To DDC or not to DDC, that is the question
/And frankly, after you’ve sat through an eight-hour DDC, throwing yourself out of the closest window doesn’t sound like such a bad option… but I digress!
OK team, let’s talk turkey. There is NO consistent way that firms get PDSs out the door and onto the shelf.
For marketing materials, it’s pretty consistent. Marketing comes up with something. Compliance says they can’t use half of it. Lots of back and forward and sighing and nashing of teeth. Then finally everyone agrees, the boss signs it off and out it goes.
PDSs on the other hand - who gets the final signoff? Does the board sign them off? The Due Diligence Committee (DDC)? Do you even have or need a DDC? Does Compliance get the final say? An external lawyer? It’s all very confusing. Let’s have a look at some of the common practices.
1.External lawyer writes them and gives final OK to go on market. Some input from team along the way.
PROs: fast, minimal time taken for people in the business.
CONs: can be expensive. Plus you run the risk that while the PDS meets the legal requirements, it doesn’t accurately reflect how the product works, which is a fast track to a meeting with AFCA.
2.Compliance writes the PDS, gets input from other areas around the business. Compliance makes decision as to when it’s ready to go on market.
PROs: again, minimal input from people around the business, who can then focus on value add activities.
CONs: It’s probably not going to be a stellar example of ‘clear, concise and effective’. For instance, I have recently discovered the word ‘connivance’ in a number of on-market PDSs. And no, I didn’t know what it meant until I asked. Also, to my way of thinking, compliance shouldn’t be ‘doing’, they should be ‘supporting’ and ‘checking’. If compliance are running the actual process, then they are essentially marking their own work, which is never optimal.
3.Marketing is responsible for PDSs, and they follow the same signoff process as other documents.
PROs: Your PDSs will look amazing.
CONs: People only read PDSs when they are upset, or need to make a claim, or their partner has died. At which point, cute photos aren’t important. What is super important is that the PDS is easy to read and understand, and includes everything that someone wants to know when they are stressed and struggling. Also, a marketing signoff process generally doesn’t include verification, that is, providing evidence that every statement in a PDS is true and correct. And without that, if ASIC comes knocking, life is going to get tricky.
4.Product manages PDSs. A full verification process is followed. A Due Diligence Committee and/or board signs off the documents before they go on market.
PROs: In our experience, this approach gives the best quality PDSs with the lowest residual risk to the business.
CONs: It’s bloody time consuming and expensive.
So what’s a girl to do? Well it depends on the size and maturity of your business. I would say though, that regardless of what you do, you need to make sure that at least the following is happening every roll.
Firstly, that every statement is verified (or has been verified recently). This means that there is decent quality evidence provided as to why it’s correct, and someone has signed a verification certificate attesting to that fact. This is the only way to be sure that not only does your PDS meet all the legal requirements in the legs®s, but it also accurately reflects the way that your product works.
Secondly, that a single person has overall responsibility for the PDSs. And by responsibility, I mean that this person makes sure that there is a process in place, and that everyone follows it and takes it seriously. This might be a different person each time (say the product manager) or the same person all the time (say the PDS manager), but unless someone has KPIs/OKRs regarding PDSs, they won’t be up to par. And anyway, with the Financial Accountability Regime coming soon, this will be a requirement.
Thirdly, that someone proof reads your PDSs before they go out the door. There’s nothing worse than a typo on page two, or in the title… And yes, it happens.
And lastly, that PDSs are given the green light to go on market by a DDC or board, not a single person or department. Products today are complicated and have many moving parts. And a defective PDS gets your product taken off market in an instant. So as well as having an individual with overall responsibility, your DDC or board gives you a second level of review and therefore comfort.
I don’t expect your DDC or board to read every word in a suite of PDSs, but I do expect them to ask questions about the process, the operating environment, recent legislative changes and anything else ‘big picture’ that might impact the overall quality of the PDSs. Once they are comfortable that the right process has been followed and the right questions have been asked (and answered!!), then you can proceed to market, knowing that not only are you delivering quality PDSs, but also that should there be a problem, you’ve made a bloody good effort. And that counts for a lot when it comes to dealing with ASIC, AFCA, etc.