Danielle Press

The corporate regulator wants superannuation trustees to review and improve the effectiveness of their TMDs after a sample review found poor compliance.

TMDs outline the class of consumers a financial product is suited for and are a requirement of the design and distribution obligations (DDOs).

When it came to establishing target markets, ASIC took issue with some trustees being too vague over describing consumer classes, using “those wishing to save for retirement” as an example of a poor one.

The regulator noted some trustees used better parameters such as age, occupation, minimum investment balance and insurance needs, which did a better job of clearly defining the intended target market.

Additionally, there were issues with defining sub-markets for investment options, including objectives, risk level and minimum timeframes, as some suggested broad objectives and non-number timeframes (ASIC cited ‘high-growth’ or ‘long-term’ as inappropriate examples).

ASIC also suggested some trustees failed to adopt consumer-centric review triggers that didn’t consider insights on how the trustee is complying with their member outcomes and obligations.

The regulator reviewed 55 TMDs from 27 trustees across retail, corporate and public sectors for accumulation and retirement products.

ASIC commission Danielle Press said it’s a fundamental responsibility of trustees to know who their products are appropriate for.

“Trustees should clearly define their target markets and review triggers in target market determinations using objective, specific and measurable parameters,” she said in a media release. “Clear target market determinations with appropriate underlying review triggers and controls, point to a trustee’s sound understanding of their product and the design and distribution obligations.”

She added some TMDs did give the regulator comfort they would be part of a well-designed and comprehensive governance program.

“However, others by their lack of specificity, raised questions about the underlying arrangements that trustees have in place to ensure their products reach the right consumers,” she said.

Upon further review

Most TMD review periods are set for a year, which the regulator recommends, but some set as long as two or three-year periods for ongoing reviews.

For complaints reporting, 82 per cent of TMDs required distributors to report complaints in periods of three months or less, but the remainder had reporting periods of either six or 12 months.