header-mask
Insights / August 8th, 2018

External report on fee and cost disclosure

The external report on RG 97 (report), prepared by Darren McShane, was commissioned by ASIC in November 2017. The purpose of the report was to ensure that ASIC’s guidance on fees and costs disclosure relating to superannuation and managed investment products meets the objective of greater transparency for consumers.

Mr McShane’s report concludes that changes should be made to the current fee and costs disclosure regime.

Preparation for the report included Mr McShane undertaking a review of approaches to fee and costs disclosure in international jurisdictions and engaging with over 120 different stakeholders. The key considerations for the report included:

  • the value of the required information on fees and costs in product disclosure statements (PDSs) and periodic statements, and whether it assists consumers in making an investment decision;

  • the extent to which disclosure assists consumers in comparing superannuation and managed investment products;

  • the practicalities of producing disclosure information required under RG 97, including the cost to consumers of doing so; and

  • how RG 97 might be amended to improve implementation and clarity.

The report recommended a number of changes to the disclosure regime, presentation of fee data, supervision and enforcement, and the use of educational material.

Many of the recommendations in the report are of a technical nature, including amendments to fee disclosure templates in Schedule 10 of the Corporations Regulations 2001 and amendments to RG 97. However, a stand-out issue is that of inconsistent compliance with the fee and cost disclosure regime in the market.

The report identifies concerns amongst stakeholders that not all market participants are disclosing fees and costs in the same way. While the report acknowledges that part of the solution is to clarify requirements to ensure that all market participants understand their obligations, it also recommends that ASIC develop and implement a surveillance strategy for compliance with the fee and cost disclosure regime.

ASIC has agreed that the changes to the fees and costs disclosure suggested in the report will be valuable to the financial services industry, and has announced that it will release a consultation paper in the coming months containing a response to the observations and recommendations raised in the report.

If you have any queries regarding the above, please contact Hillary Ray or Richard Hopkin.