Call for more clarity on MA fees and costs

Amid conjecture that the Australian Prudential Regulation Authority (APRA) may take greater note of managed accounts in superannuation, research house Morningstar has suggested it may be time for the Australian Securities and Investments Commission (ASIC) to expand its guidance around fees and costs.

Morningstar has issued an analysis of the managed accounts sector acknowledging their use in superannuation and concluding that comparing performance and fees across managed accounts is easier said than done.

In doing so, it has suggested that an ASIC expansion of ASIC’s Regulatory Guide 97 (RG97) dealing with fees and costs disclosure may be warranted.

The analysis suggests that regulatory guidance is necessary around fees and costs comparisons because APRA has brought into focus that it expects superannuation trustees to be accountable for long-term net returns delivered for a particular risk profile and that fees should be scrutinised.

“So, advisors must oversee the net return outcomes of clients’ portfolios and also monitor whether there are better value products available. Both are central to discharging their fiduciary duty. To do that, confidently comparing a client portfolio with an appropriate reference benchmark and comparing fees and costs is required. But is this easier said than done?” the Morningstar analysis said.

It said that managed accounts or portfolios have continued grow in popularity among advisers in circumstances where the technology offered by leading platforms enables transparency and, more importantly, portfolio personalisation at a scale not previously thought possible.

“Comparing performance and fees across managed accounts is easier said than done. It’s challenging! The lack of consistency between platform approaches and disclosures makes it tough, notwithstanding the added complexity that personalisation brings,” the analysis said.

“It’s worth considering how fiduciary duties are being discharged in this burgeoning area of the market. It would be nice to think that the industry could solve this itself, but commercial imperatives make agreement challenging. It may be time for RG97 to be expanded to include some more guidance in this space.”