FSC, Morningstar roll out DDO solutions

ASIC’s design and distribution obligations (DDO) kick into effect from October, which will place a host of new restrictions on both issuers and distributors of financial products.

Advice licensees will need to take “reasonable steps” to ensure products are only distributed to the target client segments for which they are intended, according to the ASIC guidance.

ASIC will require issuers to form and review a Target Market Determination (TMD), which describes who a product is appropriate for, while distributors will need to ensure their clients align with the target market.

The Financial Services Council (FSC) has developed a template for TMDs and industry data standards, for the funds management, superannuation, investment platforms and life insurance sectors.

The body has aimed to support the setting of consistent standards across the industry, to lessen the compliance burden and cost borne by companies, advisers and consumers.

FSC chief executive Sally Loane said the FSC’s goal of developing the TMDs and data standards over the past 12 months was to assist alignment and efficiency for both issuers and distributors under the DDO regime.

“Standardisation of information and data is important to the success of the DDO regime. Given the potential for complexity – and associated cost – from hundreds of different templates and data standards, the FSC has developed templates which will assist companies write TMDs for the products they issue,” Ms Loane said.

“The FSC data standards will also assist alignment and standardisation and facilitate the necessary flow of data between financial advisers, platforms and product issuers.”

The data standards will be available, free of charge, while the TMD templates will be licensed to non-FSC members.

Morningstar has also promised to deliver a single, open source data standard for TMDs, having already gathered feedback, facilitated roundtables and engaging with industry associations and data providers.

The research firm has said it will use its existing industry data exchange for the solution, which collects and processes around 8,300 unit prices, 4,000 portfolios and hundreds of PDS documents.

“We’re leveraging this existing connectivity to keep data acquisition and integration costs manageable for participants and ultimately minimise the impact of industry compliance on investor outcomes,” Graham Dixon, head of product and client solutions, Australia, said.

“Working with issuers and distributors, our goal is to ensure TMD data and document delivery is seamless, of high quality and cost-effective to implement and maintain.”

The DDO solution will cover software to support TMD document creation for issuers, TMD document collection and dissemination from issuers to industry participants and TMD data collection and dissemination, including data for distributor analysis, monitoring and reporting.

Morningstar is planning to make target market data available through its wider product suite to support distributor obligations, including Adviser Research Centre, AdviserLogic and Morningstar Direct.

Iress has previously also indicated it will deliver an industry standard technology solution to store data required by licensees under the new obligations.