Lifetime Product Ratings Methodology

Ratings Definitions

 

Main Criteria

In rating lifetime products, we focus on five main criteria, determine a score for each and then weight these to provide an overall rating for the lifetime product. The chart below shows the main criteria we use and the weights we assign to them.

The weightings above apply to lifetime products that are advised and offer a wide choice of investment options. For products that can be purchased directly by super fund members and offer a very limited range of investment options, the ‘Projected Outcomes’ weighting increases to 25% and the ‘Features and Fees’ weighting drops to 15%, and the Adviser Services criteria focuses on guidance and advice to super fund members.

Adviser Services/Guidance & Advice

The assessment criteria for this area depend on whether the product is sold by advisers external to the product provider or whether it is purchased by members from their super fund.

For lifetime products sold by advisers, we consider the range of adviser services provided to help advisers manage their clients’ accounts efficiently and help them get the most out of the lifetime product. We consider the full range of services offered to advisers including the Adviser Online portal and calculators, the process for onboarding new clients, buying and selling assets, business level and client level reporting, data feeds and adviser support through the contact centre, technical teams, BDMs and training of these products. In these lifetime products, adviser services accounts for 20% of our overall lifetime product rating.

For lifetime products purchased by super fund members, generally without an external adviser, we consider the client portal/app and calculators, the application process, guidance on using the lifetime product through the websites, seminars etc, advice services provided related to the product (all the way from general advice to comprehensive advice), as well as support for external advisers who may want to use the product for their clients. In these lifetime products, guidance and advice accounts for 15% of our overall lifetime product rating.

 

Investments

Investments are obviously an important part of a lifetime product as they are the means through which long-term value is generated for clients. Investments account for 20% of our overall lifetime product rating. Some lifetime products offer a wide range of investments whereas others offer a very small number of options that are managed in a similar way but with different risk levels.

When we rate a lifetime product with a wide range of options, 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 lifetime product’s investment governance, including the process for approving and monitoring investments on the menu.

When we rate a lifetime product with a very small list of options, we assess the structure of the portfolios, the resources used to construct the portfolios and investment governance of the portfolios.

 

Features & Fees 

The product features offered as part of a lifetime product play an integral role in maximising client outcomes over time. We assess the income profile provided through the product and its flexibility, how longevity benefits are delivered, death and withdrawal benefits, and other features that can improve member outcomes.

The fees that a client pays in a lifetime product – either directly from their account or indirectly through their investments – also have a bearing on how much money they have in retirement. We consider administration fees and fees related to the lifetime product, as well as investment fees for lifetime products with a small range of options.

Features & Fees account for 20% of our overall rating for advised products and 15% for other products which generally include a smaller range of features.

 

Projected Outcomes

We have also modelled the projected income provided through each product in a range of different scenarios. To do this, we used a stochastic model using a distribution of asset class returns, and incorporated age pension entitlements. The outcomes delivered through each product were compared to determine the score for this area.

Projected Outcomes account for 20% of our overall rating for advised products and 25% for products with a small range of options.

 

Organisation & Scale

It is important to know that the lifetime product provider has the strength and resources to continue to provide positive outcomes for clients and their advisers over the longer term.

When we assess a lifetime product in this area, we look at who owns or controls it, its capital backing and profitability, its scale and net flows, as well as how widely it is used by advisers (for advised products).

Organisation accounts for 20% of the overall rating.

Rating Process

Chant West conducts annual meetings with each lifetime product provider covering all the components of the rating. Each meeting typically lasts between 2 and 3 hours. At least two Chant West Research staff attend all meetings.

To determine the quality and effectiveness of a lifetime product’s adviser and client services, we request that each rated 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, and
• fact sheets, case studies, and strategy papers that help advisers use the bond effectively.