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Call to end the legalese around super products
Superannuation and general financial service product disclosure should be moved away from lawyers and back to the regulators to ensure a simplified and more effective system, according to actuarial research house, Rice Warner.
In an analysis published today, the actuarial firm has agreed with the sentiments of Australian Securities and Investments Commission (ASIC) deputy chair, Karen Chester on the manner in which disclosure had not served its purpose.
“While we concur with the thrust of this sentiment, a significant contributor to the problem has been the quality of the disclosure. In other words, product statements have been largely unintelligible for laypersons,” the analysis said.
“This has arisen in part due to the prescriptive nature of product disclosure. Financial institutions and superannuation funds have used legalese to respond to their statutory legal requirements and regulators’ guidelines. The total failure (over many years) to materially raise financial literacy standards in the community has also been a contributing factor.”
Discussing what could be done, the analysis suggested that legal jargon should be removed from product disclosure statements (PDSs) with such documents being made briefer and more comprehensible.
“While we are thinking about improving the system, we should remove simple comparisons such as ASIC’s comparison of fees on products for someone with $50,000. While this provides an example to consumers on how to calculate the fee for their situation, it would be better if they were required to show two or three examples to demonstrate that it varies depending on size, such as $10,000, $50,000 and $250,000.”
“Using only one standard comparison makes it easy to adjust fees to look good at that size or to insert fees that are not compared in the standard comparison. That is why new start-up super funds and exotic investment options often have extortionate buy/sell margins. These are a crude entry fee undisclosed by being omitted from the comparison formula.”
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This commentary, on the present state of financial disclosure in superannuation is just absolute rubbish. To infer that product disclosure is 'owned' by lawyers is to miss the whole point that all lawyers can do is respond to the laws as made. The law here, particularly the disgusting dog's breakfast that RG 97 always was and is, is completely the Regulator's (ASIC) doing. It became so unintelligible that after some 32 years of supplying legal advice to large superannuation fund trustees, I ceased my legal services in that area last year as you could never be sure you were right.