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 insurance or superannuation. Its purpose is to give you the key information you should know about the product, so you can decide if it is the right one for you.
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 PDS, 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, such as:
- key features
- fees and other costs
The PDS should also list important details about the company, such as:
- commissions, if the business pays or receives money from any other source but the customer for selling the product, and
- 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 door unlocked could affect your chances of being covered if there was a robbery.
The PDS might be one document, or a series of documents, such as a PDS and one or more Supplementary Product Disclosure Statements (SPDS). 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?
If you want to read a PDS for a particular product, typically a company’s website will have a section dedicated to these types of documents. There may also be a link to a PDS close to where the product is displayed on a website.
If you are considering buying a financial product, it could be a wise idea to ask if there are any disclosure documents, and to read them, before signing on the dotted line. It’s likely, however, that a company will offer you a PDS if it is required to, as there are harsh penalties for not obeying the law. If you provide an email address to receive a quote from the company, they are likely to send you an electronic copy of the PDS (or a link to it) as well as any other important documents they are required to give you.
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, and most credit products. 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 are likely to be other important documents that could be in a consumer’s interest to read, too.
What other important documents are available to consumers considering buying financial products?
In addition to the PDS, consumers considering buying a financial product should also consider reading (where applicable):
- Target Market Determination (TMD), which, as mentioned above, sets out the intended retail audience of a product;
- 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, and;
- 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 a range of other disclosure documents available, depending on the type of financial products being offered and how, and where, they are being sold. These could include:
- Product Information Statements (PIS)
- 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.