Darren McShane reviewed RG97 for ASIC (Photo: Steven Pam)
The corporate watchdog’s attempts to calm superannuation sector participants incensed by its overhaul of fee disclosure have hit a stumbling block, with major industry bodies still dissatisfied with the arrangements for platform-based funds.
The chief executive of the Australian Institute of Superannuation Trustees, Eva Scheerlinck, said the body was disappointed that ASIC, in its consultation paper, did not propose requiring funds to disclose fees and costs for platform-based superannuation clearly and simply.
“This is critical to enable consumers to compare the fees and costs of MySuper products with the fees and costs of superannuation held via a platform,” Scheerlinck told Investment Magazine. “Most bank-owned and other retail choice superannuation products are held through platforms. Most people considering switching funds choose between a MySuper product and a retail choice product.”
On Tuesday, ASIC released its much-anticipated consultation paper on the controversial fee disclosure regime, known as RG 97. It is seeking feedback on proposals to alter the current fees and costs disclosure regime for managed investment schemes and super, as part of its effort to make it easier for consumers to compare products.
While Industry Super Australia (ISA) welcomed what it called “overdue attempts to improve superannuation fee disclosure”, it warned that the new proposals the financial watchdog announced still failed to address ongoing issues.
“Under the current regime, platforms – typically owned by banks and wealth management groups – are not required to disclose all costs relating to underlying investment products. As a result, consumers may be misled into believing such products are less expensive than those with direct investments, when in fact they are likely to be more costly,” ISA said in a statement.
ISA director of research and campaigns Nick Coates described the consultation paper as a “cop-out”.
“It’s essentially just a warning to members that what you see is not what you get when it comes to platform fees,” he added.
One of ASIC’s proposed changes was that platform providers should “include a prominent statement in the ‘fees and costs template’ indicating that the fees and costs charged by the platform relate only to gaining access to the accessible financial products, and do not include the fees and costs that may be charged by the issuers of accessible financial products”.
“Platforms have a more complex structure, disclosure [for them] is always going to be more complex than for non-platform products,” ASIC stated.
But Scheerlinck said, “The royal commission highlighted serious problems with fees and costs for these products, including fees-for-no-service and fees charged to dead customers.”
Consultation on the RG 97 reforms has been rolling on for more than four years. The regime was initially implemented in September 2017; however, just two months later, ASIC was forced to appoint an independent expert, Darren McShane, to review the changes, due to widespread industry criticism over the regime’s complexity and lack of flexibility.
McShane recommended funds be required to disclose fees and costs clearly and simply for platform-based super.
“McShane counselled ASIC to implement his recommendations as a package and avoid cherry-picking,” Scheerlinck said. Superannuation consumers – the entire working population – need and deserve transparent, comparable information about fees and costs for platform-based superannuation to make informed decisions about their retirement savings.”
Some in the $2.7 trillion super sector did receive the latest consultation paper more favourably.
“The consultation paper released yesterday by ASIC appears to be well-constructed, it takes account of the issues raised in the independent review by Darren McShane, and clearly sets out ASIC’s current views on his recommendations,” Australian Private Equity and Venture Capital Association (AVCAL) chief executive Yasser El-Ansary said. “We’ve been involved in this RG 97 project from day one, and I think that superannuation fund members will ultimately benefit from a clearer and more consistent picture of how their pension savings are being managed. If RG 97 delivers that, then we have collectively achieved something worthwhile.”
As part of the consultation package released on Tuesday, RG 97 has been rewritten to provide greater context than the previous version, which some industry participants deemed too prescriptive.
Amongst the other proposed changes, ASIC said it wanted to make key amendments to the superannuation product fees and costs template, merging the indirect costs that relate to the investment of the superannuation entity’s assets with investment fees, and merging the indirect costs that relate to the administration or operation of the superannuation entity with administration fees.
Another contentious issue has been how to disclose property costs.
“Many stakeholders felt property operating costs should not be included in fees and costs disclosure, as they are difficult to collect, may be distortive and may not be relevant to consumers,” ASIC stated in the consultation paper.
In another recommendation, ASIC proposed that it would not require property operating costs, borrowing costs and implicit transaction costs to be disclosed in Product Disclosure Statements and periodic statements.