adjusting those technical issues and broader issues also warranted consideration.”
Commenting on the report, Industry Super public affairs director Matt Linden said that the report demonstrated that fee disclosure was too complicated even for experts, and that legislation reform was “likely necessary” in order to put consumers first.
“Much of the complexity is driven by the structure of platforms which straddle both superannuation and non-super investments,” Mr Linden said.
“We remain concerned that the business practices of platforms are being accommodated over comparable and understandable disclosure for consumers.
“The failure to find a solution for the opaque fee structures of super funds that utilise platforms serves to highlight the importance of net returns to assess the relative merits of superannuation options.”
In September 2017, Industry Super expressed concerns that “inexplicable carve-outs” to RG 97 would render consistent and accurate fee and cost disclosure “impossible”.
Research houses Morningstar and Rice Warner also said that RG 97 would be a “major” marketing and communications-related challenge for some in the industry.