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ASIC stifling fee reductions: Rice Warner

The introduction of new disclosure rules for super funds could inadvertently halt the downward trend in fees towards 1 per cent, says Rice Warner.


ASIC's recent introduction of Regulatory Guide 97, Disclosing fees and costs in PDSs and periodic statements, is likely to stifle the downward trend in superannuation fund headline fees, according to Rice Warner.

Superannuation fees have trended downward towards 1 per cent in recent years, and in the year to 30 June 2016 they dropped to 1.03 per cent, research from Rice Warner shows.

The company said ASIC currently requires funds to include in their product disclosure statements (PDS) that an additional fee of 1 per cent “could reduce a member’s final benefit by up to 20 per cent over 30 years”, meaning these reductions can have a “profound” effect on members’ savings.

Rice Warner said it expects the downward trend to continue and for fees to fall again this year as the final transfer of accrued default amounts from legacy products will shift another $15 billion of assets from high fees. However, the firm cautioned ASIC’s Regulatory Guide 97 (RG97) may slow these reductions.

“A significant factor acting to dampen the rate of reduction in headline fees is the increasing transparency in disclosure of a wide range of investment-related fees,” it said.

The company said the new regulatory regime meant most superannuation products must meet “certain requirements” for disclosing fees and costs in their PDSs and periodic statements, and these requirements will “impose additional complexities for investment products with multiple underlying investment vehicles”.

“We expect that a result of this will be the increase in measurable fee levels across the industry,” Rice Warner said.

“However, it is important to distinguish this type of fee increase – a technical increase – from an actual change in fee levels.

“For example, the Productivity Commission in its inquiry will need to ensure that it does not interpret this as an actual increase in fee levels for the industry.”

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