IDD Disclosure of Costs and Charges

What are the IDR rules for presale costs and charges disclosure?

Under IDR, product providers or intermediaries who distribute Insurance Based Investment Products (IBIPs) are required to provide details of product/fund costs and related charges and distribution costs and related charges to customers before a contract is signed (presale). 

Presale disclosure of product and fund costs and related charges for an IBIP are adequately met by the provision of a Key Information Document (KID)/Investment Options Document (IOD)/Key Investor Information document (KIID).

It’s worth remembering though that the KID/IOD/KIID does not include details of ‘distribution costs’ e.g. advice charges, an initial platform charge etc. so, you will still need to provide this information separately.

When considering your clients’ long-term information needs, you’ll also need to consider what other information they’ll need, based on their individual circumstances and their investment portfolio. This may mean adding additional information about the market conditions, performance, and so on.

What are the IDR rules for periodic disclosure of costs and charges

The rules require firms distributing IBIPs, to provide adequate reports on the services provided to and transactions undertaken on behalf of the customer. This includes products in force before the rules came into effect.

• The IDR requirement for regular disclosure on costs and charges to customers are summarised below. Reports must be provided at least annually.
  
  
• Client reporting requirements apply to IBIPs only, including those already in force
  
  
• The periodic disclosure should include the total of costs that have been incurred/charged to the client in the relevant reporting period – i.e. actual costs incurred in the previous year. It must include the cost of advice, where relevant, and how the customer may pay for it, and include any third party payments.
  
  
• Costs and related charges shall be provided in an aggregated form that allows the customer to understand the overall cost as well as the cumulative effect on the return of the investment and, where the customer so requests, an itemised breakdown of the costs and charges shall be provided.
  
  
• The information should be provided in a comprehensible form, so that the customers are reasonably able to understand the nature and risks concerning the IBIP offered and, consequently, to take investment decisions on an informed basis.

Where can I get information in order to meet requirements for the periodic disclosures under IDR?

The tables below detail, for the different product types, where information can be sourced to assist in meeting the requirements for periodic disclosures.