1 00:00:03,960 --> 00:00:06,930 Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer. 2 00:00:07,140 --> 00:00:10,530 Sean Aylmer: There's been a real slowdown in consumer spending in recent 3 00:00:10,530 --> 00:00:14,730 Sean Aylmer: months. National accounts from the Bureau of Statistics show that 4 00:00:14,730 --> 00:00:18,209 Sean Aylmer: while household wealth increased in the first half of 2023 5 00:00:18,209 --> 00:00:22,590 Sean Aylmer: due to higher property prices, deposit accounts shrank by about $ 6 00:00:22,770 --> 00:00:26,099 Sean Aylmer: 6 billion, as we saw the first quarterly decline in 7 00:00:26,099 --> 00:00:31,650 Sean Aylmer: savings since June, 2007. Despite population growth, retail sales growth 8 00:00:31,679 --> 00:00:35,909 Sean Aylmer: also missed expectations, giving another indication that Australia is facing 9 00:00:35,940 --> 00:00:38,640 Sean Aylmer: a per capita recession. I wanted to find out what 10 00:00:38,640 --> 00:00:42,120 Sean Aylmer: this means for investors, whether they're still investing and whether 11 00:00:42,120 --> 00:00:44,729 Sean Aylmer: it changes their approach. And it comes at a time 12 00:00:44,729 --> 00:00:48,540 Sean Aylmer: that markets are slipping back, creating potential opportunities for investors 13 00:00:48,809 --> 00:00:51,900 Sean Aylmer: looking both at the ASX and international markets. Of course, 14 00:00:52,109 --> 00:00:54,809 Sean Aylmer: this is general information only. You should always seek professional 15 00:00:54,809 --> 00:00:59,160 Sean Aylmer: advice before making any investment decision. Jon Howie recently joined 16 00:00:59,190 --> 00:01:02,010 Sean Aylmer: Stake, which is a great supporter of this podcast as 17 00:01:02,010 --> 00:01:05,069 Sean Aylmer: their new chief commercial officer. He comes with a pretty 18 00:01:05,069 --> 00:01:07,289 Sean Aylmer: impressive history in the sector, having been the head of 19 00:01:07,289 --> 00:01:11,309 Sean Aylmer: index equity for Asia Pacific at investment giant BlackRock, and 20 00:01:11,309 --> 00:01:14,640 Sean Aylmer: previously holding various roles at Macquarie Bank. Jon, welcome to 21 00:01:14,640 --> 00:01:15,360 Sean Aylmer: Fear & Greed. 22 00:01:15,720 --> 00:01:16,380 Jon Howie: Great to be here. 23 00:01:16,800 --> 00:01:20,220 Sean Aylmer: I got to start with a question about Stake as 24 00:01:20,220 --> 00:01:23,429 Sean Aylmer: opposed to BlackRock and Macquarie. BlackRock and Macquarie are two 25 00:01:23,429 --> 00:01:26,910 Sean Aylmer: of the giants in the finance world, certainly in Australia. 26 00:01:27,569 --> 00:01:29,909 Sean Aylmer: Is it different working for a smaller organization? 27 00:01:30,780 --> 00:01:33,990 Jon Howie: Look, it is, but it's also very similar as well. 28 00:01:34,170 --> 00:01:38,099 Jon Howie: Not to advertise my previous roles, but look, both of 29 00:01:38,099 --> 00:01:42,569 Jon Howie: those organizations were very innovative in their own right and 30 00:01:42,660 --> 00:01:45,149 Jon Howie: being part of Stake for the last few months, that's 31 00:01:45,150 --> 00:01:48,629 Jon Howie: been a consistent theme. Obviously, we are trying to improve 32 00:01:48,629 --> 00:01:51,810 Jon Howie: the investment landscape for Australians, and so I think there's 33 00:01:51,810 --> 00:01:55,080 Jon Howie: a lot of echoes between some of the work that 34 00:01:55,080 --> 00:01:57,269 Jon Howie: I did in some of those previous roles, both at 35 00:01:57,270 --> 00:01:58,170 Jon Howie: BlackRock and Macquarie. 36 00:01:58,800 --> 00:02:01,620 Sean Aylmer: Okay, so the slowdown in consumer spending, what's it mean 37 00:02:01,620 --> 00:02:02,520 Sean Aylmer: for investors? 38 00:02:03,330 --> 00:02:07,620 Jon Howie: Well, ultimately what you're seeing obviously is that consumers are 39 00:02:07,830 --> 00:02:11,280 Jon Howie: thinking more carefully about how they spend their money. Look, 40 00:02:11,280 --> 00:02:13,350 Jon Howie: we all know that interest rates have gone up very 41 00:02:13,350 --> 00:02:16,529 Jon Howie: rapidly over the past several months. We've seen a lot 42 00:02:16,530 --> 00:02:19,349 Jon Howie: of data and a lot of news reports about cost 43 00:02:19,349 --> 00:02:24,418 Jon Howie: of living pressures, transport costs, housing costs, just general inflation, 44 00:02:24,419 --> 00:02:27,810 Jon Howie: et cetera. So that really plays across the whole market, and 45 00:02:27,810 --> 00:02:31,290 Jon Howie: certainly our Stake customers are mindful of that, are thinking 46 00:02:31,290 --> 00:02:34,770 Jon Howie: about that. But what is interesting, from our perspective, is 47 00:02:34,770 --> 00:02:37,530 Jon Howie: that what that means is they're actually focusing more on 48 00:02:37,530 --> 00:02:42,029 Jon Howie: their investments. When we survey our customers, they are being more 49 00:02:42,029 --> 00:02:46,320 Jon Howie: careful, more thoughtful, more deliberate in making decisions around trying 50 00:02:46,320 --> 00:02:50,608 Jon Howie: to improve their own financial futures. They're continuing to invest. 51 00:02:50,610 --> 00:02:53,490 Jon Howie: They're thinking more broadly about how they invest, how they 52 00:02:53,490 --> 00:02:56,819 Jon Howie: build portfolios, and ultimately how they secure their financial futures. 53 00:02:57,299 --> 00:02:58,560 Sean Aylmer: That's a good thing, isn't it? 54 00:02:59,219 --> 00:03:02,250 Jon Howie: Look, it's a great thing. I think what we're seeing 55 00:03:02,250 --> 00:03:06,030 Jon Howie: certainly is younger investors who are coming through. Again, this 56 00:03:06,030 --> 00:03:10,020 Jon Howie: is not new news, but things like property prices, cost 57 00:03:10,020 --> 00:03:12,929 Jon Howie: of rent, cost of living, et cetera, is meaning that 58 00:03:13,230 --> 00:03:17,428 Jon Howie: young people really have some challenges on their hands and 59 00:03:18,000 --> 00:03:20,760 Jon Howie: as much as in some cases that might be painful, 60 00:03:20,760 --> 00:03:24,450 Jon Howie: what it is meaning is that they're actually paying attention 61 00:03:24,450 --> 00:03:27,060 Jon Howie: to some of those really important longer term decisions where 62 00:03:27,360 --> 00:03:29,820 Jon Howie: sometimes those can be ignored or they can be delayed 63 00:03:29,820 --> 00:03:32,790 Jon Howie: or put off. What we're seeing is certainly when we 64 00:03:32,790 --> 00:03:36,420 Jon Howie: survey customers is they're actually, they're front and center right 65 00:03:36,420 --> 00:03:38,010 Jon Howie: now, and I think that will pay dividends over the long-term. 66 00:03:40,140 --> 00:03:44,429 Sean Aylmer: Okay. So if you're investing now and the market is 67 00:03:44,490 --> 00:03:49,859 Sean Aylmer: choppy, to say the least, there are opportunities out there 68 00:03:49,860 --> 00:03:54,840 Sean Aylmer: for investors, how do you find them? I'm just interested, 69 00:03:54,990 --> 00:03:57,390 Sean Aylmer: if I'm an investor and I'm thinking about using Stake 70 00:03:57,390 --> 00:04:01,260 Sean Aylmer: and putting money into the local market or Wall Street 71 00:04:01,260 --> 00:04:03,720 Sean Aylmer: or somewhere like that, how should I think about it? 72 00:04:03,960 --> 00:04:07,350 Sean Aylmer: And particularly just with relevance to what's happening right now 73 00:04:07,530 --> 00:04:09,090 Sean Aylmer: given bond yields as they are? 74 00:04:10,440 --> 00:04:15,660 Jon Howie: Yeah, look, that's always a very nuanced question, and there's an 75 00:04:15,660 --> 00:04:19,080 Jon Howie: enormous amount of information out there today. So for investors 76 00:04:19,080 --> 00:04:22,199 Jon Howie: who are looking to educate themselves, to find out information 77 00:04:22,200 --> 00:04:25,619 Jon Howie: about what investments they might want to own, all of 78 00:04:25,620 --> 00:04:27,479 Jon Howie: those questions. So we do a lot of work trying 79 00:04:27,480 --> 00:04:32,250 Jon Howie: to provide information that's easy to digest and understand. We 80 00:04:32,250 --> 00:04:36,960 Jon Howie: do see certain trends as investors respond to certain market 81 00:04:36,960 --> 00:04:40,349 Jon Howie: dynamics. Sort of 12 months ago, you would be familiar 82 00:04:40,349 --> 00:04:43,258 Jon Howie: with a lot of the activity that was around some 83 00:04:43,259 --> 00:04:45,928 Jon Howie: of the meme stocks in the US. We saw an 84 00:04:45,928 --> 00:04:49,200 Jon Howie: enormous amount of activity there, and a lot of that 85 00:04:49,230 --> 00:04:52,140 Jon Howie: has gone away over the past six to 12 months. 86 00:04:52,440 --> 00:04:56,610 Jon Howie: We've started to see investors now thinking a little bit 87 00:04:56,610 --> 00:05:00,900 Jon Howie: more about investing locally. So our investments in Australian shares 88 00:05:00,900 --> 00:05:05,188 Jon Howie: has been accelerating really rapidly, which is great. It's a 89 00:05:05,309 --> 00:05:08,400 Jon Howie: new product for us. I think it's also partially driven 90 00:05:08,400 --> 00:05:13,680 Jon Howie: by the current weakness in the Australian dollar is that investing 91 00:05:13,680 --> 00:05:18,120 Jon Howie: offshore, up until recently, has been somewhat more expensive than 92 00:05:18,120 --> 00:05:21,540 Jon Howie: it was previously because the Aussie dollar was looking relatively 93 00:05:21,540 --> 00:05:25,320 Jon Howie: weak, and so we saw local investors focusing more locally. 94 00:05:25,680 --> 00:05:29,400 Jon Howie: That's all very cyclical as things move around. We see 95 00:05:29,670 --> 00:05:33,480 Jon Howie: investors are pretty smart on average, and we see them generally 96 00:05:33,480 --> 00:05:37,889 Jon Howie: looking, and on average flows are generally tending towards areas 97 00:05:37,889 --> 00:05:39,928 Jon Howie: of the market where there's greater value. And you raise 98 00:05:39,928 --> 00:05:42,299 Jon Howie: that really interesting one at the moment is fixed income 99 00:05:42,660 --> 00:05:44,700 Jon Howie: is a really interesting area, and we're starting to see 100 00:05:44,700 --> 00:05:46,770 Jon Howie: a lot more interest for investors who are looking to 101 00:05:46,770 --> 00:05:50,010 Jon Howie: generate stable and lower risk forms of income through things 102 00:05:50,010 --> 00:05:51,568 Jon Howie: like bond, ETFs, et cetera. 103 00:05:51,928 --> 00:05:53,729 Sean Aylmer: Stay with me, Jon, we'll be back in a minute. 104 00:05:59,969 --> 00:06:03,180 Sean Aylmer: I am talking to Jon Howie, Chief Commercial Officer at 105 00:06:03,180 --> 00:06:06,330 Sean Aylmer: Stake. So, actually, I'll get on to ETFs in a 106 00:06:06,330 --> 00:06:08,760 Sean Aylmer: moment, but just lots of people thinking about equities as 107 00:06:08,760 --> 00:06:11,130 Sean Aylmer: an investment, but do you think people are more broadly 108 00:06:11,130 --> 00:06:15,839 Sean Aylmer: becoming aware of other asset classes, bonds being the big 109 00:06:15,839 --> 00:06:18,660 Sean Aylmer: one, but all sorts of alternative asset classes as well? 110 00:06:20,070 --> 00:06:23,640 Jon Howie: Look, people are certainly becoming much more aware of bonds 111 00:06:23,700 --> 00:06:27,870 Jon Howie: in particular, and what's interesting is that the usage or 112 00:06:27,870 --> 00:06:32,699 Jon Howie: the investment in asset classes, like fixed income in Australia 113 00:06:32,700 --> 00:06:35,579 Jon Howie: has generally been a bit lower than other parts of 114 00:06:35,580 --> 00:06:39,510 Jon Howie: the world. There's a few factors behind that, partially driven 115 00:06:39,510 --> 00:06:44,428 Jon Howie: by the popularity of property in Australia. Tax policies like 116 00:06:44,428 --> 00:06:46,620 Jon Howie: negative gearing and all of those kinds of things has 117 00:06:46,620 --> 00:06:49,559 Jon Howie: meant property has been very popular, but certainly with interest 118 00:06:49,559 --> 00:06:53,339 Jon Howie: rates where they are now, that's making fixed income type 119 00:06:53,339 --> 00:06:58,980 Jon Howie: investments way more interesting for investors. Quite comfortably, you can 120 00:06:58,980 --> 00:07:03,120 Jon Howie: get 5% yields on bond investments and fixed income ETFs, 121 00:07:03,120 --> 00:07:07,620 Jon Howie: et cetera. Other alternative asset classes, we haven't seen an 122 00:07:07,620 --> 00:07:10,919 Jon Howie: enormous amount of interest in that space. One of the, 123 00:07:10,980 --> 00:07:14,280 Jon Howie: I guess the alternative asset classes, that's easy to buy 124 00:07:14,400 --> 00:07:17,880 Jon Howie: on exchange is real estate investment trusts or REITs as 125 00:07:17,880 --> 00:07:22,469 Jon Howie: they're known. The price and the performance of REITs certainly 126 00:07:22,469 --> 00:07:26,040 Jon Howie: over the last few months has been somewhat challenged because 127 00:07:26,070 --> 00:07:29,129 Jon Howie: REITs obviously are sensitive to interest rates, and so the 128 00:07:29,129 --> 00:07:34,770 Jon Howie: performance of those assets hasn't been amazing, but we are certainly 129 00:07:34,770 --> 00:07:37,740 Jon Howie: seeing investors looking further afield than just equities. 130 00:07:38,160 --> 00:07:41,820 Sean Aylmer: Okay, so let's talk about ETFs actually, but bonds is 131 00:07:41,820 --> 00:07:46,320 Sean Aylmer: a good way into it. A bond ETF is a 132 00:07:46,320 --> 00:07:50,430 Sean Aylmer: fairly, I mean, nothing is risk- free, but relative to 133 00:07:50,430 --> 00:07:52,590 Sean Aylmer: just putting your money into one bond, it's not a 134 00:07:52,590 --> 00:07:53,820 Sean Aylmer: bad way of getting involved. 135 00:07:54,780 --> 00:07:58,230 Jon Howie: That's sort of the fundamental benefit of ETFs is they're 136 00:07:58,230 --> 00:08:02,370 Jon Howie: generally diversified exposures to an asset class rather than just 137 00:08:02,370 --> 00:08:06,029 Jon Howie: a single security, exactly as you say. So in the 138 00:08:06,029 --> 00:08:11,010 Jon Howie: same way that equities ETFs, for example, track the ASX 200, 139 00:08:11,010 --> 00:08:14,999 Jon Howie: so the ETF will own 200 underlying equities and give 140 00:08:15,000 --> 00:08:19,139 Jon Howie: you a diversified exposure to Aussie equities, bond ETFs effectively 141 00:08:19,139 --> 00:08:22,529 Jon Howie: do the same thing. What's interesting about the bond market 142 00:08:22,529 --> 00:08:26,309 Jon Howie: is, in many cases, there are far more bonds issued 143 00:08:26,670 --> 00:08:29,550 Jon Howie: in the market than there are equities. And so, in 144 00:08:29,550 --> 00:08:33,000 Jon Howie: many cases, bond ETFs can have in some cases thousands 145 00:08:33,000 --> 00:08:36,088 Jon Howie: of underlying exposures. And so they really do give investors 146 00:08:36,090 --> 00:08:39,420 Jon Howie: a very broad exposure to fixed income assets. 147 00:08:39,929 --> 00:08:43,800 Sean Aylmer: And you can get exposure to along the risk spectrum 148 00:08:43,920 --> 00:08:48,809 Sean Aylmer: within bond ETFs. Obviously a government bond is rated higher 149 00:08:48,809 --> 00:08:51,959 Sean Aylmer: than BHP, which is rated higher than a much smaller company. 150 00:08:52,469 --> 00:08:56,790 Jon Howie: That's exactly right. In terms of the credit risk of 151 00:08:56,790 --> 00:09:01,978 Jon Howie: bonds, very broadly, there's two versions. There's government bonds, which 152 00:09:01,980 --> 00:09:05,429 Jon Howie: as you say, inverted (inaudible) are a risk- free 153 00:09:05,429 --> 00:09:08,130 Jon Howie: asset or a very low risk asset in terms of 154 00:09:08,460 --> 00:09:11,550 Jon Howie: default. And then there are corporate bonds which are issued 155 00:09:11,550 --> 00:09:15,389 Jon Howie: by companies like BHP and the banks, et cetera. And depending 156 00:09:15,389 --> 00:09:18,328 Jon Howie: on the issuer, they will generally have either a little 157 00:09:18,330 --> 00:09:20,458 Jon Howie: bit more credit risk or maybe a lot more credit 158 00:09:20,460 --> 00:09:23,578 Jon Howie: risk than government bonds. But the beauty is that there 159 00:09:23,580 --> 00:09:26,160 Jon Howie: are, I don't know the exact number, but there's definitely 160 00:09:26,160 --> 00:09:30,389 Jon Howie: dozens of bond ETFs available on the ASX now, and 161 00:09:30,389 --> 00:09:34,920 Jon Howie: there's probably thousands of bond ETFs available in the US. 162 00:09:34,949 --> 00:09:38,610 Jon Howie: Obviously, Stake provides access to both Australia and US markets, 163 00:09:38,610 --> 00:09:40,679 Jon Howie: and so investors really have a huge range of choice 164 00:09:40,679 --> 00:09:41,880 Jon Howie: when looking at things like bond ETFs. 165 00:09:43,050 --> 00:09:47,700 Sean Aylmer: Okay. Now, you've been with Stake for not that long, 166 00:09:47,700 --> 00:09:48,990 Sean Aylmer: is that right, Jon? 167 00:09:48,990 --> 00:09:51,719 Jon Howie: Yeah, four- ish months now, so still pretty new in 168 00:09:51,719 --> 00:09:52,110 Jon Howie: the chair. 169 00:09:52,559 --> 00:09:54,659 Sean Aylmer: I think your gig is to grow it. I'm guessing 170 00:09:54,660 --> 00:09:56,010 Sean Aylmer: your gig is to grow it given you're a chief 171 00:09:56,010 --> 00:10:00,030 Sean Aylmer: commercial officer at Stake. It's a pretty competitive spot to 172 00:10:00,030 --> 00:10:00,960 Sean Aylmer: be though, isn't it? 173 00:10:01,860 --> 00:10:05,399 Jon Howie: Look, it is. So there's a couple of things. I 174 00:10:05,400 --> 00:10:10,109 Jon Howie: think we really perceive the ability to serve investors in 175 00:10:10,109 --> 00:10:13,620 Jon Howie: Australia better than they've been served in the past by 176 00:10:13,620 --> 00:10:16,740 Jon Howie: some of the incumbents. And I think what you've seen, 177 00:10:17,160 --> 00:10:19,078 Jon Howie: again, over the last few months is some of the 178 00:10:19,080 --> 00:10:24,690 Jon Howie: incumbents have started to ultimately react to some of the 179 00:10:24,690 --> 00:10:27,719 Jon Howie: improvements that we've made, which look, is great for investors 180 00:10:27,719 --> 00:10:30,000 Jon Howie: and it's great for competition, but I think it's evidence 181 00:10:30,000 --> 00:10:33,300 Jon Howie: that we've done a really good job in providing a 182 00:10:33,300 --> 00:10:36,420 Jon Howie: really compelling service, and we've managed to become the third- 183 00:10:36,420 --> 00:10:38,968 Jon Howie: largest digital broker in the market now, which I think is 184 00:10:39,090 --> 00:10:41,730 Jon Howie: evidence again, that we've got a strong proposition and we 185 00:10:41,730 --> 00:10:45,750 Jon Howie: are continuing to see customer growth. And look, I think 186 00:10:45,780 --> 00:10:49,019 Jon Howie: you'll see the natural evolution of the market. There really 187 00:10:49,050 --> 00:10:52,890 Jon Howie: was a huge pickup in investor activity around the COVID 188 00:10:52,890 --> 00:10:56,340 Jon Howie: pandemic. People obviously stuck at home, and we saw across 189 00:10:56,340 --> 00:11:01,079 Jon Howie: the board new customers signups accelerated strongly, trading activity accelerated 190 00:11:01,080 --> 00:11:04,649 Jon Howie: strongly. That slowed down a little bit, and so you'll 191 00:11:04,650 --> 00:11:08,730 Jon Howie: probably continue to see rationalization in the industry, but we 192 00:11:08,730 --> 00:11:11,550 Jon Howie: feel like we're really strongly positioned to be a market 193 00:11:11,550 --> 00:11:12,390 Jon Howie: leader going forward. 194 00:11:13,050 --> 00:11:14,910 Sean Aylmer: Jon, thank you for talking to Fear & Greed. 195 00:11:15,360 --> 00:11:16,110 Jon Howie: Absolute pleasure. 196 00:11:16,440 --> 00:11:19,348 Sean Aylmer: That was Jon Howie, Chief Commercial Officer at Stake, a 197 00:11:19,349 --> 00:11:22,228 Sean Aylmer: great supporter of this podcast. This is the Fear & Greed 198 00:11:22,260 --> 00:11:25,500 Sean Aylmer: Business Interview. Remember, this information is general in nature, and 199 00:11:25,500 --> 00:11:28,470 Sean Aylmer: you should always seek professional advice before making any investment 200 00:11:28,470 --> 00:11:31,078 Sean Aylmer: decisions. Join us every morning for the full episode of 201 00:11:31,080 --> 00:11:34,828 Sean Aylmer: Fear & Greed, Australia's best business podcast. I'm Sean Aylmer, have 202 00:11:34,830 --> 00:11:35,399 Sean Aylmer: a great day.