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In April 2019, the Government passed a set of reforms known as Design and Distribution Obligations (DDO). This legislation comes into effect from 5 October 2021 and requires product issuers such as Colonial First State, and product distributors such as licensees and financial advisers, to work together to ensure that consumers obtain financial products that suit their objectives, financial situation and individual needs.
This article summarises how we've updated our processes to help you meet your reporting and attestation requirements under the DDO reforms. For additional background information on the DDO legislation you can review our previous articles, available on our DDO Hub.
Reporting and attestation requirements
As part of your role as a distributor of financial products, the DDO legislation stipulates that, where applicable, you’re required to provide us reporting or attestations regarding:
- Personal advice
- Significant dealings
- Complaints
We've updated our processes to help you meet your obligations from the compliance start date of 5 October 2021.
Personal Advice and Execution-Only transactions
Personal Advice Exemption - What is it?
Recommending a product to a client or executing a transaction for them related to a product that is outside their target market is considered a dealing outside of the target market.
Personal financial advice is excluded under the DDO rules, as it may be appropriate for you to recommend a product to a client that is outside the target market when it would be in their best interests. For example, it may be appropriate in the broader context of a particular client’s portfolio and personal circumstances for you to recommend a product that would ordinarily be too high-risk for the consumer if it were a concentrated holding.
In these circumstances you can rely on the personal financial advice exemption and are not required to demonstrate ’reasonable steps' were taken to ensure that the product distribution aligns with the Target Market Determination (our Target Market Determinations are available at cfs.com.au/tmd).
To ensure that we’re meeting our obligations as a product issuer, where you’re using the personal financial advice exemption you will need to notify us of this in the form of an 'adviser attestation' at the point of transacting.
Execution-Only transactions - What are they?
If you perform a transaction for a client, but do not provide personal advice this is referred to as an execution-only transaction. As part of your obligations under DDO you will be required to take reasonable steps to ensure that the dealing is consistent with the relevant TMD.
Please note that due to the complex nature of our Wrap based products and our platform functionality, we are currently not able to accommodate execution-only transactions. Transactions can still be facilitated on behalf of clients in the course of providing personal advice.
Personal advice and execution-only attestations - How to attest
When relying on the personal advice exemption or performing an execution-only transaction you will need to do the following:
The following attestation was introduced in December 2021 for both the FirstChoice Wholesale Super and Pension application forms and the FirstChoice Wholesale Investments application form, as well as FirstNet Adviser’s eSetup screen when opening an account:
"I confirm that I have provided personal financial advice to my client, and that the advice is current and related to the transaction."
A response of 'Yes' or 'No' must be provided for this attestation. If you select 'No', you must take reasonable steps to ensure the customer is in the target market.
We are progressively updating the FirstNet Adviser’s transaction screen and additional transaction forms for our Investment products to include this attestation.
From Monday 30 May 2022, an attestation will be required for additional investment, regular investment plan setup/maintenance, switches and changes in future investment selection for our Investment products and FirstChoice Employer Super only when it involves a member moving from MySuper Lifestage into a choice investment option. The attestation will be included in CFS forms and the relevant FirstNet Adviser transaction screen.
Non-standard forms/requests (e.g. a letter signed by you and your client or instructions via ePost) will also require an attestation to be provided. Please ensure either attestation is included:
"I confirm that I have provided personal financial advice to my client, and that the advice is current and related to the transaction."
or
"I confirm that I have not provided personal financial advice to my client and I have taken reasonable steps to ensure the client is in the Target Market."
If the attestation is not completed or provided, this may lead to a delay in processing the transaction request.
[I] have, for the purpose of retail applicants, taken reasonable steps to ensure distribution of FirstWrap Plus Super and Pension to the applicant is in line with the TMD and you will notify us in accordance with the requirements in the TMD if you become aware of significant dealings that are not consistent with the TMD.
Note: The reference to 'distribution' in this confirmation refers to ’retail product distribution conduct' within the meaning of section 994A(1) of the Corporations Act 2001 (Cth).
From 1 October 2021, an inclusion of a declaration to the application forms of our Super, Pension and IDPS products, as well as to the 'Super to Pension transfer' form will confirm the Design and Distribution Obligations in relation to target market appropriateness.
If providing transaction instructions to us via a non-standard form (e.g. a letter signed by you and your client) please ensure the following attestation is included:
I confirm that, I have taken reasonable steps to ensure distribution of this product to retail clients, has been in line with the Target Market Determination (TMD) and I will notify you in accordance with the requirements in the TMD if I become aware of significant dealings that are not consistent with the TMD.
Note: The reference to 'distribution' in this confirmation refers to ’retail product distribution conduct' within the meaning of section 994A(1) of the Corporations Act 2001 (Cth).
Due to the complex nature of our Wrap based products and our platform functionality, we are not currently able to accommodate execution-only transactions.
We appreciate that this is a service you would like to offer your clients, so we are currently investigating how we can accommodate this. We will communicate further information as this becomes available.
Significant dealings
What is a significant dealing?
There is currently no industry standard relating to the definition of a ’significant dealing', so the parameters and thresholds will vary from distributor to distributor. However, as part of your process when determining if a dealing is significant, you should consider:
- Volume – Many 'dealings outside of TMDs' or a significant proportion of total dealings
- Amount – A single dealing could be significant if its variance from the 'target market' is large enough. e.g. An elderly pensioner investing in a high risk geared option with a minimum suggested timeframe of 7+ years.
Significant dealings - How to report
Once you become aware of a significant dealing it should be reported to us as soon as practicable, but no more than 10 business days afterwards. You can report significant dealings to us via the following methods from 5 October.
Advisers:
1. Login to FirstNet Adviser
2. Navigate to the 'tools' menu item located at the top of the screen
3. Choose 'Significant dealing'
4. Complete the e-form and click 'Submit'
Licensees:
1. Login to FirstNet Dealer
2. Navigate to the reporting menu
3. Choose 'Significant dealing'
4. Complete the e-form and click 'Submit'
Complaints
As part of your DDO obligations, please let us know if you receive a complaint from your client related to a CFS product as soon as practicable.
The information you will need to provide to us about the complaint will need to include:
The product(s) the complaint is related to
Client name and account number
The date of the complaint
- The content of the complaint.
You can provide this information to us by the usual methods for reporting client complaints
• Email the details of the complaint to adviserservices@cfs.com.au
• Call us on 13 18 36
• Sending an email with the details of the complaint to complaints@cfs.com.au
• Calling us on 1300 769 619
Nil complaints
The Government has confirmed that updates to the reforms will be made in relation to nil complaint requirements. These updates will outline that if you don't receive any complaints within a quarterly reporting period that no action is required on your part.
More information
TMDs for all CFS products are available at cfs.com.au/tmd
To help answer any questions you might have we have prepared a page with a list of Frequently Asked Questions.
Alternatively, please speak with your local Business Development team or call FirstChoice Adviser Services on 13 18 36 or FirstWrap Service and Support on 1300 769 619 (Monday – Friday, 8am – 7pm, Sydney time).
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Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.
Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at https://www.cfs.com.au/tmd which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at www.cfs.com.au or by calling us on 13 13 36.