Best of the Best 2021: How we chose the award winners
It's no easy task to identify Australia's best (and best-value) superannuation funds, managed funds, exchange traded products (ETPs), banking products and insurers.
There were hundreds of product providers and thousands of products, choices and options to assess.
Rainmaker Group, publisher of Money, has been reviewing superannuation, managed funds and their investment managers for more than 20 years and this year we again led the reviews and assessments for the Best of the Best awards. Rainmaker is also the publisher of the SelectingSuper website, The Good Super Guide and The Good Investment Guide.
To conduct the banking products assessments, Rainmaker and Money teamed with InfoChoice, one of Australia's leading financial product comparison websites.
Reviewing each market segment requires a different approach, and the sections below describe how each category was decided.
There are more than 500 super funds and products offering tens of thousands of investment choices. Money's superannuation awards span the best-performing products, best-value products and best value for insurance.
To find the top-performers, Rainmaker reviewed MySuper products, and asset classes that include growth, balanced, moderate (capital stable), equities, property, bonds, cash and ESG investment options. MySuper products are default flagship products used by most employees for their employer-paid superannuation. They hold about $730 billion and for most people are the cornerstone of their super.
MySuper products come in two main types: diversified single-strategy products that spread your savings across all the major asset class and lifecycle products that invest your savings differently depending on how old you are.
Rainmaker identifies the best-performing superannuation products and investment choices by assessing not just how they went over the past three years, but by how they went over the past five and 10 years, as well as over the 12 months to June 30, 2020.
It must be said that 2019-20 was a tough year. Funds that normally perform well may not have delivered the goods this year. Using Rainmaker's proprietary composite scoring method enables us to reward consistency and spot the products that perform best over both good times and bad.
Lifecycle products were assessed in a similar way, except that Rainmaker examined which products had the best overall rankings across options designed for fund members aged in their teens, 20s, 30s, 40s, 50s and 60s. The best lifecycle product is the one that ranked the highest across all the age groups.
Identifying the best-value products is done by assessing the investment, administration and member fees a fund member would pay if they had both $10,000 and $50,000 in their superannuation account. That is, we ranked funds on both. Zero-fee indexed options aren't actually free because you still have to pay fees to be in the fund.
Fees for retirement products, also known as pension products, were assessed by reviewing the fees they would pay if they had $100,000 and $500,000 in their account.
To find the best-value superannuation product for young people, we look at the returns someone in their 20s would have received taking into account the fees that hit their lower account balance.
To be eligible for the awards, a super product must be public offer and be AAA-rated by SelectingSuper.
Managed funds and ETPs
When choosing a managed fund or ETP, investors are looking not just for funds that scored the highest investment returns but ones that also manage their investment risks. This includes an assessment of which managed funds most protect your capital.
This two-phase process requires Rainmaker to identify such factors as how much their performance changed month to month and how much and how often it went down versus up compared with the market and its peers. The next step is to study which ones get the highest returns per unit of risk.
This review was done over the short, medium and long term to June 30, 2020. To be eligible for the awards, managed funds and ETPs must have minimum investments that are within the reach of most Money readers, or they must be accessible through a platform or the ASX. The best investment managers or ETP providers are those that have the most funds shortlisted in the most major categories.
Rainmaker and Money's banking products data partner, InfoChoice, monitors thousands of products offered through almost 150 banks and non-bank providers.
Term deposits (TD) were assessed according to which paid the highest interest rates. Short-term TDs were assessed on rates paid for terms shorter than 12 months. Long-term TDs were assessed for terms longer than one year.
Credit cards were assessed by applying their annual interest rate to a revolving credit amount and adding the impact of fees. Many credit cards offer interest rate discounts that may span up to 18 months and might also charge a different annual fee in the first year, reverting back to the standard annual fee in the second year. To assess these impacts, Rainmaker and InfoChoice looked at the costs over two years.
Personal loans covering unsecured general purpose, car and debt consolidation loans were assessed using their annual average percentage rate (AAPR) applicable over five years.
Home loans were assessed using the AAPR applicable over 25 years with an 80% loan to value ratio (LVR). This was done over multiple categories, ranging from basic low-cost loans through to more flexible loans with redraw facilities, portability or splitting. Three-year and five-year fixed rate loans and home equity loans were also assessed.
Bank accounts were assessed based on their interest rate, counting the impact of fees. But as many banks no longer charge ATM or phone banking fees and have greatly reduced monthly fees, comparing these accounts is less complex than it used to be.
Insurance is one of the most important financial products you can buy. But it can be complex and hard to compare because premiums can vary according to the value of what you want to insure and how risky the insurer assesses you to be. For example, your car insurance premiums can go up the more kilometres you drive, the younger you are, and the more customised your car is - even its colour can make a difference.
House insurance, meanwhile, is determined by where you live, the type of building it is and things like security systems and whether someone is home during the day.
Most life insurance is now accessed through super. So we have again reviewed which funds offer the best deals for death-only, death and TPD, and income protection cover for white-collar and professional men and women.