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|Consumer’s investment objective|
|Capital Growth||The consumer seeks to invest in a product designed to generate capital return. The consumer prefers exposure to growth assets (such as shares or property) or otherwise seeks an investment return above the current inflation rate.|
|Capital Preservation||The consumer seeks to invest in a product to reduce volatility and minimise loss in a market down-turn. The consumer prefers exposure to defensive assets that are generally lower in risk and less volatile than growth investments.|
|Capital Guaranteed||The consumer seeks a guarantee or protection against capital loss whilst still seeking the potential for capital growth (typically gained through a derivative arrangement). The consumer would likely understand the complexities, conditions and risks that are associated with such products.|
|Income Distribution||The consumer seeks to invest in a product designed to distribute regular and/or tax-effective income. The consumer prefers exposure to income-generating assets (typically, high dividend-yielding equities, fixed income securities and money market instruments).|
|Consumer’s intended product use (% of Investable Assets)|
|Solution/Standalone (75-100%)||The consumer intends to hold the investment as either a part or the majority (up to 100%) of their total investable assets (see definition below). The consumer typically prefers exposure to a product with at least High portfolio diversification (see definitions below).|
|Core Component (25-75%)||The consumer intends to hold the investment as a major component, up to 75%, of their total investable assets (see definition below). The consumer typically prefers exposure to a product with at least Medium portfolio diversification (see definitions below).|
|Satellite (<25%)||The consumer intends to hold the investment as a smaller part of their total portfolio, as an indication it would be suitable for up to 25% of the total investable assets (see definition below). The consumer is likely to be comfortable with exposure to a product with Low portfolio diversification (see definitions below).|
|Investable Assets||Those assets that the investor has available for investment, excluding the residential home.|
|Portfolio diversification (for completing the key product attribute section of consumer’s intended product use)|
|Low||Single asset class, single country, low or moderate holdings of securities – e.g. high conviction Aussie equities|
|Medium||1-2 asset classes, single country, broad exposure within asset class, e.g. Aussie equities “All Ords”.|
|High||Highly diversified across either asset classes, countries or investment managers, e.g. Australian multi-manager balanced fund or global multi-asset product (or global equities).|
|Consumer’s intended investment timeframe|
|Short (≤ 2 years)||The consumer has a short investment timeframe and may wish to redeem within two years.|
|Medium (> 2 years)||The consumer has a medium investment timeframe and is unlikely to redeem within two years.|
|Long (> 5 years)||The consumer has a long investment timeframe and is unlikely to redeem within five years|
|Consumer’s Risk (ability to bear loss) and Return profile|
|Issuers should undertake a comprehensive risk assessment for each product. The FSC recommends adoption of the Standard Risk Measure (SRM) to calculate the likely number of negative annual returns over a 20 year period, using the guidance and methodology outlined in the Standard Risk Measure Guidance Paper For Trustees. SRM is not a complete assessment of risk and potential loss. For example, it does not detail important issues such as the potential size of a negative return or that a positive return could still be less than a consumer requires to meet their investment objectives/needs. Issuers may wish to supplement the SRM methodology by also considering other risk factors. For example, some products may use leverage, derivatives or short selling, may have liquidity or withdrawal limitations, or otherwise may have a complex structure or increased investment risks, which should be documented together with the SRM to substantiate the product risk rating.|
A consumer’s desired product return profile would generally take into account the impact of fees, costs and taxes.
|Low||The consumer is conservative or low risk in nature, seeks to minimise potential losses (e.g. has the ability to bear up to 1 negative return over a 20 year period (SRM 1 to 2)) and is comfortable with a low target return profile.|
Consumer typically prefers defensive assets such as cash and fixed income.
|Medium||The consumer is moderate or medium risk in nature, seeking to minimise potential losses (e.g. has the ability to bear up to 4 negative returns over a 20 year period (SRM 3 to 5)) and comfortable with a moderate target return profile. Consumer typically prefers a balance of growth assets such as shares, property and alternative assets and defensive|
assets such as cash and fixed income.
|High||The consumer is higher risk in nature and can accept higher potential losses (e.g. has the ability to bear up to 6 negative returns over a 20 year period (SRM 6)) in order to target a higher target return profile.|
Consumer typically prefers predominantly growth assets such as shares, property and alternative assets with only a smaller or moderate holding in defensive assets such as cash and fixed income.
|Very high||The consumer has a more aggressive or very high risk appetite, seeks to maximise returns and can accept higher potential losses (e.g. has the ability to bear 6 or more negative returns over a 20 year period (SRM 7) and possibly other risk factors, such as leverage).|
Consumer typically prefers growth assets such as shares, property and alternative assets.
|Consumer’s need to withdraw money|
|Issuers should consider in the first instance the redemption request frequency under ordinary circumstances. However, the redemption request frequency is not the only consideration when determining the ability to meet the investor’s requirement to access capital. To the extent that the liquidity of the underlying investments or possible liquidity constraints (e.g. ability to stagger or delay redemptions) could impact this, this is to be taken into consideration in completing this section.|
|Daily/Weekly/Monthly/Quarterly/Annually or longer||The consumer seeks to invest in a product which permits redemption requests at this frequency under ordinary circumstances and the issuer is typically able to meet that request within a reasonable period.|
|Significant dealings||Section 994F(6) of the Act requires distributors to notify the issuer if they become aware of a significant dealing in the product that is not consistent with the TMD. 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, this TMD, and its distribution strategy, and to meet its own obligation to report significant dealings to ASIC.
Dealings outside this TMD may be significant because:
In each case, the distributor should have regard to:
Objectively, a distributor may consider a dealing (or group of dealings) outside the TMD to be significant if: