Under new proposed changes by the corporate regulator, consumers will be able to compare superannuation funds and investment products more easily.
ASIC released its response to Report 581, an independent review conducted by regulatory expert Darren McShane on RG97.
McShane engaged with more than 120 industry stakeholders and analysed the practical implementation of RG97.
ASIC's Consultation Paper 308 is endorsing some of McShane's recommendations that proposes super funds to:
- modify fees and costs templates and present administration fees as one line item;
- present investment fees and costs as one line item by merging investment fees and indirect costs;
- remove advice fees or intra-fund advice costs as a line item and disclose it as part of administration fees; and
- group together the ongoing annual fees and costs separately from member activity-related fees and costs.
ASIC also wants to remove superannuation trustees' ability to treat costs as indirect costs rather than admin or investment fees.
It reasoned that these amounts will now be combined into other line items in the fees and costs template - which will be know be called the 'fees and costs summary.'
ASIC is targeting stronger transparency around performance fees in which super funds and managed investment schemes should provide how it is calculated.
As for periodic statements issued, these must contain three aspects: fees deducted from the account and investments, and the total fees and costs paid.
Rainmaker Group executive director of research and compliance Alex Dunnin said ASIC's proposal to streamline fee disclosures within PDS templates is welcomed, especially the proposal to bundle all admin and ongoing fees into a single 'cost of product' fee measure.
"But it must be said that the journey to these proposals has been tortuous and massively expensive for the superannuation industry, meaning massively expensive for super fund members. Let's hope no regulator ever puts the superannuation industry through such an inefficient reform process ever again," he said.
What was notably missing from ASIC's recommendations is McShane's proposal that requires super funds to disclose fees and costs for platform-based superannuation. The Australian Institute of Superannuation Trustees said it is "disappointed" that ASIC has not backed this.
"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. Most bank-owned and other retail choice superannuation products are held through platforms," AIST chief executive Eva Scheerlinck said.
Scheerlinck added the Royal Commission highlighted serious problems with fees and costs for these products, including fees for no service and fees charged to dead customers.
Dunnin said he appreciates ASIC has responded to industry criticism. At face value, ASIC decided to abandon the RG97 push requiring funds that invest directly to "unfairly count" asset acquisition transaction costs as 'indirect costs' which were then counted as part of that fund's total fees, he said.
"This penalised many not-for-profit funds leading to their investment fees jumping an average of 50% which had the effect of neutralising the fee advantage NFP funds once had over retail funds."
For a retail super sector already reeling from the Royal Commission fallout, Dunnin said this could have a significant impact.
"Forcing funds to now bundle indirect costs into the headline fees is meanwhile a smart move as these indirect cost ratios were, in effect, fees anyway," he added.
ASIC is seeking industry feedback until 2 April 2019.