Target Market Determinations

What is a Target Market Determination?

A target market determination is a document that describes the type of customer who may suit one of our products – based on their needs, objectives and financial situation (target market). It also sets out who can distribute our products, how they can do this, and situations when we may need to review our products and the target market.

Why is a Target Market Determination needed?

From 5 October 2021, all issuers and distributors of retail financial products need to comply with a new law under the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (‘Design and Distribution Obligations’). It requires us, amongst other things, to have Target Market Determinations for our products

This framework helps ensure that investors are at the centre of the approach to how financial products are designed and distributed.

Our Target Market Determinations

Generation Life has issued target market determinations for the following products.

What are Generation Life’s key obligations as a product issuer?

The new design obligations applicable to us include:

• making a Target Market Determination for all open products
• reviewing Target Market Determinations for appropriateness
• keeping records about Target Market Determinations
• taking reasonable steps to ensure the distribution of a product is consistent with its Target Market Determination
• notifying ASIC if we become aware that a significant dealing outside the Target Market Determination has occurred.

What are the key obligations of financial advisers?

Financial advisers have distribution obligations including: 

• ensuring there is an appropriate Target Market Determination for retail products they distribute.
• following the distribution conditions and reporting requirements set out in a product’s Target Market Determination, including reporting on the number of complaints relating to the product design, availability and distribution (even where no complaints are received)
• taking reasonable steps to ensure distribution of the product is consistent with the Target Market Determination
• collecting, keeping and providing distribution information
• notifying Generation Life of any significant dealings not consistent with a product’s Target Market Determination.

I am a distributor of a Generation Life product, what do I need to do?

As a distributor of retail financial products you are expected to:

• understand the target market defined in a Target Market Determination and take reasonable steps to ensure the product is distributed in accordance with its Target Market Determination
• understand and adhere to any distribution conditions contained in the Target Market Determination
• report on information as specified in the Target Market Determination, at the required frequency and in the required form, including reporting on the number of complaints relating to the product design, availability and distribution (even where no complaints are received)
• keep accurate records of the reasonable steps taken and any information provided to us
• report to us where you believe a significant dealing in our products has occurred which is inconsistent with the product’s Target Market Determination.

What are the ongoing reporting obligations of distributors?

You will be required to advise us on a quarterly basis (within 10 business days) if you have received any complaints relating to the design, features, availability or distribution of our products. If there is any general feedback, this should also be reported.

If there have been any significant dealings outside of a product’s Target Market Determination you must advise us as soon as practicable but no later than 10 business days after becoming aware of the significant dealing.

Distributors should, where possible, adopt the Financial Services Council (‘FSC’) data standards for reports to Generation Life.

Please click here for more information on complaints and significant dealings reporting.

What is a ‘significant dealing’?

Section 994F(6) of the Act requires distributors to notify the issuer if they become aware of a significant dealing in a product that is not consistent with its Target Market Determination. Neither the Act nor ASIC defines when a dealing is ‘significant’ and distributors have discretion to apply its ordinary meaning.

The issuer will rely on notifications of significant dealings to monitor and review the product, its Target Market Determination, and its distribution strategy, and to meet its own obligation to report significant dealings to ASIC.

Dealings outside a Target Market Determination may be significant because:

• they represent a material proportion of the overall distribution conduct carried out by the distributor in relation to a product; or
• they constitute an individual transaction which has resulted in, or will or is likely to result in, significant detriment to the consumer (or class of consumer).

In each case, the distributor should have regard to:

• the nature and risk profile of the product (which may be indicated by the product’s risk rating or withdrawal timeframes);
• the actual or potential harm to a consumer (which may be indicated by the value of the consumer’s investment, their intended product use or their ability to bear loss); and
• the nature and extent of the inconsistency of distribution with the Target Market Determination (which may be indicated by the number of customer attributes not identified in the Target Market Determination).

Objectively, a distributor may consider a dealing (or group of dealings) outside the Target Market Determination to be significant if:

• it constitutes more than a third of the distributor’s total retail product distribution conduct in relation to the product over the reporting period; or
• the consumer has 3 or more customer attributes that are not identified in the Target Market Determination.

Is personal advice exempt from the Design and Distribution Obligations?

Under the Design and Distribution Obligations, personal financial advice is excluded recognising that it may be appropriate to recommend a product to a customer that is outside the target market where it is considered to be in their best interests. 

As part of ensuring we meet our obligations, Generation Life requires financial advisers, where the personal advice exemption is being relied on, to make an attestation or confirmation which confirms that:

• the Target Market Determination was taken into account
• that personal financial advice was provided
• some details of the reason for recommending the product.

This will be integrated into our application process.