ASIC pushes for all cards on the table

FinancialPlanners could be forced to show in Product Disclosure Statements (PDSs) all the fees and commissions they receive from selling funds management products under radical new proposals being considered by the Australian Securities and Investments Commission (ASIC).

The proposals would include financial planners being required to disclose both the initial and ongoing trailing commissions they receive, as well as the source of those fees, in a dedicated fee section on every PDS.

The proposals are part of a package of disclosure recommendations, drafted by the Melbourne University law professor Ian Ramsay, and released by ASIC last week.

The package also calls for advisers to disclose in PDSs the extent of any ‘soft dollar’ commissions they might receive from the sale of funds management products.

The proposals brought a swift response from the financial planning industry last week.

The Financial Planning Association’s (FPA’s) manager of public policy, Con Hristodoulidis, says the more uniform disclosure called for in the proposals are welcome, but warned of a possible duplication of existing disclosure requirements for financial planners.

“The critical question is where disclosure should occur. Should it be in Product Disclosure Statements, or in other existing documents?” Hristodoulidis asks.

The disclosure of soft-dollar commissions, for instance, is already required in the Financial Services Guide (FSG) and Statement of Advice (SoA) given by planners to their clients.

But Ramsay, who is also the director of the Centre for Corporate Law and Securities Regulation, says the recommendations are not meant to replicate existing requirements.

“It may be that only a general statement concerning the existence of [soft dollar] arrangements can be made in the PDS together with a statement that the investor should refer to the Financial Services Guide and Statement of Advice,” Ramsay says.

Ramsay also recommended that there should be standardised descriptions and definitions of fees and charges on PDSs; separate disclosure of administration and investment fees on PDSs; and the concept of an ongoing management charge to be used on PDSs as a measure of ongoing expenses.