What is a Product Disclosure Statement?
A Product Disclosure Statement (PDS) is a document that contains details (the fine print) about a financial product such as an insurance policy, loan, or superannuation fund. Its purpose is to give you key information about the product so you can decide if it’s suitable for you. The PDS might be one document, or it may come with one or more Supplementary Product Disclosure Statements (SPDS).
Any business that wants to sell certain financial products is required by law to make sure potential customers have been given, or made aware of, the Product Disclosure Statement, according to the Australian Securities and Investments Commission (ASIC).
ASIC states that a PDS should list important information that can help consumers decide if the product is suitable for their needs, like:
- Key features
- Fees and other costs
- Benefits
- Risks
The PDS should also list important details about the company, such as:
- If the business pays or receives money from any other source but the customer for selling the product (i.e. commissions)
- Their complaints handling process.
For example, a PDS for a car insurance policy could explain how the value of your car would be assessed if you had an accident where it could not be repaired, or a home insurance PDS could explain how leaving your doors or windows unlocked could affect your coverage if there was a robbery.
ASIC recommends that consumers also read the Target Market Determination (TMD) document, which explains what type of customers the product issuer had in mind when designing the product, as well as any other important documents.
Where can I find a PDS?
A company’s website will typically have a section dedicated to important documents, such as a PDS Library. There may also be a link to a PDS close to where the product is displayed on a website.
If you can’t find a PDS or other important documents for a financial product or service online, you could contact the provider directly online, by phone, or in person at a branch to ask for a copy to be provided to you, per the legal requirements.
What is a financial product?
A ‘financial product’ is anything that “helps you to save, invest, get insurance or borrow money”, but not all financial products need to have a PDS, according to ASIC.
The types of products that do not need a PDS include:
- basic deposit products, such as basic savings or transaction accounts
- some self-managed superannuation funds
- most credit products (which may have Key Fact Sheets instead)
Some cryptocurrencies won’t necessarily supply consumers with a PDS unless they are wrapped into an investment structure (i.e. a managed fund or ETF).
A PDS is also not required if the person buying the product already has a financial product of the same kind (e.g. when you renew a product such as an insurance policy, in some cases).
You can check with the person (such as a financial adviser) or company selling any product you’re considering to confirm whether a PDS is available. There may be other important documents that could be in your interest to read too.
What other important documents are available when buying financial products?
If you’re considering buying a financial product, as well as the PDS, you may also want to consider reading (where applicable):
- Target Market Determination (TMD), which sets out the product’s intended retail audience.
- Financial Services Guide (FSG), which describes the financial services offered by a company which has an Australian Financial Services Licence.
- Credit Guide (CG), which contains important information about any company offering consumer lending products, such as home loans and credit cards.
- Any terms and conditions documents, which are often used for products that do not require a PDS. For example, you may receive a Key Facts Sheet (KFS) when you apply for a home loan or a credit card, or a terms and conditions brochure for a transaction or savings account.
There may also be other disclosure documents available, depending on the type of financial products being offered and how, and where, they are being sold. These could include:
- Prospectuses
- Product Information Statements (PIS)
- Product Information Document (PID)
- Annual reports
It’s important to contact the provider for any product you’re considering if you have questions or would like more information about how the product works, and to consider seeking professional financial advice from a suitably qualified adviser.
