ASIC cautions platform providers on fee disclosure

Platform providers should not be marketing their platforms as though the only fees and costs are the platform fees, according to the Australian Securities and Investments Commission (ASIC).

Responding to questions on notice flowing from House of Representatives Standing Committee on Economics Review of the 2016 ASIC annual report, the regulator acknowledged the status of platforms in terms of the so-called “interposed vehicle test” but made clear what it expected from platform providers.

It also warned that it would move to take action if it believed platform providers were breaking the rules.

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“A platform provider should not market their platform as though the only fees and costs are the platform fees and ASIC may take further action if they do,” the ASIC response said.

“The revised RG 97 is now very clear on our expectations with regards to platform fee and costs disclosure, including the need for examples and to show the cumulative effect of the fees and costs of the investment that may be selected,” it said.

“We expect that platform providers will give examples of the cumulative effect of fee and cost disclosure to investors. We also expect that as these investors are prepared to make their own choices about investments, their level of engagement may be higher than a person who goes into (for example) a MySuper product,” the ASIC response said.

It suggested that platform investors might also have the assistance of a financial adviser, and additional disclosure about fees and costs might be included in the Statement of Advice (SOA) received by the client in such cases.

“Where investment involves interposed vehicles in a non-platform context, it is done in order to achieve the objectives of the product in terms of exposure to an underlying asset or product,” the ASIC response said. “As such the fees and costs incurred by using the interposed vehicle are integrated into the cost of achieving the investment. However, in the context of a platform, exposure to the intermediary vehicle is the objective.”




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This really shows how little ASIC actually understands about fees in Financial services and why they demand repetition of the same fees until the consumer has no idea what they are reading.
Platform providers need to only disclose the fees that relate to their administration.
The ICR relates to fees in the fund options selected which under RG97 should be transparent unless you are an industry fund who has negotiated a carve out (not wanting to disclose the full cost of all those alternative assets). If you have a bundled admin fee then your fund mgt fee will be included in that.
Then we disclose all these fees again in every SOA and ROA.
Red tape upon red tape that does not hep the consumer and just adds to advice costs

Top notch answers PaulF........you are definitely right!!!
These ASIC (Project People) only sits behind close doors and sheltered from the real-world of the financial industry. All they try to do is making up rules after rules which is not practicl in the ideal world but sadly creating more cost & charges for the end consumer.....
I guess they need to prove that they are doing something in order to retain their position and job!!!

But if you setup a separate investment company. name it "industry Super holdings" or similar and package all the fees and investment costs into the separate investment company then your MER/ICR can be reported as a a very low number. This practice would be very difficult for ASIC to monitor or delve into. Ultimately investors want returns and risk management and fees are just one small factor that affects these.

The current difficulty as an adviser is actually doing any meaningful comparisons as not all providers are up to speed on RG97 and certainly not pulling through the various planning software - can you write and SOA in confidence?

I'm not sure what software you are using Phil but as a former Paraplanner with 14 years under the belt, the last 6 an an authorised rep in my own firm and licence, I can assure you that the two major software providers are horrible at updating ICR/MER's. I have a mantra when researching: Never trust the software, Never trust the voice on the other end of the phone and if it seems too good or cheap, call back. Your eyes would water at the varying info I was quoted within 2 mins of calling back. It's sad really. Sometimes it is too good to be true, and in those cases I ask if it's open for new business!

Yes agree Felix - but so much for this so called world of innovation, technology and efficiency!

One thing I notice a lot with comparison for smaller to medium balances Phil is that the admin fees of certain companies are actually quite costly, and of course some have the good old trustee fee on top of that.These funds can be more expensive than wholesale funds on a wholesale platform for example. Yes the devil is in the detail, depending on how much detail is actually provided.

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