Now is the time for trustees to carry out a holistic review of the processes and controls that govern the product life cycle. 

The design and distribution obligations that will come into effect on 6 April 2021 complement ASIC’s product intervention powers and ASIC will consult with the industry about them later this year.   

We will have more to say about the detailed design and distribution obligations when ASIC starts its consultation. But in the meantime, it seems to us that the governance arrangements for superannuation product management often don’t reflect the critical importance of this function. 

The design and distribution obligations promote fairer outcomes for consumers, but trustees need to have the governance arrangements in place to meet these obligations. This presents a great opportunity for trustees to think about what the ideal product management system looks like for their fund. 

Distribution governance arrangements will be of equal importance and should be reviewed in tandem. 

KEY MATTERS FOR CONSIDERATION 

• That the board and the executive leadership team have the right amount of oversight of product related activities including to ensure that: 

  • all decisions are being taken in the best interests of members; 

  • all impacts on affected stakeholders are being identified and managed; 

  • all consequential obligations (e.g. disclosure) are being identified and managed; 

  • brand consistency is being maintained; and 

  • that these considerations are being documented. 
     

• That the right delegations are in place and documented. 
   

• That the fund and the product team have access to measurable member attributes (such as age, level of engagement, level of income, amount of investment) that will allow for the identification of key groups of members. 
   

• That the product team is appropriately resourced and has access to expert legal and other consulting advice. 
   

• That there are appropriate processes in place to obtain member feedback about product design. 
   

• That appropriate product training is being provided to all product and distribution staff and to other staff who deal with members or are responsible for preparing and providing information to members. 
   

• Consistency with APRA’s Superannuation Member Outcomes and Business Performance Obligations. 
   

• That there is an ongoing program for reviewing product governance arrangements. Remember that what’s right for today might not be right tomorrow. 

If trustees can answer yes to each of the above, then they will be well placed to meet the specific obligations to encourage: 

• The development of products that are appropriately designed for fund members; 

• A dynamic and responsive process where product design is reviewed and improved in response to feedback and experience. 

Improving product governance arrangements may be driven by regulatory requirements but has the potential to improve member outcomes. 

Regards 

David 

David Reckenberg – Managing Partner, QMV Legal 

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