APRA’s heatmap is unclear for consumers

While the Australian Prudential Regulation Authority (APRA) MySuper Product Heatmap is a step in the right direction, the information is not presented clearly to consumers, according to Chant West.

Speaking at an IBR conference, Ian Fryer, general manager, Chant West, said it was helpful that APRA provided clear definitions for net investment return and net returns in its standards but that some areas were lacking in proper standards.

“The problem with the heatmap is the information isn't really [presented] in a way that's accessible to members to enable them to compare funds in a clear way so I think a lot more can be done there,” Fryer said.

“If you look on fund’s websites and product disclosure statements, there's a whole range of different performance that's disclosed there and often it's not net investment returns and it’s not net returns – it's something else and they’re not comparable.

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“Sometimes they’re net of some fees and not others, sometimes they’re based on a soft close – so unit prices that don’t reflect transaction unit prices.”

He said some funds had different tax structures which could not be adequately compared.

Adding to Fryer’s thoughts, David Bell, executive director, The Conexus Institute, said it was broadly accurate that APRA was not set up to being a consumer facing regulator.

“There’s a lot of skills and talent required in how to frame information and present information so it can be used by consumers,” Bell said.

Bell also pointed out APRA was the administrator of government policy and not the designer of it.

He said the heatmap contained four investment metrics and a 34-page document to explain them.

“A: it’s a spreadsheet and B: there are a lot of tabs and hidden columns so is that really the easiest way for consumers to make use of that information? I’d probably say no,” Bell said.

“And so that leads the reflection for me is are other consumer dedicated services required to really help members make effective decisions that present information accurately, like what Ian’s described, but also in a way that can be well understood and used.”

Bell said the Your Future, Your Super (YFYS) comparison tool was one of the first attempts made by policymakers to provide clear information to the consumer, but that there were a lot of shortcomings with it.

One of the major flaws in the YFYS comparison tool, he said, was that it only relied on one metric, ranking funds based on fees and net returns.

Meanwhile, the APRA Product Heatmap, which Bell said was more effective at comparing funds, had four metrics: performance adjusted for growth exposure, performance relative to benchmark portfolios, measure which accounted for admin fees and another which did not.