Some financial products in Australia now come with an extra document that feels like a label: the Target Market Determination, or TMD. It can read like a short profile of the “intended customer”, often with phrases such as risk tolerance, time horizon, and financial situation.
Key takeaway
A TMD describes an issuer’s intended target market and distribution limits. It is a governance tool, not a personal recommendation.
For consumers, the TMD can be useful. It can also be misread. Many people interpret a TMD as a sign that a product is good, safe, or approved. That is not what it is.
A TMD is part of Australia’s design and distribution obligations (DDO) regime. It is a product governance tool that sits alongside disclosure documents like the PDS.¹
This article explains what a TMD does, what it cannot do, and how to treat it as a boundary label rather than a decision-maker.
This is general educational information, not personal financial advice.
What a TMD is#
A Target Market Determination is a document a product issuer must make for certain financial products. It describes:
- The class of consumers for whom the product is likely to be consistent with their objectives, financial situation, and needs (as described at a general level)
- Distribution conditions, including how the product should be sold or offered
- Review triggers and monitoring arrangements¹
The purpose is to improve product design, distribution, and oversight by requiring issuers to think explicitly about who a product is for, and to set guardrails on how it is marketed and distributed.¹
What a TMD is not#
A TMD is not:
- A personal suitability assessment
- A statement that a product is “appropriate” for any specific person
- A guarantee of outcomes or a safety certificate
The issuer writes the TMD. Regulators set expectations for how it should work and how it is monitored, but the document itself is an issuer statement within a regulatory framework.¹
A useful way to think about it is that a TMD is closer to product labelling than product endorsement.
Why TMDs exist: the problem they are trying to solve#
Disclosure documents like PDSs exist to inform consumers. But disclosure alone does not always stop products being distributed to people for whom they are plainly unsuitable.
The DDO regime was introduced to:
- Put more responsibility on issuers to design products with a target market in mind
- Put more responsibility on distributors to distribute in line with that target market
- Create feedback loops and review triggers if outcomes indicate the target market may be wrong, or distribution practices are inconsistent with the TMD¹
This is a shift from “here is the document, good luck” toward “here is the product, and these are the boundaries for distribution”.
What a TMD typically contains#
TMD formats vary, but they commonly include the following sections.
Target market description#
This is often the part consumers read first. It can include general statements about:
- Likely investment timeframe
- Likely tolerance for volatility or loss
- Need for income versus growth
- Liquidity needs
- Financial situation constraints
These are general descriptors. They do not substitute for personal advice.
Conditions and restrictions on distribution#
A TMD may state where and how the product can be distributed. For example, it may specify distribution channels, screening questions, or limits on marketing methods.
This section is easy to skip, but it is often where the TMD reveals how the issuer expects the product to be used.
Review triggers and monitoring#
TMDs often include events that would trigger a review, such as:
- A material change to the product
- A significant number of complaints
- A pattern of “significant dealing” outside the target market
The existence of review triggers does not guarantee fast action. It does indicate that the product has a defined monitoring framework.¹
How to read a TMD without over-trusting it#
1) Treat it as a boundary, not a verdict#
A TMD is more like a sign on a door than a referee’s decision. It sets intended boundaries for distribution. It does not evaluate whether the product is “good”, “bad”, or “better” than alternatives.
2) Notice what is excluded#
Many TMDs describe who the product is not intended for. This can be more informative than who it is intended for.
For example, a product that requires a long timeframe may explicitly exclude consumers who may need short-term access to cash.
3) Cross-check against the PDS for mechanics#
The PDS explains how the product works, including fees, risks, and liquidity terms.² The TMD explains how the issuer expects it to be distributed.
If a TMD implies a product is for people who need liquidity, but the PDS allows withdrawals only monthly, that tension is worth noticing.
A “soul” observation that tends to hold up is that people often read labels looking for comfort, not constraints. TMDs are mostly constraints.
Limitations and grey areas#
Target markets are written broadly#
TMDs often use broad language. This makes them flexible, but it can also make them less decisive for a consumer trying to map a complex personal situation onto a short description.
Terms can be interpreted differently#
Words such as “high risk”, “medium timeframe”, or “liquidity” can be interpreted differently across issuers. The TMD is not a standardised scoring system.
Products and markets evolve#
A TMD can be updated. It can also lag real-world outcomes. This is one reason the monitoring and review framework exists, but it is not a guarantee of perfect alignment.
Where TMDs fit in a broader due diligence picture#
For a consumer, the TMD is one document in a set:
- TMD: intended target market and distribution conditions
- PDS: product mechanics, fees, risks, and operational rules²
- Issuer and provider information: licensing, registration, and complaints pathways (where relevant)
TMDs help answer the question, “Who did the issuer design this for?” They do not answer, “What will happen?” or “Is this right for me?”
Closing#
A Target Market Determination is a governance document created under Australia’s design and distribution obligations. It describes the intended target market and the conditions under which the product should be distributed and monitored.¹
Used well, it functions like a consumer label: it highlights boundaries and expectations. Used poorly, it becomes a false comfort blanket.
Summary#
A TMD is an issuer document required for certain financial products in Australia. It sets out the intended target market, distribution conditions, and review triggers under the design and distribution obligations regime. It is not a recommendation or a guarantee, and it is best read as a boundary label alongside the more detailed mechanics in the PDS.
Sources#
- Australian Securities and Investments Commission. (2021). Regulatory Guide 274: Product design and distribution obligations. https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-274-product-design-and-distribution-obligations/
- Australian Securities and Investments Commission. (n.d.). Disclosure: Product Disclosure Statements (PDS). https://asic.gov.au/regulatory-resources/financial-services/disclosure/
- Australian Government. (2001). Corporations Act 2001 (Cth) (design and distribution obligations provisions). https://www.legislation.gov.au/