Most product manufacturers fail on consumer testing
Few financial services product manufacturers actually undertake consumer-testing before offering their products to the market, according to an Australian Securities and Investments Commission (ASIC) surveillance of responsible entities (REs).
The surveillance program report, released by ASIC this week, has painted a picture of variable levels of compliance amongst REs, with the regulator stating its findings indicated “a number of areas where the responsible entities fall short of our expectations and our view of what good looks like in the funds management sector".
It said three REs continued to be the subject of high-intensity broad-based surveillance and that ASIC had required 20 of the remaining 25 REs to “address specific concerns we identified through the surveillance program”.
On the question of product approval and review, and in the context of ASIC currently working with the Government on a product intervention power, the regulator was critical of the approach being adopted by product manufacturers.
“We found that there is a general lack of consumer-focused culture,” the ASIC report said. “The majority of the responsible entities did not consider whether their financial products meet and continue to meet the needs of the target investor market as part of their product approval and review measures.”
“We also found that only four of the responsible entities undertake consumer testing before offering their products to the market,” the ASIC report said.
The report recommended that REs have a consumer-focused culture and said: “as part of their duty to act in the best interests of their investors, they should consider whether their financial products meet and continue to meet the needs of their investors”.
“Responsible entities should assess their product approval and review measures to ensure they include this consideration,” the report said.
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