ASIC reforms take us back to marketing basics
5 Minute Read
If you’re a financial services marketer and haven’t heard about the new product design and distribution obligations (DDO) introduced by ASIC it’s time to take a better look. With the deadline for introduction now October 2021, your skills and experience could make all the difference in helping your peers meet these obligations efficiently and effectively.
The new obligations are all about helping consumers choose financial products ‘likely to be consistent with their likely objectives, financial situation and needs.’ (ASIC, Product Design and Distribution Obligations Regulatory Guide, Dec 2020). What this means is financial product providers will need to know just who their target market is and how key attributes align to needs and financial goals.
A closer look at DDO
If a provider can’t identify an appropriate target market for their product, it shouldn’t see the light of day. Makes sense so far? We think so. After all, creating and exchanging products that meet a need for a group of individuals is literally the definition of marketing! (Philip Kotler, Principles of Marketing, 2005)
ASIC goes on to say that distribution of a financial products must also be directed towards this target market. Providers are expected to plan how the product and its distribution will be monitored and reviewed. Sounds very much like another nugget of marketing common sense to us. In the business, we’d call it ‘having a marketing plan.’
The ASIC term for this is a ‘target market determination’ (TMD) – a document laying out ‘the target market, distribution conditions and how an issuer will review and monitor these. If they’re missing the mark, providers must consider whether changes are required to the product and to the way and to whom it is sold.
In particular, ASIC says issuers will need to consider:
(a) whether the product reached the consumers in its target market or was sold to consumers outside the target market;
(b) how the product performed in the hands of consumers in the target market;
(c) whether the product delivered what was promised; and
(d) whether the product resulted in poor outcomes for consumers in the target market.
All for the customer: music to our ears
For ASIC this is the way forward for putting consumer outcomes front and centre in the product design, product distribution, and monitoring and review stages of the product life cycle for financial services. Wow, wow, wow. Looks like we marketers are being schooled (in detail!) on marketing fundamentals. And, by ASIC of all people. Astounding, but very welcome of course.
But far from calling us out on our poor consumer-centric performance, ASIC does point out that if you have good processes in place already, the time and cost of meeting these obligations will be reduced. So, they’re giving props to many out there doing the right thing already. On the other hand, there’s also a clear assumption that other providers are going to be playing catch-up.
What does this mean for marketers?
The bottom line is that you should be involved, somehow, in meeting your company’s product design and distribution obligations. And if your compliance and senior leadership team aren’t giving you a seat at the table, here are some questions to consider asking them:
- Are you playing a big enough role in helping your company meet their obligations – given your marketing background and know-how you can help with a lot of what they need to document and prove.
- Are they drawing on existing definitions and insights for their target market using proprietary or third-party market research?
- Have they considered the experience and knowledge marketing can offer in helping the business effectively plan and review marketing and sales practices to meet your target markets’ needs?
The answers to these questions may well be no. We’re all too aware that when it comes to ASIC obligations and product design, marketing is often brought in at the very end or not invited to the party at all. Whatever the case in your workplace, these new regulations clearly play to your skill set and we think you should get in there, see what’s happening and show that ASIC is right in making marketing a priority.
So, raise that marketing flag high, and show them just what you have to offer. We are strategists, planners, and client advocates. We have a vital role to play. And, if you need help or our support along the way, you know where to find us.
To find out more about the ASIC product design and distribution regulations click here.