In a consultation paper, ASIC proposed updating Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements, as well as draft amendments to Schedule 10 of the Corporations Regulations.
It proposed modifying the ‘fees and costs template’ for superannuation products by removing advice fees (intrafund advice costs) as a line item, and include this cost in the disclosure of administration fees.
ASIC said it will insert a definition of intrafund advice costs into clause 101 of Schedule 10 to give effect to the change.
It justified the change by saying the advice fee in the superannuation product ‘fees and costs template’ relates to a very specific type of financial product advice (intrafund advice costs) rather than personal advice, and that this meaning would be unclear and potentially confusing to a casual reader.
It also observed that in product disclosure statements this item is frequently shown as nil, which results in the line item being given undue prominence.
“We agree with these observations and believe that removing intrafund advice costs as a line item from the ‘fees and costs template’ will simplify the information provided to consumers, which may improve consumers’ understanding of the fees and costs they will be charged for their investment and therefore assist consumer decision making,” ASIC said.
“Including intrafund advice costs as part of the new administration fees and costs line item ensures that these costs are still captured as part of fees and costs disclosure.”
Further, ASIC expressed concerns about how to factor fees and costs disclosure information into their advice to clients.
The corporate regulator said it is important that advisers understand how to use fees and costs disclosure information when preparing financial product advice for their clients.
“If the fees and costs information about a product in a statement of advice is not accurate or is incomplete, it may affect the consumer’s ability to compare products and make informed value for money decisions,” ASIC said.
Wow. So ASIC believes that spreading the cost of intrafund advice over all members of the fund regardless of whether they actual take advantage of the service is ok – and then to make sure that the consumer doesn’t know about this – lets just chuck it under ‘admin fee’. If I was in corporate super (which I’m not) and had ‘grandfathered commission’ (which I don’t) – I would be very upset about the double standards from our regulator!
I agree Ted, shocking double standards. The vast majority of members don’t take up advice, so this is basically a fee-for-no-service scandal. Hayne, Hodge, Orr etc. should have tackled this in the RC. It’s no different to what AMP and the banks did. They are charging a fee for a service they know will not be delivered to the majority of those paying the fee for it. It looks to me like ASIC are quickly trying to sweep this one under the carpet before anyone notices the gross hypocrisy.