Target Market Determination – Managed Discretionary Account Service
Legal Disclaimer
A Target Market Determination (TMD) is required under Section 994B of the Corporations Act 2001 (Cth) (Corporations Act). It sets out the class of clients for whom the product, including its key attributes, would likely be consistent with their likely objectives, financial situation and needs. In addition, the TMD outlines the triggers to review the target market and certain other information. It forms part of Politis Investment Strategies’ design and distribution arrangements for the Managed Discretionary Account Service (MDA Service).
This document is not a Product Disclosure Statement (PDS) and is not a summary of the features or terms of the MDA Service. This document does not take into account any person’s individual objectives, financial situation or needs. Persons interested in investing in the MDA Service should carefully read the MDA Agreement or other offer document before making a decision whether to invest.
Target Market Summary
The Politis Investment Strategies MDA Service is an investment portfolio designed to support client’s individual investment preferences and goals. It is only available to ‘personal advice’ clients, after an Authorised Financial Planner of Politis Investment Strategies has deemed the MDA Service is in the client’s best interest.
The Politis Investment Strategies MDA Service is likely to be appropriate for a client:
- Requiring minimal ongoing involvement in the decision making and associated administrative requirements of an investment portfolio,
- Requiring professionals to oversee the portfolio, and
- Receiving personal advice from an Authorised Financial Planner of Politis Investment Strategies
Fund and Issuer Identifiers
| Issuer | Politis Investment Strategies Pty Ltd |
| Issuer ABN | 71 106 823 241 |
| Issuer AFSL | 253125 |
| Name of Product | Politis Investment Strategies Managed Discretionary Account Service (MDA Service) |
| Date TMD approved | 5 October 2021 |
| TMD Version | Version 1 |
| TMD Status | Available |
| Mandatory Review Date | 5 October 2023 |
| Phone | (02) 4962 5525 |
| reception@politis.com.au | |
| Address | 1st Floor, NCYC Commercial Centre 91 Hannell Street, Wickham NSW 2293 |
Description of Target Market
Politis Investment Strategies applies the red/amber/green rating system to determine the appropriateness of the MDA Service to a particular retail client. The TMD indicator keys are described below:
| In target market | Potentially in target market | Not considered in target market |
Generally, a client is unlikely to be in the target market for the MDA Service if:
- one or more of their Client Attributes correspond to a red rating, or
- three or more of their Client Attributes correspond to an amber rating
| Client Attributes | TMD Indicator | Product Description including Key Attributes |
|---|---|---|
| Desired Level of Decision Making | ||
| Client wishes to make majority of the investment decisions | Not considered in target market |
The MDA Service allows a client’s portfolio to be actively managed by a team of experienced investment professionals. These investment professionals are able to respond quickly to changing market conditions due to the delegation provided by the MDA Service Investment decisions will be made within agreed parameters outlined in the MDA Agreement. The client will be notified after investment changes are made and will not be asked for consent. Therefore, the MDA Service is not suitable for those who are interested in participating in the investment selection process or wanting to approve the changes before execution |
| Investments recommended by Authorised Financial Planner, however client requires approval before execution | Not considered in target market | |
| Participate in ongoing investment reviews and the decision-making process | Potentially in target market | |
|
All investment decisions to be managed and executed by professionals in accordance with a pre-agreed Investment Program |
In target market |
|
| Investment Objective | ||
| Capital Growth | In target market |
The MDA Service allows the client to participate in an Investment Program that is appropriate to meet their goals and objectives The Authorised Financial Planner must conduct, at least annually, a review of the client’s financial situation, needs, objectives and risk tolerance to ensure that the MDA Service remains suited to their personal circumstances |
| Capital Preservation | Potentially in target market | |
| Capital Guaranteed | Not considered in target market | |
| Income Distribution | In target market | |
| Client Attributes | TMD Indicator | Product Description including Key Attributes |
|---|---|---|
| Intended Product Use (% of Investable Assets) | ||
| Solution/Standalone (75-100%) |
In target market |
Given the diverse range of Investment Programs available and the discretionary nature of the MDA Service, there are no limits on the percentage of investable assets for each client |
| Core Component (25-75%) |
In target market | |
| Satellite/Small Allocation (<25%) |
In target market | |
| Investment Timeframe | ||
| Short (≤ 3 years) | Not considered in target market |
Depending on the Investment Program selected, Politis Investment Strategies recommends that client’s have a minimum investment timeframe of 5 years or more for the MDA Service The Authorised Financial Planner must conduct, at least annually, a review of the client’s financial situation, needs, objectives and risk tolerance to ensure that the MDA Service remains suited to their personal circumstances |
| Medium (> 3 years) | Potentially in target market | |
| Long (> 5 years) | In target market | |
| Risk and Return Profile | ||
| Low | Potentially in target market |
The MDA Service allows the client to participate in an Investment Program that is appropriate for their risk and return profile The Authorised Financial Planner must conduct, at least annually, a review of the client’s financial situation, needs, objectives and risk tolerance to ensure that the MDA Service remains suited to their personal circumstances |
| Medium | In target market | |
| High | In target market | |
| Very High | In target market | |
| Need to Withdraw Money | ||
| Daily | In target market |
Withdrawal requests can be made on any business day to the Authorised Financial Planner and will be processed and funded within one to three business days, depending on the amount to be withdrawn Each Investment Program or portfolio managed within the MDA Service contains highly liquid investments that are listed on the Australian Securities Exchange (ASX) with cash held in an on-call bank account |
| Weekly | In target market | |
| Monthly | In target market | |
| Quarterly | In target market | |
| Annually or longer | In target market | |
| Other Requirements | ||
| Individual tax management of investments | Not considered in target market |
While the Authorised Financial Planner can provide individual tax advice to the client, the MDA Service does not allow for the individual tax management of investments held in the portfolios |
| Visibility / transparency of portfolio holdings | In target market |
The MDA Service provides complete transparency of portfolio holdings |
| Ability to customise portfolio or accommodate other holdings | In target market |
The MDA Service can accommodate other holdings in the portfolios |
| Ability to include in specie transfer of existing investments | In target market |
The MDA Service can accommodate in-specie transfers of existing investments that are listed on the Australian Securities Exchange (ASX) |
Appropriateness
Politis Investment Strategies has assessed the product and formed the view that the product, including its key attributes, is likely to be consistent with the likely objectives, financial situation and needs of clients in the target market as described above, as the attributes of the MDA Service in Column 3 of the table above are likely to be suitable for clients with the attributes identified with a green TMD Indicator in Column 2.
Distribution Conditions/Restrictions
| Distribution Condition | Distribution Condition Rationale |
|---|---|
| Only suitable for distribution to direct clients of Politis Investment Strategies who have received personal advice |
For SMSF and Non-Superannuation accounts, Politis Investment Strategies does not provide custodial and depository services in relation to the MDA Service. This means that the client is the legal owner of their investments, with all of the investments being registered and held in their name. The investments will be held with the nominated clearing broker in the client’s account and not with Politis Investment Strategies For Retail Superannuation Accounts, Politis Investment Strategies does not provide custodial or depository services in relation to the MDA Service. Politis Investment Strategies accounts are offered by utilised the administration services of a regulated platform BT Portfolio Services Limited (ABN 73 095 055 208; AFSL 233715) (BT Portfolio Services) has been selected by Politis Investment Strategies to provide regulated platform services. As part of these services, assets that will be managed under the terms of the MDA Agreement will be held by BT Portfolio Services as the operator of the regulated platform, or a custodian they appoint, on trust for the client If the MDA Agreement is terminated, clients will retain their existing holdings and not be forced to exit from the portfolio. However, Politis Investment Strategies will not undertake any further transactions in relation to the portfolio unless it forms part of the termination process outlined in the MDA Agreement |
| Only suitable for distribution through Authorised Financial Planners of Politis Investment Strategies to clients who have received personal advice |
Review Triggers
Review triggers are events and circumstances that would reasonably suggest that the TMD is no longer appropriate for the MDA Service.
Politis Investment Strategies identifies the following possible triggers under Section 994B(5)(d) of the Corporations Act:
- Material change to key attributes, investment objective and/or fees of the MDA Service
- Key attributes have not performed as disclosed by a material degree and for a material period
- Determination by Politis Investment Strategies of an ASIC reportable Significant Dealing
- Material or unexpectedly high number of complaints (as defined in Section 994A(1) of the Corporations Act) about the MDA Service and/or the distribution of the MDA Service
- The use of Product Intervention Powers, regulator orders or directions that affect the MDA Service
Mandatory Review Periods
Under Section 994(B)(e) of the Corporations Act, Politis Investment Strategies is required to specify the maximum period from the start of the day the TMD is made to the start of the day the first review of the determination is to finish under Section 994C of the Corporations Act.
| Review period | Maximum Period for Review |
|---|---|
| Initial review | 1 year, 3 months |
| Subsequent review | Annual |
Distributor Reporting Requirements
The following reporting requirements apply to all distributors of the Politis Investment Strategies MDA Service:
| Reporting Requirement | Reporting Period |
|---|---|
| To the extent a distributor is aware, dealings outside the target market, including reasons why acquisition is outside of target market | As soon as practicable but no later than 10 business days after a distributor becomes aware of dealings outside the target market |
| Significant dealing outside of target market, under Section 994F(6) of the Corporations Act | As soon as practicable but no later than 10 business days after a distributor becomes aware of the significant dealing |
| Complaints (as defined in Section 994A(1) of the Corporations Act) relating to the MDA Service design, availability and distribution. The distributor should provide all the content of the complaint, having regard to privacy | As soon as practicable but no later than 10 business days after a distributor becomes aware of the complaint |
Distributors must report to Politis Investment Strategies regarding the above Reporting Requirements by emailing compliance@politis.com.au.
Significant Dealings
Section 994F(6) of the Corporations Act requires distributors to notify Politis Investment Strategies if they become aware of a significant dealing in the MDA Service that is not consistent with the TMD. Neither the Corporations Act nor ASIC defines when a dealing is ‘significant’ and distributors have discretion to apply its ordinary meaning.
Politis Investment Strategies will rely on notifications of significant dealings to monitor and review the MDA Service, 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:
- They represent a material proportion of the overall distribution conduct carried out by the distributor in relation to the MDA Service, or
- They constitute an individual transaction which has resulted in, or will or is likely to result in, significant detriment to the client (or class of client
In each case, the distributor should have regard to:
- The nature and risk profile of the MDA Service (which may be indicated by the risk rating or withdrawal timeframes),
- The actual or potential harm to a client (which may be indicated by the value of the client’s investment, their intended use or their ability to bear loss), and
- The nature and extent of the inconsistency of distribution with the TMD (which may be indicated by the number of red or amber ratings attributed to the client)
Objectively, a distributor may consider a dealing (or group of dealings) outside the TMD to be significant if:
- It constitutes more than half of the distributor’s total retail distribution conduct in relation to the MDA Service over the reporting period,
- The client’s intended use is Solution / Standalone, or
- The client’s intended use is Core component and the client’s risk (ability to bear loss) and return profile is Low
Definitions
| Term | Definition |
|---|---|
| Investment Objective | |
| Capital Growth | The client seeks to invest in a product designed to generate capital return. The client prefers exposure to growth assets (such as shares or property) or otherwise seeks an investment return above the current inflation rate |
| Capital Preservation | The client seeks to invest in a product to reduce volatility and minimise loss in a market down-turn. The client prefers exposure to defensive assets (such as cash or fixed income securities) that are generally lower in risk and less volatile than growth investments |
| Capital Guaranteed | The client seeks a guarantee or protection against capital loss whilst still seeking the potential for capital growth (typically gained through a derivative arrangement). The client would likely understand the complexities, conditions and risks that are associated with such products |
| Income Distribution | The client seeks to invest in a product designed to distribute regular and/or tax-effective income. The client prefers exposure to income-generating assets (typically, high dividend-yielding equities, fixed income securities and money market instruments) |
| Term | Definition |
|---|---|
| Intended Product Use (% of Investable Assets) | |
| Solution/Standalone (75-100%) |
The client intends to hold the investment as either a part or the majority (up to 100%) of their total investable assets (see definition below). The client typically prefers exposure to a product with at least High portfolio diversification (see definitions below) |
| Core Component (25-75%) |
The client intends to hold the investment as a major component, up to 75%, of their total investable assets (see definition below). The client typically prefers exposure to a product with at least Medium portfolio diversification (see definitions below) |
| Satellite (<25%) |
The client 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 client 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 family home |
| Portfolio Diversification (for completing the key product attribute section of client’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) |
| Investment Timeframe | |
| Short (≤ 3 years) | The client has a short investment timeframe and may wish to redeem within three years |
| Medium (> 3 years) | The client has a medium investment timeframe and is unlikely to redeem within three years |
| Long (> 5 years) | The client has a long investment timeframe and is unlikely to redeem within five years |
| Term | Definition |
|---|---|
| Risk and Return profile | |
| Low | The client 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) and is comfortable with a low target return profile. Client typically prefers defensive assets such as cash and fixed income |
| Medium | The client 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) and comfortable with a moderate target return profile. Client 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 client 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) in order to target a higher target return profile. Client 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 client 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 and possibly other risk factors, such as leverage). Client typically prefers growth assets such as shares, property and alternative assets |
| Need to Withdraw Money | |
| Daily/Weekly/Monthly/Quarterly/Annually or longer | The client 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 |
| Term | Definition |
|---|---|
| Client’s Other requirements | |
| Individual tax management of investments | The client is seeking a product that provides the ability to actively manage the client’s tax position in the recommendations which are made to them |
| Visibility / transparency of portfolio holdings | The client is seeking a product that provides a clear understanding of the constituents in their portfolio |
| Ability to customise portfolio or accommodate other holdings | The client requires the ability to specifically include, exclude or manage specific investments or classes of investment for particular reasons, such as ESG considerations, or because they have existing holdings which need to be accommodated in portfolio design |
| Ability to include in specie transfer of existing investments | The client has existing holdings which they expect to be incorporated into their portfolio and where ownership is to carry on, subject to subsequent portfolio management considerations. This may be for tax, transaction cost or other reasons |