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DDO and Xplan – What you need to know

Nov / 17 / 2021

From 5 October 2021, new legislative requirements under Design and Distribution Obligations (DDO) have been in force. These obligations are set out in RG 274 and have been introduced to chapter 7 of the Corporations Act.

What is DDO?

The Design and Distribution Obligations have been created to ensure a more customer-centric focus is taken regarding the design and distribution of financial products to help consumers secure more appropriate products.

Financial product providers must go further than create a financial product. They now need to make sure their products are designed to meet the needs of their intended target market — this is the design aspect.

Financial product distributors (aka financial advisers) need to make sure they only recommend products to consumers who fall inside the defined target market of the product — this is the distribution aspect.

Target Market Determinations

As an adviser — and a financial product distributor — you are responsible for complying with the obligations relating to reporting and record-keeping, and must consider the Target Market Determinations (TMDs) provided by the product issuers. This is undertaken just as you would any other product research.

The TMD describes the product features, the intended consumer, how the product might meet their financial objectives, and matters relevant to the product’s distribution and review. It serves as a reference point for distributors (Advisers) to comply with their distribution obligations.

Like all things in the finance industry, record keeping and reporting are essential. All product issuers must collect data from advisers to ensure they are distributing financial products according to the TMD.

Xplan makes TMD compliance easy

With Xplan known for its efficiency regarding compliance, it’s no surprise that they’ve introduced TMD declaration screens into both Risk Researcher and WealthSolver. During modelling, the TMD declaration screen will allow users to input the type of advice given and detail whether TMD requirements have been met.

If TMD requirements are not met, users will be able to record the reasons and whether a significant dealing has occurred. The ability to report on identified significant dealings to issuers will be released in subsequent updates. A link to the appropriate TMD will be provided on the declaration screen, and for WealthSolver users, it will also include the available links at the underlying investment option level.

TMD Downloads 

For ease of use, all TMD documents can be downloaded in the PDS Downloads section of Risk Researcher. For platform TMDs, you can access them next to the name of the platform investment option within the TMD declaration page.

The TMDs are still being rolled out and uploaded into Xplan from the Product Distributors. If you find a required TMD is not available, you will need to obtain this from the provider directly.

TMD Reporting 

Reporting via Xport and Xmerge coding is available so you can easily download the TMD declaration saved for your client recommendation.

TMDs and Risk Researcher

Premium Estimates 

When using Risk Researcher, TMD documents are listed for the selected product on the Premium Estimates screen. This enables you to undertake TMD research while assessing the suitability of the risk premiums.

Recommendations Page 

When compiling your recommendations, the TMD Declaration can be completed there and then for each recommended product. The TMD Declaration screen allows you to elect the type of advice given and whether TMD requirements have been met. If they are not met, you can record the reasons, including if a significant dealing has occurred.

TMDs and WealthSolver

Proposal Summary 

A TMD declaration option now appears on the Proposal Summary page of the WealthSolver when the Proposal Status is set as ‘Recommend and Acquire’ or ‘Client Requested’. When completing the declaration, additional questions may appear for completion, depending on the answers given.

We’re here to help

If you’d like to know more about TMDs on Xplan, please get in touch. We are more than happy to answer any questions!