Fee disclosure talks collapse
Attempts by theInvestment and Financial Services Association(IFSA) and theAssociation of Superannuation Funds Australia(ASFA) to agree on a single fee measure for superannuation and managed funds have failed.
Talks between the two associations ended without resolution on Friday following disagreement on the impact of fees over time.
ASFA chief executive Philippa Smith says “the IFSA model shows the level of fees for the first and second year, but that doesn’t show the impact over time, which is one of the more important issues that we have to deal with”.
However IFSA rejects the ASFA model, due to the “assumptions” it is based on, although IFSA chief executive Richard Gilbert says his association will strongly support theAustralian Securities and Investments Commission(ASIC) developing a calculator.
“Fee projections in the ASFA model are based on complex assumptions, including an assumed initial balance, an assumed salary, an assumed contribution rate, an assumed earning rate and an assumed discount rate - all of which can provide outcomes that are misleading for consumers,” Gilbert says.
Despite the break-down, Smith is quick to dispel reports that ASFA’s model puts retail funds at a disadvantage compared to non-profit groups, stressing the model merely seeks to provide transparency.
“We want to give consumers a clearer price tag so that they can make a better assessment of products in terms of competition and have more confidence in the system,” she says.
However Gilbert says, “our view during these negotiations was that ASFA’s proposal doesn’t provide transparency around what consumers are paying for advice, administration and investment management”.
The parties were able to reach agreement in some areas with ASFA agreeing to amend its working model in terms of splitting the adviser/product provider and changes to its benefits calculations.
The industry can now expect Government to take action with what it deems is an appropriate disclosure model for the protection of consumers.
AUTHOR
Craig Phillips
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