Financial services firms AMP and Vanguard have partnered with the Australian Securities and Investment Commission to test out digital product disclosures, the regulator announced today.
Currently, financial institutions are required to physically or electronically mail relevant and lengthy information disclosures to customers.
The regulatory framework surrounding product disclosures has been criticised as technologically inflexible and unaccommodating to the numerous ways - specifically online - that customers engage with financial services providers.
ASIC today said it would work with AMP and Vangaurd to build and test a short, online 'key facts' sheet and a self-assessment tool to test out more efficient ways to deliver updates on financial products to investors.
The specific design of the self-assessment tool will be at the discretion of the individual providers in the program, an ASIC spokesperson said. AMP and Vanguard will similarly decide how many of their customers to bring onboard for the pilot.
"More work needs to be done on short disclosure. Investors tend to turn off when faced with wordy disclosure documents. If they need more detail, investors can access further layers of information from product providers online," ASIC chairman Gred Medcraft said in a statement.
"We encourage industry to harness the opportunities of digitisation. More and more, people are accessing financial products and making decisions using mobile devices."
ASIC will use the findings of its pilot to inform its broader work on digital disclosure, Medcraft said. The regulator may also bring other providers into the project.
It expects to deliver preliminary results by mid next year.
The issue of modernising product disclosures has been canvassed in the Government's current financial systems inquiry (FSI).
In its preliminary report, the FSI panel said the disclosure regime has been "driven by an industry culture of legal compliance, rather than a focus on how best to inform consumers".
"This has resulted in lengthy and complex documents, rather than short, targeted documents that highlight product features, risks and rewards," it reported.
The Commonwealth Bank was one of many organisations calling for legislation to be reviewed to deliver a “technology-neutral” approach to disclosures.
Regulations need to be updated to allow financial institutions to make relevant information disclosures to customers using a variety of technological methods, the bank said in its submission to the FSI panel.
“Technology would allow the applicable disclosure requirements to be satisfied in non-documentary forms and in ways which will assist in improving customer engagement and understanding,” it said.
“For example, smart phone users can receive videos and voice memos which, once stored or hosted, can be accessed at any time in the future. It is also possible to provide consumers with links to content on social media platforms, with required information to consumers which can be viewed from any device.”