ASIC today released updated guidance on fees and cost disclosure for issuers of superannuation and managed investment products.

The updated version of Regulatory Guide 97 Disclosing Fees and Costs in PDSs and Periodic Statements (RG 97) explains how product issuers and platform operators should disclose fees and costs.

ASIC Commissioner Danielle Press said, ‘Consistent and comparable disclosure helps consumers and their financial advisers to better understand the fees and costs involved, compare products more easily and make more informed assessments about whether a product is suitable for the consumer.  

‘The updated RG 97 will provide greater clarity on disclosure obligations for product issuers and platform operators, which should result in more transparent and useable fees and costs information being produced.’

ASIC’s update of RG 97 follows public consultation after an external expert review of the regulatory guide as well as consumer testing of proposed changes to the presentation of fees and costs (refer Background).

Key changes

The main changes to fees and costs disclosure are: 

• a re-grouping of values in the re-named fees and costs summary to more clearly show fees and costs that are on-going and those that are member-activity based
• a simplification of ongoing fees and costs into three groups – Administrative, Investment and Transaction
• including a single ‘Cost of Product’ figure in a PDS, and
• simplifying how fees and costs are presented in periodic statements.

Also, the guidance and associated legislative instrument have been drafted to make the regime more practical for industry and promote compliance by issuers with their legal obligations.

• The guidance has separate sections dealing with superannuation and managed investment products
• Modification of the legislation has been done by way of a legislative instrument that includes a consolidated version of Schedule 10 of the Corporations Regulations 2001, and
• The costs categories that need to be counted in the disclosed amounts have been clarified, including confirming that some categories that are hard to accurately measure consistently and have limited value for users need not be included (e.g. implicit market costs).

Commissioner Press said, ‘We expect the changes to RG 97 will help address some previous industry concerns, deal with some practical issues and offer guidance for more effective disclosure.

‘While disclosure has its limits, transparent fees and costs are important for the proper functioning of the market and product issuer accountability. Effective fees and costs disclosure supports better decision-making by consumers and the advisers who assist them,’ Ms Press said.

Transition to new requirements

The new disclosure requirements in updated RG 97 will apply to all PDSs issued on or after 30 September 2020.

Periodic and exit statements with reporting periods commencing from 1 July 2021 must comply with the new requirements. However, where a fund is ready, an early opt-in is available for reporting periods commencing from 1 July 2020.

The existing requirements under ASIC Class Order 14/1252 and the transitional version of RG 97 will continue to apply until the end of the transition period. However, industry should note that the updated version of RG 97 released today will provide clearer guidance about those existing fees and costs disclosure requirements that have not changed.

Next steps

Separately, ASIC will undertake focussed work on fees and costs disclosure on platform arrangements in 2020. We will also work with industry bodies to clarify how financial advisers should use fees and costs information when giving advice.

ASIC will also monitor fees and costs disclosure going forward and consider taking action where we find misconduct.

To give effect to the new fees and costs disclosure regime, ASIC has released:

• Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements (RG 97)
• ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070
• ASIC Corporations (Amendment) Instrument 2019/1071
• Report 637 Response to submissions on CP 308 Review of Regulatory Guide 97 (REP 637)
• Report 638 Consumer testing of the fees and costs tools for superannuation and managed investment schemes (REP 638)

Background

On 28 November 2017, ASIC appointed Mr Darren McShane to undertake an external expert review of the fees and costs disclosure regime. Mr McShane engaged with more than 120 industry stakeholders and considered approaches to fees and costs disclosure in other jurisdictions for comparison.

On 24 July 2018, ASIC released Mr McShane’s review Report 581 Review of ASIC Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements (REP 581).  REP 581 contained 34 recommendations and observations.

On 8 January 2019, ASIC released Consultation Paper 308 Review of RG 97 Disclosing fees and costs in PDSs and periodic statements (CP 308), proposing to accept most of  Mr McShane’s recommendations and sought feedback on a draft updated RG 97 and Schedule 10. In preparing CP 308, ASIC carefully considered REP 581 as well as the feedback provided by industry to Mr McShane during his review.

ASIC also commissioned consumer research during the consultation period to test whether the proposed fees and costs templates and wording changes helped consumers more easily understand and compare fees and costs.