Overview
In 2023, we commenced rating investment bonds, leveraging our ratings process for platform products that was introduced in 2022. Investment bonds have a tax-paid structure where income and capital gains from underlying investments are taxed within the product at a maximum rate of 30%, regardless of marginal tax rate. These products are generally sold and serviced by advisers, so for these products to be successful they need to meet the needs of both investors and advisers.
By applying our knowledge and experience of platforms and investment bonds, we compare investment bonds in a way that is both fair and rigorous, and on an 'apples with apples' basis.
The result is a set of ratings that encapsulate our view about the quality of each investment bond we rate, and we express those ratings in terms of Apples.
The table below summarises the ratings definitions for the new investment option ratings terminology. Our ratings are based on information that is either publicly available or is provided directly to us by the investment bond providers themselves.
Ratings Definitions
Main Criteria
In rating investment bonds, we focus on six main criteria, determine a score for each and then weight these to provide an overall rating for the investment bond. The chart below shows the main criteria we use and the weights we assign to them.
Adviser Services
We consider adviser services as the most important part of an investment bond’s offering. Investment bonds are complex products with significant tax benefits if used correctly. Investment bond providers need to make it easy for advisers to use the product and provide supports to help advisers get the most out of the investment bond for their clients. Adviser services accounts for 25% of our overall investment bond rating.
When we rate an investment bond’s adviser services, we consider the full range of services offered to advisers. We assess the Adviser Online portal, focusing on the process for onboarding new clients, buying and selling assets, business level reporting across the adviser’s client base, and reporting on individual client accounts, as well as data feeds.
We also consider how the investment bond makes it easy for clients to provide consent on various actions where required, such as applications and fee consents. This includes digital consent functionality, the range of digital signature solutions and online identification solutions.
And we consider the support provided to advisers through the contact centre and technical support on the use of investment bonds to help advisers service their clients more effectively.
Investments
Investments are obviously an important part of an investment bond as they are the means through which long-term value is generated for clients. Investments account for 20% of our overall investment bond rating.
When we rate an investment bond’s investments, we do not assess every investment option that is available but rather the range of investment options offered and the quality of those options. We also assess the quality of the investment bond’s investment governance, including the process for approving and monitoring investments on the menu.
Fees & Performance
The fees an investment bond client pays – either directly from their account or indirectly through their investments – have a bearing on how much money they have in retirement.
When we assess an investment bond on fees, we look at administration fees on a range of scenarios covering different balances. We also consider investment fees and how they compare with what is charged by the corresponding managed fund and by other investment bonds. We also compare the net of fees and tax performance of investment options common across different investment bonds.
Fees & Performance account for 20% of our overall rating.
Features
The tax and product features of an investment bond play an integral role in maximising client outcomes over time.
When we asses an investment bond on features, we examine how the product optimises tax efficiency, leveraging the favourable tax treatment associated with investment bonds. Additionally, our assessment encompasses various product features such as estate-planning tools and investment features which assist advisers to use the bond structure most efficiently.
Features account for 15% of our overall rating.
Client Services
While the services provided through investment bonds are often focussed on helping advisers manage their clients efficiently, we cannot forget that the end customer is the client. We expect investment bonds to provide a range of services to help clients understand their investment bond, including their investments and options in relation to contributions and withdrawals.
The client services we consider includes the client portal and member app which both provide snapshots of a client’s investments, and also include a range of reports that can be run for clients who want further information on their account. We also consider the effectiveness of the annual client statement in clearly showing clients how much they have and how it is invested, as well as any client-friendly reports that the adviser can run from the adviser portal to share with their client.
Client services accounts for 10% of our overall weighting.
Organisation, Scale & Administration
It is important to know that the investment bond has the strength and resources to continue to provide positive outcomes for clients and their advisers over the longer term.
When we assess an investment bond in this area, we look at who owns or controls it, its capital backing and profitability, ongoing investment in the product, its scale and net flows, as well as how widely it is used by advisers. We also consider its systems and processes for administration and unit pricing.
Organisation accounts for 10% of the overall rating.
Rating Process
Chant West conducts annual meetings with each investment bond provider covering all the components of the rating. Each meeting typically lasts between 3 and 4 hours. At least two Chant West Research staff attend all meetings.
To determine the quality and effectiveness of an investment bond’s adviser and client member services, we request that each rated bond provider supplies a range of documents that includes (but is not limited to):
- Snapshots of adviser portal screens
- Snapshots of client app and client portal screens
- Investment governance documentation
- Fact sheets, case studies, and strategy papers that help advisers use the bond effectively.
Disclaimer: ©Zenith CW Pty Ltd ABN 20 639 121 403 (Chant West), Authorised Representative of Zenith Investment Partners Pty Ltd ABN 27 103 132 672, AFSL 226872 under AFS Representative Number 1280401, 2023. This website is only intended for use by Australian residents and is subject to use in accordance with Chant West’s Terms of Use and should be read with Chant West’s Financial Services Guide. Products, reports, ratings (Information) are based on data which may be sourced from a third party and may not contain all the information required to evaluate the nominated product providers, you are responsible for obtaining further information as required. To the extent that any Information provided is advice, it is General Advice (s766B Corporations Act). Individuals should seek their own independent financial advice and consider the appropriateness of any financial product in light of their own circumstances and needs before making any investment decision. Chant West has not taken into account the objectives, financial situation or needs of any specific person who may access or use the Information provided including target markets of financial products, where applicable. It is not a specific recommendation to purchase, sell or hold any product(s) and is subject to change at any time without prior notice. Individuals should consider the appropriateness of any advice in light of their own objectives, financial situations or needs and should obtain a copy of and consider any relevant PDS or offer document before making any decision. Information is provided in good faith and is believed to be accurate, however, no representation, warranty or undertaking is provided in relation to the accuracy or completeness of the Information. Information provided is subject to copyright and may not be reproduced, modified or distributed without the consent of the copyright owner. Except for any liability which cannot be excluded, Chant West does not accept any liability whether direct or indirect, arising from use of the Information. Past performance is not an indication of future performance. Chant West ratings and research are prepared by Chant West and are not connected in any way to research and ratings prepared by any of our related entities.