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Bundling obscures fee transparency - SuperRatings
An emerging trend of superannuation funds bundling administration and investment fees with product fee disclosure into a single Indirect Cost Ratio (ICR) measure is serving obstruct the ability to make accurate fee comparisons, according to SuperRatings.
The superannuation ratings house has used its submission to the Financial Systems Inquiry to argue that while fee disclosure should allow for a meaningful comparison between funds, particularly in relation to administration and investment fees, subsequent to 1 July 2014, this has become more difficult.
"An emerging trend has been the bundling of administration and investment fees within product fee disclosure into a single Indirect Cost Ratio measure. This presents challenges for accurate attribution of fees into their underlying components and makes effective fee comparison extremely difficult," it said.
The ratings house claimed a further difficulty within fee disclosure was the indirect levying of fees through reductions in the crediting rate/unit prices given to members, rather than accurate disclosure of these amounts as specific fees.
"An example of this has been the creation of the Operational Risk Financial Requirement reserve, which many funds have drawn from the crediting rate/unit prices of the fund, but have not disclosed this as a discreet fee to members," the submission said. "This has incorrectly resulted in a number of funds appearing to maintain low fees than those that have accurately disclosed the reserve allocation as a discrete fee."
The submission pointed to regulatory changes coming into effect but noted that "the regulator must ensure, however, that all funds are making accurate disclosures in respect of these requirements, as based upon the data collected by SuperRatings, we are aware that very few funds are providing full disclosure in relation to their underlying investments and in particular, fund of fund structures".
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