With our specialist knowledge of data collection, dissemination, and document creation coupled with our global expertise in PRIIPs KIDs, MiFID II and other regulatory solutions, we believe that there are a number of standout challenges facing product issuers and distributors and one key solution - automation.
Data Collection & Maintenance
After identifying the target market for each financial product – product issuers need to understand the flow of information between them, distributors, and investors; identify which data fields are required, in what format and their definitions.
Does the data already exist in the organisation? Where is it stored? How do you source missing data?
Challenges linked to the collection of the necessary target market data and the ongoing maintenance thereof, may include:
- Disparate sources of data
Data may be situated in various locations and formats, and data points be stored owned or stored separately, which is likely to complicate and slow down the collection process.
- Manual data management processes
Where internal processes for collecting and managing target market and other fund data are predominantly manual, they carry the risk of error and inaccuracy.
- Lack of a centralisation
Data may be stored on spreadsheets and with multiple resources rather than in a central database. This may result in compromised data quality and validity.
Once the target market data has been identified, collected, validated, and formatted into the industry standard template, the focus shifts to the distribution of the data to the necessary parties.
Challenges around this include:
- Identifying data recipients
The recipients of the target market data need to be identified and may include multiple recipients each with various and/or unique requirements. These parties might include investors, distributors, platforms, and third-party vendors.
- Distribution method
A process needs to be established to manage how will the data be sent to the various parties, the funds to be included and the necessary format/s.
- Frequency of distribution
How often do the various data recipients need to receive the data? This may be daily, monthly, quarterly, or ad hoc and could differ according to the numerous recipients’ requirements.
- Tracking and monitoring
Consideration needs to be given to how the distribution of data will be tracked and monitored to ensure accuracy and timeliness.
- Managing enquiries from data recipients
To maintain the accuracy and validity of the data, there needs to be a process to manage all enquiries received from the various data recipients.
Document Production & Dissemination
A target market determination (TMD) describes the suitable consumer of a financial product and any conditions around the distribution of the product to consumers.
A TMD needs to be created for each financial product (no longer than 3 A4 printed pages), made publicly available free of charge and distributed to the necessary parties. TMDs need to be republished based on review periods or review triggers, and records must be kept of any changes or republication.
This is the most important albeit cumbersome component of the entire process and therefore faces the greatest challenges.
- Defining the template
The necessary information needs to be captured in an industry standard template that is simple, easy to understand, approved by industry bodies and widely accepted by third parties.
- Company branding
Brand requirements need to be upheld in the design of the document template.
- Audit trail
A process needs to be implemented to establish an audit trail and suitable sign-off procedures to ensure transparency, integrity, and accuracy within the governance framework.
- Feedback loop
Putting in place systems or processes to capture and monitor feedback from distribution partners to ensure the accuracy and validity of each TMD and to make changes in a timely manner.
- Negative target market
As part of the TMD, ASIC has indicated that it would be useful to set out the details of consumers for whom the product is unsuitable thereby mitigating sales made to non-target market consumers.
In addition to the above, there are 2 challenges that span each of the preparation components and may have the greatest impact on being compliant by the 5 October 2021 deadline:
There may be significant costs related to implementing changes around processes, people, IT or infrastructure associated with
- Collecting target market data
- Getting the data to the right parties
- Creating the TMD documents and sending them to the right parties, and
- Ensuring that a feedback loop and audit trail are in place.
Each component of the preparation process requires a significant amount of time to scope, plan and execute. In setting out timeframes to assist clients with an end-to-end DDO technology solution, we estimate the process (from data collection through to document creation and dissemination) to be approximately 4-5 months.
With only 6 months to go until the deadline, timing is critical.
Implementing a technology solution to automate DDO compliance can alleviate most challenges facing the industry in the struggle to prepare for the fast-approaching deadline and carries significant long-term benefits for businesses.
Benefits of an automated technology solution in the context of preparing for DDO include:
- Automated data collection, validation, and dissemination
- Automated TMD production and dissemination to the necessary parties in a timely manner and in the required format
- Minimised manual handling and associated risks of disparate sources of data and separate vendors
- Creation of a single source of clean data stored in a centralised, secure database
- In-built workflows and triggers to help with the TMD review process and ongoing monitoring
- An audit trail of completed actions and an archive of published documents
- Reduced costs associated with additional resource or infrastructure changes
- Time saved and resources freed up to focus on other business critical tasks
- Scalability and accessibility – whether you need to produce a handful or a hundred TMDs, it can be done quickly and easily.
FE fundinfo Automated Solutions
We specialise in automated data collection, dissemination, and document creation.
FE fundinfo solutions minimise manual handling and the associated risks of disparate sources of data and separate vendors.
We create user-friendly, scalable, and automated internal data collection processes that collect and validate the data. The validated data is then checked against relevant triggers, easily disseminated, and displayed in documents that are created in your branding.
We automate the document production and ensure that the latest version is shared as soon as the document is published, and we keep record of all published documents to produce the necessary audit trails.