ASIC: Disclosure no longer the ‘silver bullet’

Reliance on mandated disclosures has often proved ‘ineffective’ and disclosure is no longer the ‘silver bullet’ it once was, according to a report by the Australian Securities and Investments Commission (ASIC).

The report, which was conducted jointly with the Dutch Authority for the Financial Markets, examined the effectiveness of disclosure for financial products on consumer outcomes.

It found reliance on mandated disclosure and warning had been ‘ineffective’ and occasionally caused more consumer harm than less. This included unnecessary product complexity which made it hard for consumers to switch products or make complaints.

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Five limits of disclosure were identified by ASIC:

  1. Disclosure does not 'solve' the complexity in financial services;
  2. Disclosure must compete for consumer attention and influence;
  3. One size disclosure does not fit all – the effects of disclosure are different from person-to-person and situation-to-situation;
  4. In the real world, disclosures can backfire in unexpected ways; and
  5. A warning about warnings.

Going forward, ASIC suggested it would take a more consumer outcome-focused approach which would make the most of its regulatory toolkit as well as using its product intervention powers.

ASIC deputy chair, Karen Chester, said: “It's time to 'call time' on disclosure as the default consumer protection.  It's not the 'silver bullet' once thought, nor should it be relied upon as one.  Disclosure can and has backfired in unexpected and harmful ways.

“Our report highlights the need to rebalance the onus from consumers to firms – to become a shared responsibility.  To do this, firms need to understand, measure and deliver on consumer outcomes. This aligns with the Royal Commission and the ensuing legislative reform program the Government has underway.

“Put simply, disclosure has been asked to do too much.  It cannot solve the complexity of the financial system.  Especially when that complexity, in the form of thousands of barely differentiated products, is firm induced'




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So has ASIC finally figured out that drowning consumers in voluminous FSG, SoA, PDS, RoA, and FDS, just drives up the cost of advice, lines the pockets of lawyers, and confuses consumers more than it enlightens them?

Let's hope this feeds into a consumer friendly, disclosure reduction program. Unfortunately it is likely to get worse before it gets better though with lawyer Hayne's idiotic proposal for yet another disclosure document, which it seems our gutless government will blindly implement without any proper consideration for its real impact on consumers.

i think that's what advisers are saying. we want to give high quality advice, just give us a break with the disclosure regime. we get it. less is good.

If we move to an annual opt in, you can do away with FDS, and technically opt in as well - have the client re-engage every 12 months so two becomes one.

"Product' disclosure. Nowhere are they suggesting relenting with advisers. If anything, this will only reinforce their stance that the onus is 100% on advisers to take all responsibility for interpreting absolutely everything that could possibly go wrong with complex products.

Has nil to do with the FSG etc that you state except the PDS providers can leave stuff out.

In fact this plays nicely into the union super funds hands, as they never ever wanted to disclose all their fees etc. I am interpreting this as the politically left leaning ASICk Jokes way of subverting the recent moves by a Lib gov to get super back on a level playing field and forcing union super to start being transparent.

Agree with your comments re Hayne's idiotic proposal but this is about "Product' disclosure. Nowhere are they suggesting relenting with advisers. If anything, this will only reinforce their stance that the onus is 100% on advisers to take all responsibility for interpreting absolutely everything that could possibly go wrong with complex products.

Has nil to do with the FSG etc that you state except the PDS providers can leave stuff out.

In fact this plays nicely into the union super funds hands, as they never ever wanted to disclose all their fees etc. I am interpreting this as the politically left leaning ASICk Jokes way of subverting the recent moves by a Lib gov to get super back on a level playing field and forcing union super to start being transparent.

More proof FOFA has been a complete waste of time, with the end result low to middle income earners will find it increasingly difficult to access advice. Statements of advice should be overhauled, to simply disclose the fees & that is all. Opt ins for advice fees should be changed to Opt Out, as should IntraFund Advice fees, which should also be changed to Opt out as well. The UK experience shows quite clearly that it is a total failure.

this is just laughable. They have been told this for years. They had to wait for a Dutch study rather than actually listen. FDS/Opt in etc etc. ring any bells.

ha ha so what now. we have too much disclosure ?

hey assholes at asic. told you so. a long time ago. stupids get it now. confirmed by research.

To all those commenting on here - read the article again. It has nothing to do with our disclosures at all, so if you're cheering about that side relenting it will die stillborn in your throats!

If anything this helps FSC and more likely ISA or industry funds. All the ones willing to slip ASIC a few bucks or first class tickets (as per the undisclosed gift list) to find an obscure report from a country vastly different to ours, so that they don't have to list any fees except headline fees. This is something so ludicrous it is almost as unbelievable as a plot in Suits or Billions!

You remember the 'Industry Super: $1 a week is the only fee you will ever see" misleading ads? Welcome back to those days, as factually they are correct; it is the only fee members will ever see, it's just not the only fee that they'll unwittingly pay.

Your system in Australia is very complicated, confusing and very costly system
In Iraq the opportunities in financial services have more upside then Australia. Insurance is very profitable and there are many clients. It is money for jam. We do not waste time with meaningless disclosure documents and brochures. Just a 2 page document stipulating basic contract details
Advisers are very highly regarded unlike Australia
You Aussies could learn so much by seeing what is done overseas. Your system is rubbish. I encourage you come on a study tour of Iraq and see a system that works for all. No time wasting with regulator as there is no regulator

i think they will increase disclosure on advisers. i think we should spend most of our time just doing disclosures. i think i will find a job where i am paid to just send out disclosures.

Good point. According to one large fund manager, who specialises in Asian investment, there is also very expensive insurance (very profitable to the life company there) being sold in China, due to LACK OF COMPETITION. So much so, the Chinese go on purpose driven "insurance" flights to Singapore & Hong Kong, simply to buy life insurance/crisis cover at a far cheaper premium. Amazing.

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