ASIC wants simple disclosure of super fees

It floats the idea of going one step further to require funds to provide a single, easily comparable figure combining both administration and investment fees.

“We believe that 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 – would simplify fees and costs disclosure, which may help consumers to make value for money decisions,” the paper says.

Direct costs are those that are directly deducted from super accounts, making them easier to spot. Indirect costs arise when a super fund use external providers such as investment managers.

These fees aren’t charged directly to the member, but the fact they are subtracted from returns means there is an indirect cost.

Sticking points

A 2014 review by ASIC uncovered issues such as non-disclosure relating of costs associated with underlying investment vehicles, incorrectly disclosure of fees net of tax and inconsistent reporting of performance fees.

ASIC produced new guidance but encountered considerable push-back from industry.

One sticking point was property operating costs. Some parts of the industry baulked at the fact they would have to disclose higher costs for holding direct property compared to investing via a real estate investment trust, for example.

The industry fund sector warned it might have to sell down higher-cost unlisted property and infrastructure even though those assets were delivering better returns.

In November 2017, ASIC appointed regulatory expert Darren McShane to conduct another review in consultation with funds. Some of his recommendations have been adopted in the latest discussion paper.

QMV Super Solutions principal consultant Jonathan Steffanoni said multiple waves of consultation and delays had frustrated industry.

“The most significant change in this latest iteration is consolidating direct and indirect fees and costs into administration and investment management categories for product and periodic disclosure,” he said.

Also important was the move to exclude costs associated with owing property, Mr Steffanoni said. “This move is likely to be welcomed by industry and is largely due to the operational and technical challenges previously raised in identifying and monitoring such costs.”

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