01.Inconsistent approach continues to leave consumers in the dark
A recent ASIC investigation into fee disclosure practices in the superannuation and managed fund industry has found plenty of cause for confusion.
The investigation was a follow up to the introduction of new fee disclosure rules on 1 July this year, part of the previous Labor government’s Stronger Super reforms. Among other things, the reforms are meant to standardise and improve the way fees are disclosed to account holders.
The corporate regulator says the investigation "identified a number of issues which have a substantial impact on how fees and costs are disclosed".
ASIC's key findings
- Non-disclosure of fees and costs relating to underlying investment vehicles
- Incorrect disclosures of fees as they relate to tax
- Inconsistent disclosure of performance fees
"It is crucial for super and managed fund issuers to disclose fees and costs on a consistent and comparable basis in order for consumers to make meaningful comparisons between products," ASIC commissioner Greg Tanzer said.
"Our review shows that there is some inconsistency at the moment and we will work with industry to improve fee and cost disclosure more generally".
Fees and FoFA
The current government’s proposed changes to the Future of Financial Advice (FoFA) reforms include the removal of the opt-in clause, which allows account holders to regularly approve or disapprove ongoing financial advice and any related fees.
Industry Super Australia recently called asset-based fees without an opt-in clause “shadow commissions”, since they allow fees to be deducted without the account holder’s ongoing consent.
"There is no requirement for a financial adviser to provide ongoing advice, but they can continue to deduct ongoing percentage based fees from a client’s super nest egg," Industry Super said in a statement, adding that it "opposes ongoing asset based fees for advice without the opt-in consumer protection".
Stakeholders in the financial services industry who support the FoFA changes have said the opt-in provision imposes too much of a regulatory burden on service providers.