Design & Distribution Obligations
From 5 October 2021, issuers and distributors of financial products need to comply with new Product Design and Distribution Obligations (DDO). Below you will find information about:
- The purpose of DDO.
- Obligations under DDO for Affluence as a product issuer and for those parties, such as investment platforms and financial advisors, that distribute our products.
- Target Market Determinations and how have we identified the appropriate customers for our financial products.
We have also provided answers to some common questions we have received about DDO.
The purpose of Design and Distribution Obligations
DDO requires issuers and distributors to have a customer-centric approach to the design and distribution of financial products and to develop and maintain effective product governance arrangements across the life cycle of financial products.
Affluence is both an issuer and a distributor of its products.
DDO is designed to help customers (investors) in three ways:
- Product issuers, such as Affluence, need to design financial products that are consistent with the likely objectives, financial situation and needs of the customers for whom they are intended.
- Product issuers need to prepare a Target Market Determination (TMD) for each product. Issuers and distributors need to take ‘reasonable steps’ that are likely to result in financial products reaching customers in the target market described in the TMD.
- Product issuers need to monitor customer outcomes and review their financial products to ensure that customers are receiving financial products that are likely to be consistent with their likely objectives, financial situation, and needs.
Target Market Determinations
The TMD is a document issued by product issuers which:
- Describes the class, or type, of customers who the product is likely to be appropriate for.
- Specifies conditions and restrictions on how products can be distributed to customers.
- Specifies events or circumstances that will require the product issuer to review the TMD for their products.
- Outlines the information that third-party distributors must provide to the product issuer.
Affluence products to which DDO applies
Affluence Investment Fund
This product is likely to be appropriate for a consumer seeking Capital Growth and Income Distributions to be used as a Core or Satellite Component of their portfolio where the consumer has a Medium or longer investment timeframe, at least a Medium risk/return profile and needs access to capital Monthly or less often.
Affluence LIC Fund
This product is likely to be appropriate for a consumer seeking Capital Growth and Income Distributions to be used as a Core or Satellite Component of their portfolio where the consumer has a Long Term investment timeframe, at least a Medium to High risk/return profile and needs access to capital Monthly or less often.
The PDS and TMD for each of our Funds are available here.
Design and distribution obligations do not apply to the Affluence Small Company Fund, because that fund is not available to retail clients.
DDO Obligations for Affluence and third party distributors
As an issuer and distributor of financial products, Affluence must:
- Make a TMD for all our retail products available for investment, except for closed retail products.
- Take reasonable steps so that distribution is consistent with the most recent TMD.
- Make our TMDs available to the public free of charge.
- Review the TMDs at specified times or on the occurrence of certain events, to ensure they remain appropriate.
- Notify ASIC of any significant dealings in a product that are not consistent with the product’s TMD.
- Specify distribution information that distributors must collect, keep, and report to us.
- Maintain records and information relating to our obligations under the regime.
If you are a distributor of Affluence products (including financial advisers and investment platforms), you must:
- Consider the TMD when giving personal advice to help meet your best interest duty.
- Not distribute a product without a TMD being made available with the PDS.
- Notify us of a significant dealing in a product that is not consistent with the product’s TMD. This does not prevent you from recommending the product if it is appropriate for your client.
- Provide us details of any complaints about our products and any other distribution information specified in the TMD relating to the product.
- Maintain records and information relating to your obligations under the regime and keep records of this distribution information for up to seven years.
Distributor reporting requirements
A significant dealing outside of the target market must be reported to us as soon as practicable but no later than 10 business days after the distributor becomes aware of the significant dealing.
Dealings outside the target market must be reported to us quarterly, within 10 business days following the end of the calendar quarter.
Complaints relating to the product design, product availability and distribution must be reported to us quarterly, within 10 business days following the end of the calendar quarter.
A significant dealing is not defined in the legislation and is specific to each Affluence product.
Dealings outside a TMD may be significant because:
- They represent a material proportion of the overall distribution conduct carried out by the distributor in relation to the product.
- They constitute an individual transaction which has resulted in, or will or is likely to result in, significant detriment to the consumer (or class of consumer).
In each case, the distributor should have regard to:
- The nature and risk profile of the product (which may be indicated by the product’s risk rating or withdrawal timeframes).
- The actual or potential harm to a consumer (which may be indicated by the value of the consumer’s investment, their intended product use, or their ability to bear loss).
- The nature and extent of the inconsistency of distribution with the TMD (which may be indicated by the number of red or amber ratings attributed to the consumer).
In accordance with industry practice, Affluence has adopted the definition of significant dealing contained in the FSC template TMD. Accordingly, Affluence has identified the following events which it believes are ‘significant’ in the context of the distribution of the Fund:
- Distribution—if Affluence identifies a particular distributor (platform or adviser) where a significant number of its clients are outside the Target Market.
- Complaints—if Affluence identifies a significant number of its total complaints are attached/linked to a particular platform or Adviser.
- If Affluence discovers a significant number of new applications in any calendar year are from investors who are not within the Target Market.
DDO requires external distributors of our products to report to us the volume of complaints they have received about our products covered by our TMDs, on a regular basis.
A complaint is an expression of dissatisfaction made to us by an account holder (or someone legitimately representing their interests), related to our products or services where a response or resolution is explicitly or implicitly expected or legally required.
Distributors should refer to ASIC’s guidance on complaints (Regulatory Guide 271) for further information.
If practicable, distributors should adopt the FSC data standards for reports to Affluence.
- Significant dealings can be reported by distributors to Affluence using the template available here.
- Dealings outside the Target Market can be reported by distributors to Affluence using the template available here.
- Complaints relating to the product design, product availability and distribution can be reported by distributors to Affluence using the template available here.
Further questions about design and distribution obligations
A TMD is a governance document intended to ensure the product is distributed appropriately and, in a manner, likely to result in the product reaching consumers in the target market for the product defined by Affluence.
However, advisers must report dealings of the product outside of the TMD to Affluence quarterly including dealings where personal advice was provided.