Fund managers with digitised short-form Product Disclosure Statements (PDSs) are altering the online accessory documents so often that they are in danger of accidentally including links to obsolete accessory documents when selling a product.
An increasing number of fund managers and super funds are placing short form PDSs online, with a link to accessory documents within the PDSs as a method of reducing paperwork.
However, financial software firms are raising concerns that fund managers are tinkering with the ‘incorporation by reference’ documents so often it is exposing them to the danger of including outdated accessory documents on PDSs that are provided to clients.
By law, fund managers are allowed to include ‘incorporation by reference’ accessory documents in their short form PDSs.
IQ Business Group chief executive Graham Sammells said the risk of including obsolete accessory documents was much higher with online material in recent PDSs.
"The issue is more at risk and pervasive in just the online world, and in the digital world there is a higher potential that changes will get made because it seems to be easier," Sammells said.
Digitised documents were becoming increasingly pervasive and more of an issue to manage, he said.
Fund managers need to ensure that changes to accessory material are managed and coordinated properly, Sammells warned.
Senior consultant for superannuation communications company Transform Consulting, Ian Taylor, said that some funds were almost totally unaware of the issues involved in short form PDS and had to be walked through the legislation.
Transform offers a short form PDS for super funds.
“They’re really not aware of a lot of the issues, particularly around the incorporation by reference stuff," Taylor said.
Although easily updated online short form PDSs were "a beauty", fund managers needed to maintain an ‘order trail’ to ensure that clients were accessing the current supporting documents, Taylor said.
Aon Hewitt changed its existing governance procedures for their short form PDSs to ensure that any incorporation by reference changes went through a sign-off process before going on the Internet, Aon principal and actuary Jenny Dean said.
Aon was one of the early fund managers to institute the short form PDSs.
Any changes to Aon’s PDSs have to be signed off by legal counsel and the office trustee. Dean is the office trustee at Aon Hewitt.
"I know that I will be reviewing the document before it replaces what’s on the web. So therefore there’s version control, and we also keep copies of the versions," Dean said.
Fund managers must have version control for their accessory documents, she said.
However, Dean said accidentally including an outdated document wouldn’t lead to legal action against the fund manager.
"It would have to be a pretty major error, and there usually is a clause in most PDSs that they will be changed from time to time," she said.
