Best of the Best 2022: How we chose the winners
Money's Best of the Best 2022 bumper awards issue is out now! Here's how we chose the winners.
Identifying Australia's best financial products is no easy task. There are hundreds of providers and thousands of products, choices and options to assess.
Rainmaker, publisher of Money, has been reviewing superannuation, managed funds and their investment managers for more than 20 years. To conduct the banking products assessments Rainmaker and Money teamed up with InfoChoice, one of Australia's leading financial product comparison websites.
The sections below describe how it's done.
There are more than 500 superannuation products in Australia, offering tens of thousands of investment choices. The Money superannuation awards span best-performing products, best-value products and best-value insurance.
To find Australia's top-performing super products, 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.
These products hold more than 60% of all the superannuation owned by working Australians and are the cornerstone of their retirement savings.
MySuper products come in two main types: diversified single-strategy products that spread your savings across all the major asset classes and lifecycle products.
Lifecycle products were assessed in a similar way except 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.
Rainmaker identifies Australia's best-performing superannuation products and investment choices by assessing not just how they went over the past five years, but by how they went over the past 10, five and three years and how they went over the 12 months to June 30, 2021.
Rainmaker's proprietary composite scoring method enables us to reward consistency and spot the superannuation products that perform best in good times and bad.
It must be said that 2020-21 was a remarkable year for super funds as they experienced their best returns in 34 years. It led to quite a changing of the guard for Australia's best super funds, with some newer brand names making their first appearance in the winners' circle. But this shows just how competitive the super market is.
Identifying the lowest cost products is done by assessing the investment, administration and member fees a fund member would pay if they had $10,000 and $50,000 in their 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 members would pay if they had $100,000 and $500,000 in their account.
The best-value super product for young people is the best product when we look at the returns people in their 20s would have received taking into account the fees that hit their lower account balance.
To be eligible for the Money awards, a superannuation product must be public offer and be AAA-rated by Rainmaker Information.
Managed funds and exchange traded products
When choosing which managed funds or exchange traded products (ETP) to invest with, investors are looking not just for funds that scored the highest investment returns but also managed their investment risks.
This includes an assessment of which managed funds most protect your capital.
This multi-phase process requires Rainmaker to identify such factors as how much their performance changed month to month, how much and how often it went down versus up compared with the market and its peers, and 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, 2021. The best investment managers or ETP providers are those that have the most funds shortlisted in the most major categories.
Money and Rainmaker's banking products research partner, InfoChoice, monitor 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 may also charge a different annual fee in the first year, reverting to the standard annual fee in the second year. To assess these impacts, Rainmaker and InfoChoice looked at the costs over two years.
Home loans were assessed using the annual average percentage rate (AAPR) applicable over 25 years with an 80% loan valuation 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. Personal loans covering unsecured general purpose, and car and debt consolidation were assessed using their AAPR applicable over five years.
Bank accounts were assessed using their interest rates, counting the impact of fees. But as many banking accounts 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.
This year's awards also include a new category for buy now pay later, an innovative alternative to credit cards.
But while these products offer big benefits to consumers if they pay them off quickly, because they aren't regulated there are big differences between them regarding how clearly they describe their fees and how any late repayment penalties work. These were the factors Rainmaker assessed.
Insurance can be complex and hard to compare because costs 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, the more customised your car is and even depending on its colour.
Home and contents insurance is determined by where you live, the type of building, your home security system and whether someone is home during the day. Most life insurance is now accessed through superannuation funds.
So Rainmaker and Money have again reviewed which funds offer the best overall deals for all fund members and which ones offer the best deals for death-only, death and TPD, and income protection cover for white-collar and professional workers.
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