Glossary

Adviser Ratings is an Australian privately owned business which was created to make financial advice more affordable, accountable and accessible by fostering transparency, trust and integrity. They have done this by creating an online platform where consumers can easily find financial advisers and online advice tools which suit their specific needs and circumstances. Importantly, it is a source of independent consumer reviews and feedback.
In mathematics and computer science, an algorithm is a finite sequence of well-defined, computer implementable instructions, typically to solve a class of problems or to perform a computation.
In Australia a business involved in the provision of financial services is legally required to be licensed for those specific services and products. An AFSL can be issued to an individual, a director or employee of an AFSL holder. Alternatively, it can be provided to an authorised representative of a person who holds an AFSL. In that situation, the service or product provider operates as a Corporate Authorised Representative under the supervision of the AFSL.
The Australian Securities and Investments Commission is an independent Australian government body that acts as Australia’s corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors.
The Australian Taxation Office is an Australian statutory agency and the principal revenue collection body for the Australian government. The ATO has responsibility for administering the Australian federal taxation system, superannuation legislation, and other associated matters.

A Risk Profile is an evaluation of an individual’s willingness and ability to take risks. A risk profile is important for determining a proper investment asset allocation for a portfolio. The risk profiles and portfolios typically share the same or similar names. There are typically five risk profiles:

    1. Very low risk tolerance – eg “Conservative”;
    2. Low risk tolerance – eg “Moderately Conservative”;
    3. Average risk tolerance – eg “Balanced”
    4. High risk tolerance – eg “Moderately Aggressive”; and
    5. Very high risk – eg “Aggressive”.

Describes the requirement of an adviser or other person with a “fiduciary duty” to act in the best interests of their client eg to only recommend financial products that are in the best interests of their clients, and typically requires disclosure of any conflicts of interest.

Compound interest can be thought of as “interest on interest”. My initial amount of money earns interest in the first period, and then in the second period on earn interest on my initial amount + interest on the first period’s interest, and so on.
CPI is the most commonly used measure of inflation. Inflation means the rate at which prices are rising, eg if the price of eggs rose from $1.00 to $1.10 in a year, we would say eggs had price inflation of 10% in that year. CPI measures the total inflation on a basket of goods meant to represent the typical household’s expenditure. As an index, CPI will typically be 100 when the index starts and rise by the inflation on the CPI basket each year. Official inflation for a year, which the media sometimes shorthands to “CPI %” is the change in CPI from one year to the next, eg if CPI is now 210.8 and one year ago it was 209.1, inflation would be 0.81% (210.8/209.1 – 1).
The Corporations Act sets out the laws dealing with business entities in Australia at federal and interstate level. It deals primarily with companies but also with other entities, such as partnerships and managed investment schemes. The Act is the primary basis of Australian corporations law.

Cumulative means “in total” or “in aggregate” eg. if I earned $1000 a week for four weeks, cumulatively I earned $4,000.

Superannuation funds are usually either “defined benefit funds” or “defined contribution funds”. In a defined benefit fund, the individual receives a defined number of payments of a defined amount, both defined at the time the fund is set up eg “when you retire, this fund will pay you 75% of your salary in your final year, each month for 20 years” (never quite as simple as that). In defined benefit funds, the payments are known but not the amount of money required to be put aside today to make sure there is enough money in the fund by that person’s retirement date.

Defined contribution funds are really the reverse of defined benefit funds – the payments put aside today are known, but the payments in the future are not. Australia’s superannuation system is a defined contribution system, the legislation requiring a given percentage of an individual’s salary is paid by employers into that individual’s super fund each pay cycle.

While defined benefit funds are better for retiree’s certainty about how much income they will have in retirement, the world has been plagued with bankrupted defined benefit funds that did not put enough aside to meet payments, so defined contribution funds are now accepted as the best approach.

While the standards vary, generally funds described as ethical, sustainable, “ESG” or “impact” have an investment mandate that either favours investments that “do good” or won’t invest in those that “do bad”.

Our goal is to present a fund which has delivered consistently strong returns over a meaningful period of time and has low fees. To create this list of the top ten performing funds over the past 15 years, we have created the Fierce Performers Index. From this list, we identify which of these funds is the lowest cost option for you. Click here to read the quantitative rules inside the Index.

A legal document which contains information about the entity providing you with financial advice. It explains the financial services offered, what can and cannot be provided to you, the fees charged, your rights and how the person or company providing the service will deal with complaints.

In Australia, all providers of financial products and services must be licenced and provide their retail customers with access to a Financial Services Guide (FSG). Typically, an FSG must be given to the customer as soon as you realise that you are likely to provide a financial service.

Normal companies’ purpose is to make profits to distribute as dividends to the shareholders that funded their set up and growth. Charities purpose is to support a particular cause, with funding coming from donations. “Profit for purpose” companies are a middle ground between these two in which the purpose of the company includes both making profits to distribute to shareholders and particular causes. They are funded by shareholders just like normal companies, but the shareholders approve and support the distribution of some share of the profits to the particular cause before they receive any dividends.
Simply means you in the future!
A growth fund is generally a fund with a more aggressive investment strategy, meaning that it takes on more risk in the expectation that that will result in more growth. More risk doesn’t always mean more return, but over very long periods, as is the case in super, this has been fairly reliable.
Income protection is a product that pays you a regular cash amount if you are unable to work as the result of an accident or sudden illness. If you suffer an income loss due to sickness or injury and can no longer cover your living costs, having income protection insurance is invaluable. Income protection explained.

Independent financial advice from a Certified Financial Planner (CFP). Independent financial advisers work with you to provide a financial plan tailored to your specific needs.

Refers to the types of advice that a superannuation trustee can provide to members where the cost of the advice is borne by all members of the fund. The intra-fund advice may be provided by you directly or by another person acting as your employee or under an arrangement with you.
An entity or person licensed by the Licensor to do certain activities. In financial services, generally the licensee is authorised by the licensor (eg the holder of an AFSL) to undertake say financial advice under their AFSL.

Advice in Australia is defined by the Corporations Act as either “personal” or “general”. Personal Advice essentially refers to advice that has been given or directed to a person in circumstances where the provider has “considered one or more of the person’s objectives, financial situation and needs” (or which a reasonable person might have expected the provider to have considered before giving such advice), and general advice is anything that is not personal advice.Limited Personal Advice is still Personal Advice, but the provider has only considered a limited scope of the person’s objectives, circumstances or need eg just superannuation.

In politics, a mandate is the authority granted by a constituency to act as its representative. The concept of a government having a legitimate mandate to govern via the fair winning of a democratic election is a central idea of representative democracy.
Mean refers to a simple mathematical average of two or more numbers, and is calculated by adding all of the numbers and dividing by the count of the numbers. Mean is often confused with the commonly used word ”average”. Average is used by normal people to imply “typical”, not the mathematical mean. With things that are evenly spread, like people’s height, mean is a good way to describe typical as roughly 50% of people are taller than the mean and roughly 50% of people are shorter. But some things are evenly spread, like people’s superannuation balances. Roughly 30% of Australians have no super and there are more than 2,000 people with balances over $10m. If we took 99 of those with no super and 1 of those with $10m, their mean would be $100,000, which is quite a healthy balance. But that would not describe the typical person in that group. So when you read the word “average” be careful not to assume that it means “typical”.

Median literally means “middle”. In maths and finance, median also means middle, again quite simple. There is no formula. To work out the median, simply line up all of the items in order and pick the one in the middle. For example, the person with the median height out of a group of 7 people is the 4th tallest – the same number of people are taller than the median as are shorter than the median. Using the example from the “Mean” definition above, where we have 99 people with a nil superannuation balance and 1 with $10m, the median is nil. If we put all of those people in order of their superannuation balances, there would be 99 people with nil all in a row and the $10m person at the end, so the middle person is obviously a nil balance (note that in this case, because there are an even number of people, there is no middle one person, but rather a middle two people – the average of these two is referred to as the median in this case, which is still nil).

MySuper funds are low cost funds authorised to be used as default accounts, meaning that if an employee does not nominate a specific fund for their super to go into, the employer is allowed to put it into any MySuper fund they choose. MySuper funds are supposed to be low cost, but this is not always true, with several MySuper accounts costing well above average. MySuper is always supposed to be simple, which is typically true, and they always offer just one investment option, typically “Balanced”.

A not for profit entity is one whose objective is not about making a profit, typically in favour of supporting some other cause or objective. Charities and government are the most common not-forprofits, or NFPs.

A mix of different asset classes, and single sector options such as cash, property and shares.

A statement or a legal document that discloses some or all of the ways a party gathers, uses, discloses, and manages a customer or client’s data.

A document that financial service providers must provide to you when they recommend or offer a financial product. It must include information about the product’s key features, fees, commissions, benefits, risks and the complaints handling procedure.

The Productivity Commission is the Australian Government’s principal review and advisory body on microeconomic policy, regulation and a range of other social and environmental issues. The Productivity Commission was created as an independent authority by the Productivity Commission Act 1998, an Act of the Australian Parliament.
Measured and/or compared using non-numeric quality measures eg kindness, client service. Qualitative factors are often attempted to be measured quantitatively using numbers that reflect some parts of the qualitative factor eg “customer satisfaction survey results” as a measure of client service, but truly qualitative measures cannot be turned into a data point, whereas truly quantitative measures like “height” is perfectly described by numbers.
Measured and/or compared using numbers. For example, height, account balance, performance.Measured and/or compared using numbers. For example, height, account balance, performance.
A risk profile is an evaluation of an individual’s willingness and ability to take risks. It can also refer to the threats to which an organization is exposed. A risk profile is important for determining a proper investment asset allocation for a portfolio.
A self-managed super fund (SMSF) is a superannuation trust structure that provides benefits to its members upon retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund.
Shares are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends. The two main types of shares are common shares and preferred shares.

A document that sets out the advice given to a consumer by their licensed financial planner or adviser. It must include the basis on which the advice is given, details of the providing entity, and information on any payments or benefits the adviser or licensee will receive.

Providing end to end administration for a portfolio of superannuation funds. Processing payments, contributions and reconciliations. … Updating clients’ portfolios with superannuation and investment- related transactions.
Superannuation Guarantee contributions are compulsory contributions made by your employer to your superannuation fund. It is a legal requirement for your employer to make SGC payments into your superannuation account by the due dates. The SGC rate as as January 2020 was 9.50%, and is legislated to rise to 10.00% on 1 July 2021 and rise at 0.50% each year until it reaches 12.00% on 1 July 2025.

If you ask us to make a change to your super on your behalf, we charge a fee for this service.

Once you’ve read our advice, we can switch your superannuation into the recommended fund. It only costs $499.95 to save you thousands for your golden years, and you can pay using your superannuation or via credit card!

See our FSG for more detail.

Superannuation, also called “pension plans” in other countries, is a fund of deposits made by employers on behalf of individuals or by the individuals directly themselves, to earn investment returns and grow in order to fund retirement for the individual, typically with a tax advantage while still in the superannuation fund.
Total Permanent Disability is a phrase used in the insurance industry and in law. Generally speaking, it means that because of a sickness or injury, a person is unable to work in their own or any occupation for which they are suited by training, education, or experience.
This is quite uncommon these days, but untaxed funds or “Constitutionally Protected Funds” don’t pay tax on their earnings, whereas typical super funds pay 15% of income and 10% on capital gains realised.
Concessional contributions include the employer SG and contributions made from your pre-tax income.

Non-concessional contributions (voluntary after-tax contribution) are made from your post-tax income or savings, which does not attract the 15% contribution tax, as you have already paid tax on your income.

TermFinance lingo
Adviser RatingsAdviser Ratings is an Australian privately owned business which was created to make financial advice more affordable, accountable and accessible by fostering transparency, trust and integrity. They have done this by creating an online platform where consumers can easily find financial advisers and online advice tools which suit their specific needs and circumstances. Importantly, it is a source of independent consumer reviews and feedback.
AlgorithmIn mathematics and computer science, an algorithm is a finite sequence of well-defined, computer implementable instructions, typically to solve a class of problems or to perform a computation.
Australian Financial Services Licence (AFSL)In Australia a business involved in the provision of financial services is legally required to be licensed for those specific services and products. An AFSL can be issued to an individual, a director or employee of an AFSL holder. Alternatively, it can be provided to an authorised representative of a person who holds an AFSL. In that situation, the service or product provider operates as a Corporate Authorised Representative under the supervision of the AFSL.
Australian Securities and Investments Commission (ASIC)The Australian Securities and Investments Commission is an independent Australian government body that acts as Australia’s corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors.
Australian Taxation Office (ATO)The Australian Taxation Office is an Australian statutory agency and the principal revenue collection body for the Australian government. The ATO has responsibility for administering the Australian federal taxation system, superannuation legislation, and other associated matters.
Balanced Fund Risk ProfileA Risk Profile is an evaluation of an individual’s willingness and ability to take risks. A risk profile is important for determining a proper investment asset allocation for a portfolio. The risk profiles and portfolios typically share the same or similar names.There are typically five risk profiles:

  1. Very low risk tolerance – eg “Conservative”;
  2. Low risk tolerance – eg “Moderately Conservative”;
  3. Average risk tolerance – eg “Balanced”
  4. High risk tolerance – eg “Moderately Aggressive”; and
  5. Very high risk – eg “Aggressive”.
Best Interest DutyDescribes the requirement of an adviser or other person with a “fiduciary duty” to act in the best interests of their client eg to only recommend financial products that are in the best interests of their clients, and typically requires disclosure of any conflicts of interest.
Compound InterestCompound interest can be thought of as “interest on interest”. My initial amount of money earns interest in the first period, and then in the second period on earn interest on my initial amount + interest on the first period’s interest, and so on.
Consumer Price Index (CPI)CPI is the most commonly used measure of inflation. Inflation means the rate at which prices are rising, eg if the price of eggs rose from $1.00 to $1.10 in a year, we would say eggs had price inflation of 10% in that year. CPI measures the total inflation on a basket of goods meant to represent the typical household’s expenditure. As an index, CPI will typically be 100 when the index starts and rise by the inflation on the CPI basket each year. Official inflation for a year, which the media sometimes shorthands to “CPI %” is the change in CPI from one year to the next, eg if CPI is now 210.8 and one year ago it was 209.1, inflation would be 0.81% (210.8/209.1 – 1).
Corporations Act 2001The Corporations Act sets out the laws dealing with business entities in Australia at federal and interstate level. It deals primarily with companies but also with other entities, such as partnerships and managed investment schemes. The Act is the primary basis of Australian corporations law.
Cumulative BenefitsCumulative means “in total” or “in aggregate” eg if I earned $1000 a week for four weeks, cumulatively I earned $4,000.
Defined Benefit FundSuperannuation funds are usually either “defined benefit funds” or “defined contribution funds”. In a defined benefit fund, the individual receives a defined number of payments of a defined amount, both defined at the time the fund is set up eg “when you retire, this fund will pay you 75% of your salary in your final year, each month for 20 years” (never quite as simple as that). In defined benefit funds, the payments are known but not the amount of money required to be put aside today to make sure there is enough money in the fund by that person’s retirement date.

Defined contribution funds are really the reverse of defined benefit funds – the payments put aside today are known, but the payments in the future are not. Australia’s superannuation system is a defined contribution system, the legislation requiring a given percentage of an individual’s salary is paid by employers into that individual’s super fund each pay cycle.

While defined benefit funds are better for retiree’s certainty about how much income they will have in retirement, the world has been plagued with bankrupted defined benefit funds that did not put enough aside to meet payments, so defined contribution funds are now accepted as the best approach.

Ethical/Sustainable FundWhile the standards vary, generally funds described as ethical, sustainable, “ESG” or “impact” have an investment mandate that either favours investments that “do good” or won’t invest in those that “do bad”.
Fierce PerformersOur goal is to present a fund which has delivered consistently strong returns over a meaningful period of time and has low fees. To create this list of the top ten performing funds over the past 15 years, we have created the Fierce Performers Index. From this list, we identify which of these funds is the lowest cost option for you. Click here to read the quantitative rules inside the Index.
Financial Services GuideA legal document which contains information about the entity providing you with financial advice. It explains the financial services offered, what can and cannot be provided to you, the fees charged, your rights and how the person or company providing the service will deal with complaints.

In Australia, all providers of financial products and services must be licenced and provide their retail customers with access to a Financial Services Guide (FSG). Typically, an FSG must be given to the customer as soon as you realise that you are likely to provide a financial service.

For Purpose CompanyNormal companies’ purpose is to make profits to distribute as dividends to the shareholders that funded their set up and growth. Charities purpose is to support a particular cause, with funding coming from donations. “Profit for purpose” companies are a middle ground between these two in which the purpose of the company includes both making profits to distribute to shareholders and particular causes. They are funded by shareholders just like normal companies, but the shareholders approve and support the distribution of some share of the profits to the particular cause before they receive any dividends.
Future YouSimply means you in the future!
Growth/Performance FundA growth fund is generally a fund with a more aggressive investment strategy, meaning that it takes on more risk in the expectation that that will result in more growth. More risk doesn’t always mean more return, but over very long periods, as is the case in super, this has been fairly reliable.
Income ProtectionIncome protection is a product that pays you a regular cash amount if you are unable to work as the result of an accident or sudden illness. If you suffer an income loss due to sickness or injury and can no longer cover your living costs, having income protection insurance is invaluable. Income protection explained.
Independent Tailored Personal AdviceIndependent financial advice from a Certified Financial Planner (CFP). Independent financial advisers work with you to provide a financial plan tailored to your specific needs.
Intra-fund AdviceRefers to the types of advice that a superannuation trustee can provide to members where the cost of the advice is borne by all members of the fund. The intra-fund advice may be provided by you directly or by another person acting as your employee or under an arrangement with you.
LicenseeAn entity or person licensed by the Licensor to do certain activities. In financial services, generally the licensee is authorised by the licensor (eg the holder of an AFSL) to undertake say financial advice under their AFSL.
Limited Personal AdviceAdvice in Australia is defined by the Corporations Act as either “personal” or “general”. Personal Advice essentially refers to advice that has been given or directed to a person in circumstances where the provider has “considered one or more of the person’s objectives, financial situation and needs” (or which a reasonable person might have expected the provider to have considered before giving such advice), and general advice is anything that is not personal advice. Limited Personal Advice is still Personal Advice, but the provider has only considered a limited scope of the person’s objectives, circumstances or need eg just superannuation.
MandatesIn politics, a mandate is the authority granted by a constituency to act as its representative. The concept of a government having a legitimate mandate to govern via the fair winning of a democratic election is a central idea of representative democracy.
MeanMean refers to a simple mathematical average of two or more numbers, and is calculated by adding all of the numbers and dividing by the count of the numbers.

Mean is often confused with the commonly used word ”average”. Average is used by normal people to imply “typical”, not the mathematical mean. With things that are evenly spread, like people’s height, mean is a good way to describe typical as roughly 50% of people are taller than the mean and roughly 50% of people are shorter. But some things are evenly spread, like people’s superannuation balances. Roughly 30% of Australians have no super and there are more than 2,000 people with balances over $10m. If we took 99 of those with no super and 1 of those with $10m, their mean would be $100,000, which is quite a healthy balance. But that would not describe the typical person in that group. So when you read the word “average” be careful not to assume that it means “typical”.

MedianMedian literally means “middle”. In maths and finance, median also means middle, again quite simple. There is no formula. To work out the median, simply line up all of the items in order and pick the one in the middle. For example, the person with the median height out of a group of 7 people is the 4th tallest – the same number of people are taller than the median as are shorter than the median. Using the example from the “Mean” definition above, where we have 99 people with a nil superannuation balance and 1 with $10m, the median is nil. If we put all of those people in order of their superannuation balances, there would be 99 people with nil all in a row and the $10m person at the end, so the middle person is obviously a nil balance (note that in this case, because there are an even number of people, there is no middle one person, but rather a middle two people – the average of these two is referred to as the median in this case, which is still nil).
MySuperMySuper funds are low cost funds authorised to be used as default accounts, meaning that if an employee does not nominate a specific fund for their super to go into, the employer is allowed to put it into any MySuper fund they choose. MySuper funds are supposed to be low cost, but this is not always true, with several MySuper accounts costing well above average. MySuper is always supposed to be simple, which is typically true, and they always offer just one investment option, typically “Balanced”.
Not for Profit CompanyA not for profit entity is one whose objective is not about making a profit, typically in favour of supporting some other cause or objective. Charities and government are the most common not-forprofits, or NFPs.
Pre-mixed OptionsA mix of different asset classes, and single sector options such as cash, property and shares.
Privacy PolicyA statement or a legal document that discloses some or all of the ways a party gathers, uses, discloses, and manages a customer or client’s data.
Product Disclosure Statement (PDS)A document that financial service providers must provide to you when they recommend or offer a financial product. It must include information about the product’s key features, fees, commissions, benefits, risks and the complaints handling procedure.
Productivity Commission’s ReportThe Productivity Commission is the Australian Government’s principal review and advisory body on microeconomic policy, regulation and a range of other social and environmental issues. The Productivity Commission was created as an independent authority by the Productivity Commission Act 1998, an Act of the Australian Parliament.
QualitativeMeasured and/or compared using non-numeric quality measures eg kindness, client service. Qualitative factors are often attempted to be measured quantitatively using numbers that reflect some parts of the qualitative factor eg “customer satisfaction survey results” as a measure of client service, but truly qualitative measures cannot be turned into a data point, whereas truly quantitative measures like “height” is perfectly described by numbers.
QuantitativeMeasured and/or compared using numbers. For example, height, account balance, performance.
Risk ProfileA risk profile is an evaluation of an individual’s willingness and ability to take risks. It can also refer to the threats to which an organization is exposed. A risk profile is important for determining a proper investment asset allocation for a portfolio.
Self-Managed Super Fund (SMSF)A self-managed super fund (SMSF) is a superannuation trust structure that provides benefits to its members upon retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund.
SharesShares are units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends. The two main types of shares are common shares and preferred shares.
Statement of Advice (SOA)A document that sets out the advice given to a consumer by their licensed financial planner or adviser. It must include the basis on which the advice is given, details of the providing entity, and information on any payments or benefits the adviser or licensee will receive.
Super Switch Service FeeIf you ask us to make a change to your super on your behalf, we charge a fee for this service.

Once you’ve read our advice, we can switch your superannuation into the recommended fund. It only costs $499.95 to save you thousands for your golden years, and you can pay using your superannuation or via credit card!

See our FSG for more detail.

Super Fund AdministratorProviding end-to-end administration for a portfolio of superannuation funds. Processing payments, contributions and reconciliations. Updating clients’ portfolios with superannuation and investment-related transactions.
Super Guarantee Charge (SGC)Superannuation Guarantee contributions are compulsory contributions made by your employer to your superannuation fund. It is a legal requirement for your employer to make SGC payments into your superannuation account by the due dates. The SGC rate as at July 2022 was 10.50%, and is legislated to rise at 0.50% each year until it reaches 12.00% on 1 July 2025.
SuperannuationSuperannuation, also called “pension plans” in other countries, is a fund of deposits made by employers on behalf of individuals or by the individuals directly themselves, to earn investment returns and grow in order to fund retirement for the individual, typically with a tax advantage while still in the superannuation fund.
Total and Permanent Disability (TPD)Total Permanent Disability is a phrase used in the insurance industry and in law. Generally speaking, it means that because of a sickness or injury, a person is unable to work in their own or any occupation for which they are suited by training, education, or experience.
Untaxed FundThis is quite rare these days, but untaxed funds or “Constitutionally Protected Funds” don’t pay tax on their earnings, whereas typical super funds pay 15% of income and 10% on capital gains realised.
Voluntary ContributionsConcessional contributions include the employer SG and contributions made from your pre-tax income.

Non-concessional contributions (voluntary after-tax contribution) are made from your post-tax income or savings, which does not attract the 15% contribution tax, as you have already paid tax on your income.