The shift towards simplification of financial services and superannuation law may see greater use of principles-based standards much like prudential standards, said QMV principal consultant for legal and risk Jonathan Steffanoni.
According to him, regulation by way of product disclosure assumes that individuals are:
- adequately financially literate to understand what they are reading;
- motivated, engaged and have the time to read product disclosure documents;
- have all the information necessary to make an informed decision about what is best for them; and
- continue to remain attentive to changes in product terms that are disclosed.
“Current product disclosure is based on the premise that individuals are at liberty to freely decide what they want, and what’s best for them, and are capable of actually doing that. In reality, this is often not the case,” Mr Steffanoni said.
“Most people simply don’t have the attention or the patience to wade through product disclosure – let alone compare it to alternatives in the context of their personal circumstances.”
Mr Steffanoni said recommendations directed at simplifying the disclosure laws would benefit from considering the increasing reliance people are likely to have on the data economy, which will enable the fast comparison of financial products and allow individuals to consider their financial profile and the product that will best meet their needs.
Further, he believed the Hayne royal commission may consider whether now is the time to recommend the extension of the Consumer Data Right to superannuation products, to require product disclosure in machine readable API format.
“This would enable consumers to utilise smart phone apps and other online services to compare and assess key product features in a familiar and user-friendly manner,” Mr Steffanoni said.
Lawyers are writing the requirements. A PDS will be 8 pages but the attachment will increase from the current 100 pages to 1,000 pages. An SOA won’t be able to be provided in less than 75 pages because after all “disclosure is the key”. They have designed a compliance system which actually makes it easier to rip people off, well done ASIC.
Current Comminsure Risk PDS is 160 pages. Something has to be done.
but what will the lawyers do ???::roll:
The first half of this article made a lot of sense. Then he completely undermined his credibility with a ridiculous suggestion about phone based comparison tools.
Financial products are too complex, and consumer requirements too varying, for simplistic comparison tools. Just because comparison tools can easily be created, doesn’t mean they are accurate or helpful. The same principle applies whether they are on a website, TV ads, or apps. They are all just marketing gimmicks to create content and deceive the gullible. The union funds “compare the pair” campaign is a classic case of deception by dodgy comparison tools.