Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirkby, the Wealth editor at the Australian. Welcome aboard everybody.
Speaker 1: Someone I've wanted to have on the show for some
Speaker 1: time is Nathan Fradley. He's a leading financial advisor. He's
Speaker 1: unusual to the degree that he is a entirely independent
Speaker 1: operator and as such is both good advisor and a
Speaker 1: voice for the financial advice sector. And it's an ideal
Speaker 1: week to have him on because you probably know there's
Speaker 1: been some alleged changes to Super put through Parliament, some
Speaker 1: simplification of financial advice bureaucracy if you like, which is
Speaker 1: supposed to cost us all less in the end, which
Speaker 1: would be good if it comes to pass. Importantly, big
Speaker 1: change with Super. You know, the big super funds wanted
Speaker 1: to expand their advice offering and Big Super gets what
Speaker 1: it wants normally, and they got what it wanted again
Speaker 1: this week because they're now allowed to expand advice. But
Speaker 1: not only that, they're allowed to charge for advice in
Speaker 1: the manner that they charge for most things, that is
Speaker 1: in a pooled fashion. So if you've got five million
Speaker 1: in Super or you've got fifty dollars in super you're
Speaker 1: probably going to pay the same fee with your big
Speaker 1: super fund that's got all sorts of issues. But it
Speaker 1: look maybe it will widen financial advice for mass market
Speaker 1: and that would be useful if it's good advice, If
Speaker 1: it's advice that pays off for the people who use it.
Speaker 1: Will see And I want to talk to Nathan about
Speaker 1: a whole bunch of things which are on the table
Speaker 1: which would help you. I hope find advice, find the
Speaker 1: best advice and the optimum way of engaging if you like,
Speaker 1: with financial advice, because every single listener on this show,
Speaker 1: I would say needs good advice, including myself.
Speaker 2: How are you, Nathan, I'm good, James, thanks for having me.
Speaker 1: Now, Nathan Fradley, is you operate under the corporate empire
Speaker 1: of Nathan Fradley advice? That's unusual, isn't it just to
Speaker 1: be there by yourself, pay all your own fees, your
Speaker 1: own license fee, I expect, et cetera. That must be
Speaker 1: quite difficult. There's very few tell me how many what
Speaker 1: percentage do you reckon? Of all financial advisors in Australia,
Speaker 1: fifteen thousand of them are independent in the sense that
Speaker 1: people might understand what that word means.
Speaker 3: So I think that the current number is about two hundred.
Speaker 3: So and that's sort of meeting the definition which is
Speaker 3: labeled in the Corporations Act. And to be independent, you're
Speaker 3: receiving no commissions of any sort, which there's only insurance
Speaker 3: commissions now all investment commissions have been banned. But also
Speaker 3: no volume based or any benefits that could influence your advice,
Speaker 3: which is some that's sort of the questionable bit sometimes.
Speaker 1: Yeah, I mean someone came on to me recently, torrent
Speaker 1: of strongly held views, let's put it that way about
Speaker 1: our own lists, the top advisor's list, and was mentioning that, okay,
Speaker 1: there's no commission, but there's all these investment platforms now
Speaker 1: they're really big and they dominate the space, and that
Speaker 1: the advisors get fees from these platforms, and so they
Speaker 1: heard people into those platforms. Is that fair?
Speaker 3: No, there is no fees paid to the advisor or
Speaker 3: the convice company from a platform provider. What you might
Speaker 3: find is that they've been banned. What you might find
Speaker 3: is that they will have discounted cards, so rate cards,
Speaker 3: so if your clients will pay less to be on there,
Speaker 3: which can be a sticking point because if I leave.
Speaker 2: This advisor, my account becomes more expensive.
Speaker 3: So that's all that they run their fee through the
Speaker 3: account itself. But that fee is a normal it's money
Speaker 3: out of an account paid to them. There's no behind
Speaker 3: the scenes fees with platforms anymore.
Speaker 1: Okay, So it's about two hundred independent advice was out
Speaker 1: of fifteen thousand. Those two hundred they cost do they
Speaker 1: cost more? Necessarily?
Speaker 2: This is a tricky part.
Speaker 3: So as much as I am an independent advisor myself,
Speaker 3: don't they don't think it makes me better than anyone else.
Speaker 3: And I think it depends on who you serve and
Speaker 3: what advice you provide. And so if you're providing a
Speaker 3: lot of risk or insurance advice, it's really hard to
Speaker 3: make that work on a fee basis.
Speaker 2: I've tried in the past.
Speaker 3: They get a discount on their insurance because you write
Speaker 3: the commission out and then three years later they come
Speaker 3: back and need to just tweak a bit of a
Speaker 3: policy and you've got to charge your fee. It's like, oh,
Speaker 3: I just realize I have to pay because they're not used.
Speaker 3: It's not something you're used to paying for, so it
Speaker 3: would be like getting a mortgage broker, charging a fee
Speaker 3: there and then turning and having to pay another fee
Speaker 3: in two years.
Speaker 2: It's just not normal.
Speaker 3: So I think that people who run businesses who have
Speaker 3: got a lot of clients that built up every years
Speaker 3: with insurance products, it's very hard to become independent because
Speaker 3: you have to get rid of all of that revenue,
Speaker 3: which is quite difficult. So I think it does play
Speaker 3: to the markets that you exist in and who you
Speaker 3: serve in your business.
Speaker 1: Okay, so the big news this week obviously is about
Speaker 1: the big super funds being given wider powers legislations in
Speaker 1: Parliament by Stephen Jones, the Minister to offer financial advice.
Speaker 1: Interesting this is happening, of course, just as Cebus the
Speaker 1: super fund is being what can we say, the embattled
Speaker 1: superfund which has regulatory investigations going on in parallel. I
Speaker 1: can name three three different investigations going on at the
Speaker 1: same time at Cebus over all sorts of issues. The
Speaker 1: most spectacular I suppose being ACIC taking them to court
Speaker 1: for delaying payments on death benefits and that sort of thing.
Speaker 1: But we won't tire them all with the same brush.
Speaker 1: The different big super funds, do you think for our
Speaker 1: listeners who don't want to face five thousand dollars a year, well,
Speaker 1: will it be a good thing and what sort of
Speaker 1: caveat would you add to that.
Speaker 3: I'm probably not the most sensational advice when it comes
Speaker 3: to the stuff.
Speaker 2: I like to be pretty moderate.
Speaker 3: What I don't like is the broad base pricing that
Speaker 3: everyone pays for the advice to access by few. I've
Speaker 3: never been advocate for that. They get the values what's
Speaker 3: been given, and it also means, you know, those who
Speaker 3: don't use the services, who generally won't need to use
Speaker 3: the services we're paying for those that don't lack a
Speaker 3: lot of insurances and things like that. But what I
Speaker 3: would say is, I think there's something I remember reading
Speaker 3: something recently. It's about half of all over sixty five
Speaker 3: year old super fund holders aren't in pension phase. So
Speaker 3: that's pension phase being the tax free part. There's an
Speaker 3: enormous amount of people who maybe just needed a conversation
Speaker 3: that could be saving huge amounts in tax And by
Speaker 3: way of reference, I think it's about ten or twelve
Speaker 3: percent for cmsfs. People have a bit more engaged, So
Speaker 3: I think there's a lot of room here where people
Speaker 3: just need small transactional benefits that can be beneficial. I
Speaker 3: think where we're going to go wrong with this is
Speaker 3: around the messaging and around what's done around it, and
Speaker 3: around some of the controls. So if you go to
Speaker 3: McDonald's you expect a big back, you're not going to
Speaker 3: get a whopp up. And that should be made very
Speaker 3: evident if you're getting advice from your superfund that they're
Speaker 3: only going to give you advice on what they have.
Speaker 3: And for the most part that's fine. But there is
Speaker 3: things like these retirement income products that will come to
Speaker 3: market very soon which can't be broken very easily once
Speaker 3: set up, and that could be areas where I see problems.
Speaker 1: I mean, surely two things here. Surely the funds could
Speaker 1: simply send a letter to someone when they get to
Speaker 1: the age and say, hey, by the way, you should
Speaker 1: know at this stage, you know a tax fity future
Speaker 1: is ahead of you because you've just passed preservation edge.
Speaker 1: They don't even do that. No, they do, Actually they do,
Speaker 1: they do that happens nobody reads them.
Speaker 3: So yeah, I mean this is I remember chatting to
Speaker 3: someone at one of the big super funds back in
Speaker 3: just before twenty twenty and something like ninety two percent
Speaker 3: of money left the fund when someone turned sixty five,
Speaker 3: so they had a big retention issue.
Speaker 2: It was a hospitality sort of sided group.
Speaker 3: The bounces weren't enormous. People either pulled it out and
Speaker 3: paid off their mortgage or they just didn't understand their super.
Speaker 3: They didn't understand what was there, and they didn't have
Speaker 3: a great advice component to keep people in neither. So
Speaker 3: I think they've got a huge challenge on that engaging
Speaker 3: people in their super.
Speaker 2: I think people are a lot.
Speaker 3: More disengaged than we think, and they do actually do
Speaker 3: some of this. I think this is just an added
Speaker 3: benefit because like, hey, do you know you could do this?
Speaker 3: But it costs money? Is friction and if it's like
Speaker 3: it won't cost anything, might encourage people to take advantage.
Speaker 2: Of this a bit more.
Speaker 1: And the other thing, of course, is if I go
Speaker 1: to you and you're independent, I'm assuming you've got to
Speaker 1: tell you you or anyone like you, the two hundred
Speaker 1: like you that and let's add more than that, because
Speaker 1: there would be advisers. We'd like to think you have
Speaker 1: people's best interests in mind and think in a holistic way.
Speaker 1: But if I go into a super fund and I see,
Speaker 1: you know, I'd like to put most of my money
Speaker 1: in gold. Or I'd like to put a third of
Speaker 1: my money in gold and a third in cash, and
Speaker 1: a third and something speculative. There's no way that fund
Speaker 1: is going to say yes to that, I expect. Or
Speaker 1: I'd like to take half my money out and put
Speaker 1: it into an investment property, which I've got my eye on,
Speaker 1: and I'm an expert property investor and I really know
Speaker 1: how to do it. I'm going to prejudge them here,
Speaker 1: but I fall off my chair of a big super
Speaker 1: fund is going to suggest anything other than stay with
Speaker 1: the fund?
Speaker 3: Yes, So I mean, firstly, I hope they don't suggest
Speaker 3: anything other than stay with the fund, because that's outside
Speaker 3: of the scope of their work and licensing. I would
Speaker 3: like it to be really obvious that we can only
Speaker 3: do this. And I think if that's the case and
Speaker 3: people are fully aware of that, which is in different levels,
Speaker 3: I think that's great. I think then there should be
Speaker 3: a channel which says, okay, you need a greater level
Speaker 3: of service. A lot of the funds will have internal
Speaker 3: advice capability, but they should also recognize around limitations and
Speaker 3: refer out as well, and I think that's probably an
Speaker 3: area we're going to see some challenging who to refer to.
Speaker 3: In some sense, some of the funds do have some
Speaker 3: good processes in place on that already, but ultimately I
Speaker 3: think that's going to be the biggest challenge in this
Speaker 3: is people who needed more who didn't get what they
Speaker 3: actually needed, which is often the case when people seek
Speaker 3: advice now, and it's something we see in some of
Speaker 3: the AFCA determinations and things, is people go in for
Speaker 3: one thing and that person the advisor in front of them,
Speaker 3: sets them up in a way that they understand or
Speaker 3: and it's something they're familiar with, but it may not
Speaker 3: have been something that could have been available to them
Speaker 3: outside of that, depending on the school of the advisor.
Speaker 3: But I will say that that's a minority advisor these days.
Speaker 2: It's vastly improved over the last year.
Speaker 1: And what about the obvious issue of competence or credibility
Speaker 1: or qualification. I'm tempted to the awful, the awful, but
Speaker 1: the awful old joke, but it's got something in it
Speaker 1: which says, you know, financial product marketing is people who
Speaker 1: don't know what they're buying dealing with people who don't
Speaker 1: know what they're selling. Now, you know, if you think
Speaker 1: about a big super fund and a call center, won't
Speaker 1: that be a danger that these people and they can't
Speaker 1: even give them a name yet, who work in the funds,
Speaker 1: we'll just know this tiny area this script. Basically the
Speaker 1: person they're dealing with knows even less. Can we even
Speaker 1: call it advice?
Speaker 3: I mean, that's one step away from some automated and
Speaker 3: robo based advice that already exists. And some of the
Speaker 3: retail funds have rolled this out. One of the large
Speaker 3: retail funds rolled it out of eighty eight dollars a
Speaker 3: year recently. So I think there's a couple of parts
Speaker 3: of this. I think if you can get the scoping
Speaker 3: right who you're dealing with, is there anything else can
Speaker 3: we actually give advice and follow the rules that are
Speaker 3: currently in place, then I don't think that's necessarily going
Speaker 3: to be an issue. I also think this is a
Speaker 3: great opportunity to backfill. You know, we've got fifteen thousand
Speaker 3: advisors that's halfed in the last five years. We cannot
Speaker 3: at the current position. We won't have advisors in fifteen
Speaker 3: twenty years. They won't exist anymore, and so we need
Speaker 3: to find a way to get people experience. And the
Speaker 3: current pathway in is you go for administrative assistant to
Speaker 3: all of a sudden full fledged advisor. And there's a
Speaker 3: big gap in that too. There's a lot of challenges
Speaker 3: that come around that as well.
Speaker 1: Very good point, very good point. I know they're so
Speaker 1: desperate they are recruiting of receives for financial advisors. I
Speaker 1: know that the association is actively underground in India, for instance,
Speaker 1: trying to get people to become financial in Australia financial
Speaker 1: advisers in Australia, and as you see, there was thirty thousand,
Speaker 1: then there was fifteen thousand, and the issue there's no
Speaker 1: one coming through.
Speaker 3: And the ones that are a lot of them leave.
Speaker 3: So they get into the job and they go, this
Speaker 3: is not what I want to do. You know, it
Speaker 3: took me so long to get here, and yeah, now
Speaker 3: what do I do next?
Speaker 1: Okay, so then maybe come training camps, I think in
Speaker 1: a good way, Yeah, I think so.
Speaker 3: I think obviously this comes with any of the issues
Speaker 3: that we see with large institutions trying to do anything
Speaker 3: at scale. You're going to you have to have a
Speaker 3: lot of controls in place. No different to the bank's
Speaker 3: doing exactly the same thing prior. Hopefully we've learned from
Speaker 3: our previous mistakes. But it's a different area of large
Speaker 3: business doing something at scale.
Speaker 2: This could go really well, it could go really poorly.
Speaker 2: I just hope we keep an eye on it.
Speaker 1: Okay, very balanced view. All right, we'll take a short
Speaker 1: break back in a moment. Hello, and welcome back to
Speaker 1: the money Puzzle. I'm James Kirby, and I'm talking to
Speaker 1: Nathan Fradley, Financial advisor, independent financial advisor. Okay, Nathan, in
Speaker 1: terms of how someone optimizes their dealings with an advisor,
Speaker 1: if they can find one, a b if they can
Speaker 1: find a good one, see if they can get in
Speaker 1: the door on the basis that there's a shortage, chrolic
Speaker 1: shortage really and we haven't seen anything like this in
Speaker 1: any other areas. It's not like the number of lawyers
Speaker 1: have been cut in half, or dentists or anything else.
Speaker 1: How does someone optimize their meeting with an advisor?
Speaker 3: I think the first thing I'd say this We just
Speaker 3: had our cou big conference and I said I think
Speaker 3: I said this one hundred times chatting to people financially
Speaker 3: that you can find a financial advisor that can solve
Speaker 3: your problems, but you should also find one.
Speaker 2: That believes what you believe.
Speaker 3: I think if you can have chat with them over
Speaker 3: the phone or in a zoom and get a really
Speaker 3: good feel about who they are, you know, google them,
Speaker 3: see what your podcasts would have being on, articles have
Speaker 3: been quoted in whatever that might be social media they
Speaker 3: put out there. You can self select a lot better
Speaker 3: because even though there's only fifteen thousand of us, the
Speaker 3: divergence in the way we operate as enymous. So if
Speaker 3: you want someone just to build a portfolio complex with
Speaker 3: shares and golden all sorts of fun stuff, it's going
Speaker 3: to be vastly different than if you come to see me,
Speaker 3: for example, where I do a lot more lifestyle based,
Speaker 3: strategic based, and I suppose hard moments of allse age
Speaker 3: care that kind of thing.
Speaker 2: So there's a real.
Speaker 3: Diversity in who you're dealing with, and you've got to
Speaker 3: like them and ideally you're going to work with them
Speaker 3: for a very long time, so you better get along.
Speaker 3: And so I think you know, having that alignment, particularly
Speaker 3: if you're a couple trying to find an advisor that
Speaker 3: can be also a balance there and then being prepared
Speaker 3: them all you can give them. The more time you
Speaker 3: spend with them on valuable things, less time you spend
Speaker 3: with them running through your balance sheet, there's better bang
Speaker 3: for bucket that and I'm sure they'll appreciate that. A
Speaker 3: client that is easy to work with as a client
Speaker 3: you work with more so those two things if you're
Speaker 3: a bit more organized, but also you found someone that
Speaker 3: is your kind of person.
Speaker 2: I think they're really the best ways to find an advisor.
Speaker 1: Well, you've got a page time you check them out,
Speaker 1: don't you really?
Speaker 3: It depends the Most advisors will offer some form of
Speaker 3: initial contact free charge. I do a fifteen minute call,
Speaker 3: which you know, if anyone can figured out yet always
Speaker 3: goes to half an hour because I'd like to talk.
Speaker 3: But you know, generally you have that as a bit
Speaker 3: of a vetting. They want to vet, you want to
Speaker 3: vet them. I think that's really important.
Speaker 1: Do you think it's important to meet the person in person?
Speaker 2: If that's important to you, So.
Speaker 1: Nathan, what a percentage would you think of your client
Speaker 1: base likes actually insists on meeting you person to person.
Speaker 3: I don't think they necessarily insist. I think it's a
Speaker 3: lot lower than you'd think. I like to meet them
Speaker 3: at least once. I think that's really important. If I
Speaker 3: could meet everyone multiple times, I would.
Speaker 1: Yeah, but once at least just once to make the connection,
Speaker 1: is it, or to just too you can.
Speaker 2: Get tow withstand them.
Speaker 3: Yeah, you can understand someone much better with physical presence.
Speaker 2: It's just a factor.
Speaker 3: There's a disconnection that comes with you know, being on
Speaker 3: a camera across from someone, and so I think that's important.
Speaker 3: There's also the aspect of, you know, we've got responsibilities
Speaker 3: around our doing our clients.
Speaker 2: So that's a big part of it too.
Speaker 3: Are they who they say they are?
Speaker 2: Yeah, exactly, Yeah, Yeah, so that's a bit part of
Speaker 2: it as well. But I just I would prefer, you
Speaker 2: know that to be with all clients.
Speaker 3: You know. But because this is that we operate on
Speaker 3: a national level, work with people over the country, sometimes
Speaker 3: it's not realistic as well.
Speaker 1: Is it delineated in religion to demographics and age?
Speaker 3: Yeah, I speaking to other advisors to work with a
Speaker 3: lot younger clients than I do, I'd say there's a
Speaker 3: lot more zoom and that's not just because they're used
Speaker 3: to the technology.
Speaker 2: It also is lifestyle.
Speaker 3: You know, they've got an hour, well the kids are
Speaker 3: putting the kids down before they're going to need to
Speaker 3: do this, and they're trying to get multiple professionals in
Speaker 3: the same room at the same time.
Speaker 2: It's very difficult.
Speaker 3: Demographic guy tends to work with is a little bit easier,
Speaker 3: and they also prefer it when you suggest and look,
Speaker 3: I really want to meet in person. Oh absolutely please,
Speaker 3: we want to do that. So yeah, I think it's
Speaker 3: definitely demographic based.
Speaker 1: Okay, I want to ask you one other thing before
Speaker 1: we go to the break, which is entirely different subject matter,
Speaker 1: but I know it's something that we said we talk
Speaker 1: about and you are interested in ESG investing environmental, social
Speaker 1: and governance issues, which were so dominant for a couple
Speaker 1: of years there by that when I say they're dominant,
Speaker 1: I mean the concept was dominant of ESG, and slowly
Speaker 1: but surely it's sort of percolated through the investment system
Speaker 1: to the advisor base where clients were saying, we want
Speaker 1: to invest in an ESG fashion where we're happy with
Speaker 1: those issues environmental, social and governance issue of the investments
Speaker 1: we make. Now it seems to me just as differential
Speaker 1: advisor regime had grappled to it at all and had
Speaker 1: a sense of it. There's a blowback on ESG, mostly
Speaker 1: coming out of the US, but also coming out of
Speaker 1: places that ESG started, like the EU, on the basis
Speaker 1: that had lacked definition, on the basis that it was abused,
Speaker 1: and some of it was an entire charade. We had greenwashing,
Speaker 1: if you know what I mean. So we're are advisors
Speaker 1: and their clients on that whole ESG issue. Now.
Speaker 3: I think there's multiple parts that form this. It's a
Speaker 3: complex answer. One of them is that I think you're
Speaker 3: seeing a decrease in demand from you know, if you're
Speaker 3: breaking people into the pragmatists versus the believers versus people
Speaker 3: that aren't going to do it at all, the believers
Speaker 3: are still going to be really invested in this. I
Speaker 3: think that the pragmatists are looking at their budgets. They're
Speaker 3: looking at their interest rates and their mortgages and their
Speaker 3: were payments, and they're going, I need to take care
Speaker 3: of myself before I think outside of myself. And so
Speaker 3: we really saw that as rates ramped up, that's starting
Speaker 3: to change. We're seeing a shift in demand again back
Speaker 3: and whether that's a broader political concern as well, but
Speaker 3: that's definitely shifting. But then the other side, we had
Speaker 3: every fund and their dog was running some form of
Speaker 3: ESGRI strategy because it was marketable a lot of funds.
Speaker 3: You can understand ESG itself is just.
Speaker 2: A risk metric.
Speaker 3: It's looking at more data points that could have you know,
Speaker 3: material impact on decisions, you know, But that became a
Speaker 3: marketable point and if we weren't marketing it and they were,
Speaker 3: you know, what are we going to do? So everyone
Speaker 3: started talking about it, and even in recent weeks we've
Speaker 3: seen some of the bigger funds that did some of
Speaker 3: the most promotion pulling their more ESG products or just
Speaker 3: renaming them. They're still doing all of the same stuff
Speaker 3: behind the scenes, they're just not marketing it anymore. And
Speaker 3: I think that speaks to the maturity of the industry
Speaker 3: as well. I think it's less of a shiny object
Speaker 3: now and it's just to become normalized, which is what
Speaker 3: a lot of us are saying was going to happen
Speaker 3: eventually anyway. So I think those are the aspects. The
Speaker 3: greenwashing thing is really interesting. When you've got a lot
Speaker 3: of large companies that said they were going to do
Speaker 3: a lot but haven't and they're just pulling their statements,
Speaker 3: pulling there. And sometimes it's because they're physically impossible to
Speaker 3: meet what they were talking about, and that's a factor
Speaker 3: as well. So it's more complex than that, but it's
Speaker 3: probably as simple as I can bring it in.
Speaker 1: Yeah, Okay, it's interesting. I love, I would say I love,
Speaker 1: but I'm absolutely intrigued by the theory about defense spending.
Speaker 1: The defense spending fits with the ESG be cause onto
Speaker 1: a peaceful nation, I can defend itself, So you never
Speaker 1: know which way that argument goes. One other thing that
Speaker 1: just struck me. There is you mentioned about, and I
Speaker 1: imagine this is relevant that people do get more focused
Speaker 1: on hard numbers and returns when the cost of living
Speaker 1: goes up, and they do behave differently and they probably
Speaker 1: judge in a more severe fashion all the variables around investing.
Speaker 1: It's just interesting. I just noticed yesterday that we did
Speaker 1: something on that the forty year mortgage has arrived, and
Speaker 1: the forty year mortgage whatever as it means, it's actually
Speaker 1: a response to people pushing out their mortgages because of
Speaker 1: cost of living and finding ways to keep going, so
Speaker 1: you see how behavior changes when cost of living lifts.
Speaker 1: And I imagine I don't want to be so facetious
Speaker 1: as to say ESG is something that you are more
Speaker 1: willing to do when you're richer, but when you have
Speaker 1: less money, I imagine you get a little bit more
Speaker 1: sober and demanding on ESG definition and what exactly you're getting.
Speaker 1: And I'm more suspicious about grinwashing.
Speaker 3: I would say it's more related to I think it's
Speaker 3: more it's detailed than that. I think it's behaviorally, it's
Speaker 3: the old mass loves hierarchy of needs. Until you've taken
Speaker 3: care of where you are, your security, your safety, your family,
Speaker 3: your social need, it's harder to think of others.
Speaker 1: Yeah, but you might never get there. I mean the
Speaker 1: flip side of that is you know at what point
Speaker 1: you know, so it doesn't happen at twenty, it doesn't
Speaker 1: happen at thirty, doesn't.
Speaker 3: It doesn't have to happen. It's the thought process of Yeah.
Speaker 3: If you look at say during COVID, post COVID, people
Speaker 3: were saving more than they ever had rates below. They
Speaker 3: weren't necessarily safe or better off, they just felt safe
Speaker 3: for a better off the messaging that they were receiving
Speaker 3: was that. And if you tie that back in healthcare
Speaker 3: stocks and tech was doing really well, both overrepresented in
Speaker 3: responsible than any of SG portfolios, then you see, you know,
Speaker 3: energy crisis for multiple reasons, but you know, obviously some
Speaker 3: geopolitical ones, and all of a sudden that shifted and
Speaker 3: people who were in it for the you know, for
Speaker 3: the nump for the returns, not just for the ethics
Speaker 3: or the morals or whatever sits behind it moved because
Speaker 3: they were tested. And that's I think there's always going
Speaker 3: to be an aspect of that that's cycliqu with people
Speaker 3: that are going if everyone's into this, I'm into it
Speaker 3: because I can see money here. As people going or
Speaker 3: maybe I should think about it. I've changed my mind,
Speaker 3: and there's people that are just going to be like,
Speaker 3: I still stand by. I'd have nothing to do with this.
Speaker 3: And what this is differs. It could be difference between
Speaker 3: nuclear and no nuclear. It could be weapons or not
Speaker 3: weapons because of the exact reasons you've said, which is
Speaker 3: always the challenge in the space.
Speaker 1: Okay, very interesting, very interesting, interesting too, But you mentioned nuclear,
Speaker 1: which actually for money fits into the environmental because it's
Speaker 1: the least forest option, et cetera, and argument for another day. Okay,
Speaker 1: back in the morment, folks, some really interesting questions coming
Speaker 1: up and Nathan is ideally pleased. I hope to answer
Speaker 1: them all right back in a minute. Hello, Welcome back
Speaker 1: to the Australians Money Puzzle. I'm James Kirby and I'm
Speaker 1: talking to Nathan Fradley, financial advisor and well known voice
Speaker 1: on financial advice matters and the industry issues and how
Speaker 1: this financial advice industry is represented in the public eye.
Speaker 1: As he mentioned, and he's the first person to say
Speaker 1: this that if it keeps going the way it's going,
Speaker 1: there won't be any financial advisors. There's about as many
Speaker 1: being recruited. I'm being facetious, but the numbers are something
Speaker 1: like that. There's something like priests, that is, there is
Speaker 1: so few being recruited that they're all getting older. They
Speaker 1: better get some young people in there, and maybe the
Speaker 1: super funds coming in will allow the industry to replenish
Speaker 1: in a fashion that people will start in those big funds,
Speaker 1: start to know what they're talking about, grow become advisors
Speaker 1: that used to be how it worked, and a lot
Speaker 1: of the advisors you know today that are on our
Speaker 1: top five one hundred and fifty list. They started in
Speaker 1: big banks and insurers in the days before those big
Speaker 1: banks and insurers blew it basically by by advocating a
Speaker 1: sales culture which absolutely blew up and ended up with
Speaker 1: their Royal Commission once upon a time. Okay, Now, first question, Andrew,
Speaker 1: if I understand correctly, when your super is converted to
Speaker 1: a retirement phase, you no longer pay tax on earnings
Speaker 1: are capital gains tax for a total super balance below
Speaker 1: one point nine Bang on, Andrew. So why wouldn't every
Speaker 1: person once they reach preservation age that that's okay, that's
Speaker 1: when you can get to when you can retire. Everybody,
Speaker 1: why would't they transfer all their super into a pension
Speaker 1: phase and open up a second super account in accumulation
Speaker 1: if they are still working, come to some agreement with
Speaker 1: their employer to stop full time and work say thirty
Speaker 1: five hours a we come about thirty nine instead of forty,
Speaker 1: and then carry on contributing to the fund. The benefits
Speaker 1: would be that your super in retirement phase is tax free.
Speaker 1: The four to five percent minimum withdrawal from the super
Speaker 1: accountant pension phase could be redirected straight back into your
Speaker 1: super accumulation phase. All very elaborate, and to my first glance,
Speaker 1: all entirely legal and possibly sensible. Andrew, this is never
Speaker 1: advice information only Nathan, what do you think of that
Speaker 1: particular construction?
Speaker 2: I missed one detail? Ah, what is that?
Speaker 3: So?
Speaker 2: Spot on? Spot on?
Speaker 3: Accept once you are sixty to access your super you
Speaker 3: have to finish an employment and employment you can't just
Speaker 3: drop hours, you can't go part time. You have to
Speaker 3: finish unemployment. So that means just decreasing your hours doesn't
Speaker 3: meet that definition. And there's a pretty good argument to
Speaker 3: say leaving your employer and then being hired again two
Speaker 3: weeks later is probably early access of superannuation issues.
Speaker 1: Has anyone ever been sorry, has anyone ever been fined?
Speaker 1: Or stop doing that?
Speaker 3: I don't know the answer to that, But what I
Speaker 3: do know is there is a really high number of
Speaker 3: people over sixty operating at the voting boots that only
Speaker 3: work for a day.
Speaker 1: So sorry, elaborate, what do you mean? What do you
Speaker 1: try to say that?
Speaker 3: Well, if they had an employment and then they cease
Speaker 3: that employment, then they've made a.
Speaker 2: Condition of release.
Speaker 1: Oh yeah, yeah, I see, Okay, yeah.
Speaker 3: So that's the bit that he missed. Once you're sixty five,
Speaker 3: it doesn't matter. You can do it straight away. But
Speaker 3: as we spoke about earlier, fifty percent of people don't still,
Speaker 3: so you were sent him as one hundred percent. Bang on,
Speaker 3: Andrew just missed one little detail, all right.
Speaker 1: Sounds like a good advisor could help someone like that
Speaker 1: navigate how to do this if it was legitimate.
Speaker 3: I had someone literally two weeks ago who had an
Speaker 3: advisor for a very long time sixty seven and was
Speaker 3: an inpension phase. So sometimes things are just missed.
Speaker 2: Unfortunately as well.
Speaker 1: Yeah, okay, well it sounds like Andrew isn't going to
Speaker 1: miss it or all the Andrews out there. All right, Okay, now,
Speaker 1: very good Steve. I've been enjoying and learning good Steve.
Speaker 1: One thing I see is advertising all the time for platforms.
Speaker 1: I think he means trading platforms. I'm interested in trading
Speaker 1: a little myself for diversification, and is often said on
Speaker 1: your podcast to spice it up. I don't say that
Speaker 1: that sounds I changed your heart by having an angle
Speaker 1: where I am directly involved. However, there are many scams
Speaker 1: out there. Having some solid and trusted recommendations would be
Speaker 1: a good start to begin and understand and practice theories
Speaker 1: and approach safety. I wanted to try something without real risk,
Speaker 1: and I'm ready to take the plunge to see if
Speaker 1: it's for me. Thoughts on this, Okay, Steve and all
Speaker 1: the Steve's out there. Trading is an early different game
Speaker 1: than investing, and I see the I see people who trade,
Speaker 1: and I've talked to people who trade, and I find
Speaker 1: them very interesting, and I find that they're not particularly
Speaker 1: interested in I'll give you. I can tell you a story.
Speaker 1: I met a guy one time who traded BHP. This
Speaker 1: was his thing. He traded BHP day and night. And
Speaker 1: I said, Wow, this guy's going to be really interesting.
Speaker 1: He's going to he's going to know all about BHP.
Speaker 1: And I started talking about BHP at the time, who
Speaker 1: was the CEO, what they were doing, their policies, you know,
Speaker 1: different commodities and the balance between our and ore and
Speaker 1: copper and everything else. And he wasn't remotely interested in
Speaker 1: all that. He was just interested in the trading passions.
Speaker 1: There was the head and shoulders forming the.
Speaker 2: Was this, that was that?
Speaker 1: And it struck me that it's just completely different. So
Speaker 1: difficult question Nathan Fradley. Is there a safe, sensible way
Speaker 1: into trading for someone who's never done it.
Speaker 3: I mean, I think you're bang on, and thank you
Speaker 3: for taking a little words out of my mouth with
Speaker 3: it difference here I thought I would do that.
Speaker 2: No, it's no, it's great. I'm glad that i'd have
Speaker 2: to say it. I feel like I'm a downer.
Speaker 3: I think you know, if you if your retirement is
Speaker 3: otherwise locked in for ninety ninety five percent of your money,
Speaker 3: and this brings you personal satisfaction, then it's a hobby
Speaker 3: and see it that way. If you get a bit
Speaker 3: extra money out of it, great, you can rather that
Speaker 3: if you lose it, it doesn't derail everything.
Speaker 2: Great.
Speaker 3: I'd like to note firstly, if you're seeing Instagram ads
Speaker 3: for trading platforms and fun things that seem sexy, the
Speaker 3: sexier it is probably the least you should's likely you
Speaker 3: should be taking part in it. Trading is not sexy.
Speaker 3: It's boring. It's it might be fun for certain people,
Speaker 3: but it's not a sexy thing. But I would also
Speaker 3: say that, you know, if you're looking for diversification, it's
Speaker 3: also not necessarily speculative stocks. It could be you could
Speaker 3: have an index fund for the majority of your Australian holdings,
Speaker 3: and note that half of it is ten stocks, so
Speaker 3: you buy some other companies that you like to rebalance.
Speaker 3: It's a very different thing to try to find speculative microcaps.
Speaker 3: So I think there's a lot of good information out there,
Speaker 3: but generally if it's the old two good to be
Speaker 3: true saying probably rings true with this, and also like
Speaker 3: why are you doing it?
Speaker 2: What are you really looking for here?
Speaker 1: He's looking to make money? I expect, I think just
Speaker 1: in it to make money.
Speaker 3: I don't know if it's the great There's people who
Speaker 3: are paid a lot of money with Bloomberg terminals and
Speaker 3: see if the degrees you aren't able to make more money.
Speaker 3: So yeah, I would question whether it was your self
Speaker 3: attribution that resulted in that outcome.
Speaker 1: Just not to stamp it out entirely, I would say
Speaker 1: to listeners that if you know something very well, I
Speaker 1: don't know hypothetically here, Let's say you were in gold
Speaker 1: mining all your life, and you really know gold mining,
Speaker 1: and you know about gold and you've watched it for years,
Speaker 1: then you know you might, for instance, take out an
Speaker 1: option on a gold miner that you know very well,
Speaker 1: a call option, a put option, you might tiptoe in
Speaker 1: there where you have a reasonable chance of adding value
Speaker 1: or adding something or no something more than the vast majority,
Speaker 1: because by definition, that's what trading implies. And if you
Speaker 1: don't know something other than the vast majority, then you're betting.
Speaker 1: And that's feel feel free to bet. I mean, off
Speaker 1: you go, but I know what you're doing. That you're
Speaker 1: betting out there. That's that's my overarch in common to
Speaker 1: everyone on that one. Okay, we have a few questions.
Speaker 1: I want to keep going, but thank you Steve, thank
Speaker 1: you Andrew Daniel. I have a reasonable amount of equity
Speaker 1: and would like to use my principal place, my principal
Speaker 1: loan to invest in Shairs through borrowed funds. Are you
Speaker 1: able to explain the difference in debt recycling versus just
Speaker 1: increasing the size of the existing loan and splitting the
Speaker 1: increased amount to invest for tax purposes? Complex question? What's
Speaker 1: you really trying to say there?
Speaker 3: Yeah, I think I've got I think I know what
Speaker 3: you're saying. This is really hard to explain without a whiteboard,
Speaker 3: but we're going to We're going to try so gearing
Speaker 3: or borrowing to invest is the first step. Year it's
Speaker 3: very separate from debt recycling itself, and effectively, what we're
Speaker 3: talking about here is when you have a loan and
Speaker 3: you borrow against that loan, or you borrow from that
Speaker 3: facility and you invest. If you're investing a NOD or
Speaker 3: earn an income, then.
Speaker 2: That loan becomes tax deductible.
Speaker 3: It's not what that loan is secured against that met
Speaker 3: defines its deductibility. It's the purpose of where that money goes.
Speaker 3: So that's the first part. So if you're in a
Speaker 3: forty five percent tax bracket and you took out a
Speaker 3: hundred thousand dollars loan and you invested it, you know,
Speaker 3: and that loan was ten percent, it's only it's going
Speaker 3: to cost you five point five percent after tax. So
Speaker 3: that's sort of the way to think about it.
Speaker 2: That's the first part.
Speaker 3: Debt recycling is effectively trying to increase the amount of
Speaker 3: deductible debt and decrease the non deductible debt, but your
Speaker 3: debt position is the same. So a really simple example
Speaker 3: of this might be you've inherited one hundred thousand dollars
Speaker 3: and you want to invest it. So you invest one
Speaker 3: hundred thousand straight away just from your pocket, and you've
Speaker 3: got a mortgage to say half a milk, or you
Speaker 3: put a one hundred on the mortgage, take it out
Speaker 3: and then invest it. So now you've got the same
Speaker 3: amount of investment, the same amount of debt, but you've
Speaker 3: recycled one hundred thousand of it from non deductible to deductible.
Speaker 3: Your overall cash flow position should be better because you're
Speaker 3: paying less interest in and of tax. And what a
Speaker 3: debt recycling strategy then, is all your cash flow, your dividends,
Speaker 3: your normal surplus that you would otherwise invest, goes onto
Speaker 3: your non deductible and then you draw it out of
Speaker 3: the deductible and keep investing. And the argument is you
Speaker 3: would pay off your debt faster because your net cash
Speaker 3: flow is better.
Speaker 2: That's the simplest way I can explain it.
Speaker 1: Yeah, No, it's good. That's a very good explanation. And
Speaker 1: I would say to people, explore that, explore death recycling,
Speaker 1: optimize it. Okay, very good. None of that was advice,
Speaker 1: of course, it's all general. Thank you very much Daniel
Speaker 1: and Andrew and Steve for those very good questions. I
Speaker 1: think We are running out of time, Nathan, so we
Speaker 1: might just leave it there. Lovely to have you on.
Speaker 1: Thank you very much, Thanks James. That was Nathan Fradley, Folks,
Speaker 1: Nathan Fradley financial Advice. We'll hear from him again, I'm sure.
Speaker 1: Let's have some correspondence the Money Puzzle at the Australian
Speaker 1: dot com dot au for all your emails, questions, observations, complaints,
Speaker 1: and thank you very much to Leah Samuel Gloup for
Speaker 1: producing today's show. Talk to you soon,