New super disclosure rules will make it impossible for consumers to compare super fund fees and costs giving bank-owed and other retail super funds another leg up by failing to capture investment platforms - the majority of their assets - over half a trillion dollars - are invested through.
This decision is hot on the heels of the deferral of “Choice Dashboards” lobbied for the bank-owned super funds; and the Government’s Member Outcomes Bill which fails to include Choice products from enhanced trustee obligations. 82% of bank-owned super assets are in Choice products.
ASIC’s new Regulatory Guide 97 (or RG97) rules were designed to inject greater transparency into the often murky world of indirect investment fees and costs which are unwittingly borne by consumers.
However, inexplicable carve-outs to the new RG97 rules exclude investments via platforms favoured by bank-owned super funds and also can result in direct investments in infrastructure and unlisted property looking more expensive -- while actually costing the investor less -- than an investment in the exact same infrastructure or property asset through a listed vehicle or platform. These carve outs make it almost impossible to achieve consistent and accurate fee and cost disclosure, denying investors the opportunity to accurately compare the products available to them and determine whether a particular product represents value for money.
Thus, not only will this bamboozle consumers it could, if not fixed, change investment strategies of funds resulting in less direct illiquid investments, and ultimately lower returns to members.
“Consumers should be able to compare super funds on both performance and cost and charges, but the RG97 exemptions will make this impossible,” said Whiteley.
“Industry super funds strongly support full disclosure by super funds, but disclosure needs to be comparable, in order for consumers to benefit, all super funds must be required to disclose the same fees and costs.
“The light must be shone on fees and costs across the board, including the shadowy corners of platforms and investment trusts favoured by bank-owned super funds,” he said.
“In its current form, RG97 will create perverse incentives for super funds to change the way they invest, using the carve outs to hide costs,”
“This could negatively impact both member returns and the capacity of Australian super funds to invest in long-term, nation-building infrastructure projects”, said Whiteley.
Industry Super is calling on the Government to defer the implementation of RG97 until it can guarantee full disclosure by reversing the exemptions on platforms and intermediary trusts investing in real property or infrastructure.
Amendments to fee and cost disclosures for super and managed investment products were announced in 2015. They were re-issued with changes in March 2017; Q&As were then provided later. The new requirements for product disclosure statements are set to apply from 1 October 2017.
David Whiteley is available for interview. Media contact: Phil Davey 0414 867 188.