ASIC puts platforms on fee transparency notice
The Australian Securities and Investments Commission (ASIC) has sent a clear message to the platform industry on just how assiduously it will be pursuing fee transparency in the sector.
Addressing Money Management’s Fintech Platforms and Wraps Conference on the Gold Coast, ASIC senior executive leader, Investment Managers and Superannuation, Ged Fitzpatrick said it was important for investors in superannuation funds and managed investment products to have confidence in the information provided to them when making important decisions about which financial products to buy and when monitoring their investment.
“As the regulator responsible for disclosure we have been working to help ensure consistency and accuracy within the industry,” he said. “To this end we have updated RG 97 and clarified the regulatory requirements for disclosure to help ensure that industry more clearly understand how fees and costs need to be disclosed, including those fees and costs associated with investing indirectly, through interposed vehicles.”
“We also clarified that costs must be disclosed using reasonable estimates when they are not known,” he said.
Fitzpatrick said that for platform operators, the platform disclosure needed to make it clear that there were additional costs in those products and illustrate the cumulative impact.
“Specifically, to ensure that retail investors are not misled, a platform product disclosure state (PDS) will need prominent statements following the example of annual fees and costs that the fees and costs of the platform relate to access to the investments on the list, and that additional costs will be charged by the issuers of the products that the investor decides to invest in,” he said.
“To help ensure that the PDS is not misleading an example should illustrate the combined effect of fees and costs of the platform and of a major proportion of the investments selected by investors in the relevant platform. The example would need to be on the same assumptions and basis as the example of annual fees and costs.”
“If you are undertaking marketing activities or providing financial product advice referring to fees and costs for investment options that involve platforms need to ensure that there is no inappropriate comparison with other kinds of investment options,” Fitzpatrick said. “In particular, it would likely be misleading to compare the investment option in tables of fees and costs with other kinds of investment options without including fees and costs of gaining exposure to the option via the platform.”
“We will be conducting compliance reviews to check how well issuers including MDA providers and platform operators are complying with the disclosure requirements. Following the end of the transiton period at the end of September, ASIC will actively focus on compliance by platform operators with these expectations and may take individual action as appropriate if the objectives of transparency and facilitating appropriate comparisons are not being achieved.”
“For MDA providers, if the client portfolio assets include interposed vehicles like managed funds, the disclosure of fees and costs must take into account fees and costs in the interposed vehicle. When reporting fees and charges relating to the MDA to clients, it is important to also include all management costs in interposed vehicles.”
Recommended for you
David Sipina has been sentenced to three years under an intensive correction order for his role in the unlicensed Courtenay House financial services.
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
Betashares has named the top Australian suburbs with the highest spare cash flow, shining a light on where financial advisers could eye out potential clients.
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
