ASIC has issued a warning to superannuation funds to avoid claims about fees and costs that leave out critical information.
‘It appears that some funds believe they could tell consumers about fees and ignore costs. In our view, this is misleading or is likely to mislead consumers’, ASIC’s Executive Director of Consumer Protection, Mr Greg Tanzer said.
When claims about the level of fees are made, ASIC expects funds to take all fees and costs charged into account. Any exclusion must be made very clear.
It is imperative that all costs that apply – regardless of how they are characterised by the fund – including administration fees, other fees and charges, investment management costs and transactions costs such as buy sell spreads, are included.
Mr Tanzer said that ASIC had been monitoring new and revised superannuation advertising since mid-2004 and had published a report summarising key trends in superannuation advertising up until late 2005.
Mr Tanzer also warned that ASIC will continue to monitor superannuation advertising.
‘It is important that consumers are not enticed to make choices about superannuation based on incomplete or inaccurate information, particularly in relation to cost’, he said.
‘ASIC will move quickly if it believes that claims about costs are likely to mislead.’
ASIC has already raised concerns with two superannuation funds, Virgin Super and maxSuper, about advertising that referred to a single fee without reference to other costs:
- an advertisement for Virgin Super promoted ‘low annual fees of just 1%’, suggesting this was the only cost incurred by members, when in fact, transaction costs also applied; and
- max Super made similar representations in its advertisements, including ‘One Low Fee, No Hidden Fees’ and ‘1% low fee. No sneaky charges or commissions’. In fact, transaction costs also applied.
ASIC believes these representations were misleading or likely to mislead consumers. Both Virgin Super and max Super responded quickly and constructively to ASIC’s concerns, agreeing to make appropriate changes to their promotional material.
Background
ASIC began a project to monitor superannuation advertising in the lead up to the introduction of choice of super legislation on 1 July 2005. That project remains ongoing.
A report prepared by ASIC that summarises trends in superannuation advertising in Australia from mid 2004 until November 2005 is now available.
Misleading or deceptive conduct is prohibited under the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001, both of which are administered by ASIC.
Transaction costs – buy/sell spreads
These costs are standard in the superannuation industry, and apply when investments are bought or sold by a fund. They are generally charged as a percentage, commonly at a rate of 0.25 per cent to 0.5 per cent of the value of the investment.
Further information about choice of superannuation can be found at www.superchoice.gov.au and www.fido.gov.au.
Media releases referring to other action ASIC has taken in relation to misleading or deceptive superannuation advertising can also be found on this website.
End of release