As the full suite of responsibilities advisers and licensees will take on under the new design and distribution obligations comes into view, the intent of the rules is being overshadowed by concern over the administrative overlay required and the apparent lack of benefit to consumers.

As one of six reforms to land in October, product issuers will need to publish target market determinations (TMDs) for their products while distributors (i.e., advisers and licensees) must take “reasonable steps” to ensure the clients receiving those products sit within the TMD.

Advisers are also obliged to regularly report back to issuers on the distribution of products, even if there is no hint of a breach of the obligations – something Encore Advisory CEO Tom Reddacliff believes amounts to needless administration.

“Most of my licensee clients are wondering why every six months they’re going back to something like 30 or 50 product providers and reporting back that there’s nothing to report,” he says.

“It’s the ultimate box ticking exercise that adds absolutely no value to the client,” Reddacliff continues. “Going back to report that there’s nothing to report is classic red tape and more unnecessary administration.”

According to ASIC’s regulatory guide, distributors need to keep product records and “ensure that this information flows back to the product issuers” within 10 business days of the “relevant reporting period”.

The reporting period itself is a matter of conjecture because each product issuer has their own interpretation of what information is required and how often they want to receive it, says Fortnum Private Wealth chief executive Neil Younger.

The relevant legislation – already embedded into section 994F of the Corporations Act – enables this ambiguity by stating the information should be “of a specified kind to the person that made the determination”.

“We’ve got 1,100 products with manufacturers taking different approaches to what they want reported,” Younger says. “Some are three months, some are six months. What does it do to de-risk the outcome for the client? It does nothing because nil reporting says nothing.”

Both Reddacliff and Younger agree with the intent of the D&D obligations, but there is a “mismatch” between the intent and the operation, Younger says.

“It’s not the rule itself, it’s moreso how it interplays with advice and the operation of the regulation,” Reddacliff notes.

Some of the burden can be minimised through clever exception reporting, Sean Graham from Assured Support says, but that doesn’t solve all the problems.

“Like most compliance, it should be on a complaints register so you just filter it out,” he says. “That would make it relatively easy to administer but it is still a burden and it does have risks.”

In its submission on the draft regulations, the Association of Financial Advisers expressed concern about the unnecessary cost involved in the record keeping and the “additional actions” required.