ASFA: consumers not clear on fees

By Mike Taylor

Consumersare still struggling to fully understand fees and charges within the superannuation sector according to the latest research released by theAssociation of Superannuation Funds of Australia(ASFA).

The report, the result of research into consumer understanding of fees and charges commissioned by ASFA, makes clear that while significant progress has been made in improving Product Disclosure Statements (PDS) and standardising formats, more needs to be done.

The ASFA research was based on the responses of 24 consumers recruited by an independent recruiting group, who were sent copies of two PDS documents produced consistent with the model developed last year by theAustralian Securities and Investment Commission(ASIC).

The consumers were asked to read the documents as if they were choosing a superannuation fund. A week after receiving the documents they were interviewed and asked a series of questions to test their capacity to find information, recall it and make informed choices between funds and investment options.

The ASFA research suggests that while all test participants liked the ASIC table format and the presentation of the fees and charges, their ability to understand and compare the fees associated with the different superannuation funds was poor.

As a result of the research, ASFA is recommending that only one fees table should be used and that where more complex information is presented in a table, clear explanations are provided.

It says the tables used in the research exercise failed to give consumers the capacity to make informed comparisons between funds and between investment options based upon fees and charges.

ASFA says that where percentage figures are used to indicate fees, a worked example indicating the outcome in dollars should be required.

“The research indicates that when consumers fail to understand, they become suspicious and at times anxious and tend to rely on their own explanations in terms of meanings with often disastrous results,” it says.

“It is therefore recommended that ASIC and industry groups undertake consumer testing of disclosure proposals before their adoption to ensure they meet their stated objective.”