The Association of Superannuation Funds of Australia (ASFA) has called on the Government and the Australian Securities and Investment Commission (ASIC) to get behind its new recommendations on fee disclosure.
The recommendations follow what ASFA describes as a “breakthrough” after it produced a new comparable and meaningful bottom line measure of super fund fees on the back of research it has done with Chant West.
The research, which examined the fees of 50 super funds, sifted through the different ways fees are currently revealed, and the ways they are not revealed.
ASFA CEO Philippa Smith says: “The holy grail of straightforward fee comparisons is closer, but additional work will be needed by industry, ASIC and the Government to ensure a standardised approach.”
Chant West’s Warren Chant says: “[The research] shows the huge diversity of disclosure, in terms of completeness and clarity. The recommendations that we are putting forward would standardise exactly what is disclosed and how it is measured.”
Among these are that investment fees need to be disclosed more fully and more clearly. To allow comparability, a single fee based on a single investment option is recommended.
The researchers consider the exclusion of entry and exit fees from a bottom line fee comparison a significant omission. They find that the typical entry/exit fees in a personal retail product could add 1 to 1.5 percentage points to the published fee over a five year period. Instead, they recommend an ‘average total fees approach’ to provide a clearer bottom line.
ASFA adds that fees should always be shown gross of income tax and inclusive of GST. In addition, any performance fees paid or payable to investment managers should be reflected in investment fees.
Meanwhile, parliamentary secretary to the Treasurer, Ross Cameron, has welcomed ASFA’s research on ways to improve ASIC’s fee disclosure model. He notes that the Government will await the presentation of ASFA’s consumer testing research results to ASIC and other members of the group for their joint consideration as part of the on-going collaborative approach to implementing the Financial Services Reform disclosure requirements.
