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, Well,
Speaker 1: how is your financial year going? We are moving towards
Speaker 1: the end of January. You've had a few weeks now.
Speaker 1: Have you enacted those plans formulating in your mind all
Speaker 1: through the holidays about what you were going to do?
Speaker 1: Have you got on top of those posts you had
Speaker 1: about maximizing your situation as an investor? Have you sold
Speaker 1: those stocks that you know are no good and you
Speaker 1: won't let go? And most importantly, have you got a plan?
Speaker 1: Have you got a plan for this year? And my
Speaker 1: guest today is what I would think of as a
Speaker 1: classic financial planner and keeps his eyes firmly fixed on
Speaker 1: the issues that matter most two investors, and that often
Speaker 1: comes down to actual detail or the nitty grit if
Speaker 1: you like, of managing money as much as it does
Speaker 1: what we all have to talk about, which is markets
Speaker 1: and global forces and geopolitics which drive markets seem short
Speaker 1: of the Sonas Group, He's volunteer to answer the first
Speaker 1: batch of questions from investors for the year. How are
Speaker 1: you Liam.
Speaker 2: I'm very good. James has a lovely breakover Christmas in
Speaker 2: New Year, so ready to go for twenty twenty five.
Speaker 1: I like the sound of that. I like the sound
Speaker 1: of the refreshed guest. Very good, very good. All right
Speaker 1: now we still are just about and perhaps no more
Speaker 1: after this, but I think people do like to reset
Speaker 1: and get a sense of, you know, how is last
Speaker 1: year of what's coming down the line. We've covered that
Speaker 1: in the show fairly well, and most people would have
Speaker 1: listened now to the summer series where we laid out
Speaker 1: what the expectations are and some guides if you like,
Speaker 1: for the year ahead in all acid classes, shares and
Speaker 1: property and everything else. Just from your point of view, Liam,
Speaker 1: in terms of every year, some planners will be so
Speaker 1: sort of focused on a textbook approach. Would be like
Speaker 1: that they refuse to think that there's anything different one
Speaker 1: year after another, that the basic stay the same, but
Speaker 1: there's always new things. And just give us, if you would,
Speaker 1: your estimation of what the risks and opportunities are specifically
Speaker 1: this year. What about the risks, because I know there
Speaker 1: is there's certainly some points you want to make.
Speaker 2: Now we've had a couple of good years for people
Speaker 2: to invest in cash and fixed interest term of positive
Speaker 2: rates have been above five percent, and they did really well,
Speaker 2: and they've got accustomed to it. And now what we're
Speaker 2: seeing is as those rates start to drop and people
Speaker 2: understand that they're probably going to drop a fair bit
Speaker 2: in this year, probably about over zero point eight percent
Speaker 2: by the end of the year, but it's still a
Speaker 2: drop below that five percent. Key what I'm afraid of
Speaker 2: is that people are now going to be poached or
Speaker 2: attracted to new investments that are still offering more than
Speaker 2: five percent and in some case is double that by
Speaker 2: making it sound like they're safe investments. That The one
Speaker 2: I'm worried about is private credit and private equity. Often
Speaker 2: these are badged up as wholesale investments sold to wholesale investors,
Speaker 2: which means it just means somebody with assets over two
Speaker 2: and a half million or an income over two hundred
Speaker 2: and fifty zer now in one of the capital cities
Speaker 2: that a person's house may qualify them for that. So
Speaker 2: what concern is these investments are being targeted at people
Speaker 2: because their wholesale investor status, they don't have to give
Speaker 2: as much information. There's no protection in the background if
Speaker 2: it goes wrong, because they're not retail funds. So all
Speaker 2: I'm saying to people is, instead of trying to chase returns,
Speaker 2: understand that the cash raid is going to drop a
Speaker 2: little bit and your term deposits will drop a bit.
Speaker 2: Maybe look to do a two or three year term
Speaker 2: to posit that your four point seven or four point
Speaker 2: eight percent rather than worrying about, you know, sort of
Speaker 2: trying to get more than five percent in a different investment.
Speaker 1: That's thing you know, people have we you know this
Speaker 1: can't this this broadcam census and team that rates cycle
Speaker 1: the top, then that rates will fall in the year ahead.
Speaker 1: I've not actually come I'm not entirely convincedly in myself
Speaker 1: that they will, but they may, and the US certainly,
Speaker 1: I'm particularly not convinced that they might fall anymore.
Speaker 2: There.
Speaker 1: But having said that, that doesn't matter, because the banks
Speaker 1: will upset their rates anyway, won't they. They'll do what
Speaker 1: they like regardless of official rates to some degree. So
Speaker 1: you're altually coming upon this when you talk about this
Speaker 1: whole rush to private credit and unlisted opportunities, but mostly
Speaker 1: what they call private credit. Private and let's distinguish that
Speaker 1: from private equity or whatever. This is private credit where
Speaker 1: people are it's put in front of investors that they
Speaker 1: can get in on this sort of line of business
Speaker 1: that was always there, and for some reason we are
Speaker 1: led to believe that all of a sudden it suits everyone.
Speaker 1: And why hadn't everyone been in it all the time?
Speaker 1: Tell me, if you would, how that comes across and
Speaker 1: how how are people like our listeners encountering this. Is
Speaker 1: it in the way of a listed option, a listed
Speaker 1: investment on the market. Is it a private fund? How
Speaker 1: how does this stuff get offered? Is it just ads
Speaker 1: basically in newspapers and on websites.
Speaker 2: Yeah. Look, often it's being prompted by you know, promotion
Speaker 2: to accountants or to probably trusted advisors, and they're you know,
Speaker 2: they're being sold. But it's usually unlisted and you're talking
Speaker 2: a managed funder unit trust. The key factors that we've
Speaker 2: seen it is because it's private credit, it's loans to companies,
Speaker 2: and a lot of this has come from the fact
Speaker 2: that in construction of property development at the moment, they're
Speaker 2: finding it hard to raise money from the normal lenders,
Speaker 2: the banks and other providers, so they're looking for an
Speaker 2: alternative source of financing, and that's where these private credit
Speaker 2: funds are built up. So they're packaging up these It
Speaker 2: might be you know a number of different developments around
Speaker 2: the country and you're funding that the developer. But it
Speaker 2: doesn't really sound like that in the perspectives. It's just
Speaker 2: and it is a very short perspectives because it's for wholesale.
Speaker 2: It's basically been sold as you know sort of, it's
Speaker 2: you lending to private companies, you know, and it's pretty
Speaker 2: secured secured over investments, and you know, but you know,
Speaker 2: you start looking at things like it may be locked
Speaker 2: in for three to four years, so there's no liquidity,
Speaker 2: there's no guarantee on the return on the investments, even
Speaker 2: though there's assets backing it. Well. You know, for example,
Speaker 2: if there's a development that falls apart and doesn't go ahead,
Speaker 2: most of the money could be lost on that. It
Speaker 2: just depends on what they recover selling the land that's there.
Speaker 2: So I just warned people to to think twice, get
Speaker 2: an independent view of something like that, and really ask themselves,
Speaker 2: am I a wholesaler sophisticated investor do it have I
Speaker 2: really got the knowledge to manage something like this and
Speaker 2: to be involved in something like this, and there is
Speaker 2: the person who's selling it to be are they connected
Speaker 2: to it in any way integrated?
Speaker 1: I must ask you two things. One is, this isn't
Speaker 1: all private, right? There is listed versions of this, isn't there?
Speaker 2: Yes?
Speaker 1: So that means you don't have to be a sophisticated investor, right.
Speaker 1: So if it's on the share market, you can buy
Speaker 1: five hundred buxworth. So but as you say, the sort
Speaker 1: of target audience is so cold sophisticated investor audience, which
Speaker 1: is something of a misleading term these days if it
Speaker 1: was ever or anything else, but certainly misleading these days
Speaker 1: because it allows the seller of the product to not
Speaker 1: take half as many as they don't have half as
Speaker 1: much responsibility to you because you're classified as sophisticated. You're
Speaker 1: classified sophisticated. Nothing to do with your sophistication, just a
Speaker 1: matter of your bank accounts and how much you have.
Speaker 1: And they haven't indexter changed that threshold. Consequently, the number
Speaker 1: of people who qualify has become enormous, really, and they
Speaker 1: are reviewing that, but for the moment everyone's taking advantage
Speaker 1: of it. I went to a presentation with the top
Speaker 1: really the top and I'm not want to pin someone here,
Speaker 1: but I went to the presentation from the leading private
Speaker 1: credit group probably in Australia and one of the originals.
Speaker 1: And of course people would have made money out of
Speaker 1: this fund and funds from this house in the early days,
Speaker 1: and now of course they see now they just know,
Speaker 1: you know, this is what we're going to go for
Speaker 1: the middle Australia. We can get the average investor. And
Speaker 1: the same group has gone very big and they've moved
Speaker 1: from their little suburban office block up in the suburbs
Speaker 1: into the middle of town. I'm sure you have an
Speaker 1: idea who I'm talking about. Anyway, it was such a
Speaker 1: good presentation. It was so convincing, and it was about
Speaker 1: how the banks were pulling back and the banks weren't
Speaker 1: really lending anymore, and this was the opportunity for lifetime
Speaker 1: and you know, don't miss this, You're going to If
Speaker 1: you miss this, you're going to regret it. Blah blah blah,
Speaker 1: And it was quite convincing. What's the flow in their presentation?
Speaker 1: Do you think.
Speaker 2: It's the nature of the assets that are backing these
Speaker 2: funds has changed dramatically since COVID. The financing is tougher
Speaker 2: materials have gone up to cost the trades to complete
Speaker 2: these developments, and council requirements to complete these developments. Is
Speaker 2: it all?
Speaker 1: It's propertly Liam, is it?
Speaker 2: I mean?
Speaker 1: Is there nothing else to these guys are doing?
Speaker 2: There is some yeah, you know, we talked to private
Speaker 2: equity separate, but there's also you know, financing for companies
Speaker 2: that want to do some growth and things like that.
Speaker 2: The ones I'm worried about are the ones that are
Speaker 2: backing construction. I know that we have to build in
Speaker 2: this country, and I know that's required, but I don't
Speaker 2: think that should be done on the back of people
Speaker 2: that don't understand what they're getting into. If I was
Speaker 2: doing funding a private developer, I would be wanting eighteen
Speaker 2: to twenty five percent return. So when somebody sees something
Speaker 2: that says ten to twelve percent and it's a great opportunity,
Speaker 2: I don't think that's a great opportunity because you're taking
Speaker 2: a lot of risk that the development can go wrong,
Speaker 2: and we you know, I think there's over seven hundred
Speaker 2: construction companies went bust in Victoria last year, and I'm
Speaker 2: not sure the number of New South Wales and the
Speaker 2: other States. But that should tell you alone. And the
Speaker 2: thing you mentioned the banks are pulling back from this area. Yeah,
Speaker 2: the banks have assessed the risk and decided.
Speaker 1: It's too book. That's right. It was good, it was
Speaker 1: good business. You'd imagine they'd be in there. I want
Speaker 1: to simplify it, but there is that line of thinking, okay,
Speaker 1: very good. So it's interesting that to do this with you,
Speaker 1: just to sort of narrow down and say, Okay, there
Speaker 1: standing risk and what about the harder question imagined for
Speaker 1: someone like you to answer, what about the outstanding opportunities
Speaker 1: This year?
Speaker 2: It can be really volative, continued volatile year. There's a
Speaker 2: bit of euphoria today that Gazza seems to be you
Speaker 2: on its first step, but that that could fall apart
Speaker 2: very quickly, and if it does, then may be a
Speaker 2: shock to the market. So this is a year to
Speaker 2: keep some money in cash. Trump is coming in. If
Speaker 2: he suddenly announces tariffs or threadns tariffs, the markets may drop.
Speaker 2: That's always his first gamble gambit, so he often pulls
Speaker 2: back from that. So when he does threaten them, the
Speaker 2: markets may fall. That maybe your time to buy into
Speaker 2: a nicely diversified ETF and just get yourself a little
Speaker 2: bit of extra exposure and just ride that wave of
Speaker 2: recovery once he calms down and says, okay, instead of
Speaker 2: a twenty five percent taro, if I'm going to do
Speaker 2: a five percent taro for you know, I'm not going
Speaker 2: to attack Canada and Mexico because they are good.
Speaker 1: Neighbors in itself. By the dips. Is this fairly bullish view,
Speaker 1: isn't it?
Speaker 2: Well? If if you're buying into a solid blue chap
Speaker 2: etf well diversified for the long term, it's nice to
Speaker 2: get in at five or ten percent below where it's
Speaker 2: currently trading. Yeah. And I'm a long term investor, James,
Speaker 2: So I'm not trying to trade the market. I'm just
Speaker 2: looking for opportunities for at the moment, I'm looking at
Speaker 2: it and going, oh, I really don't want to put
Speaker 2: more into the market at the moment. But if I've
Speaker 2: got an opportunity to get in at five or ten
Speaker 2: percent less, yeah, So for the long term, I'd like
Speaker 2: to just move a little bit of money from cash
Speaker 2: and fixed interest where we've done really well, just to
Speaker 2: take a little bit of an extra risk going forward.
Speaker 2: But also I'm taking some money out of things like
Speaker 2: CommonWell Bank and things that just can't back their valuations.
Speaker 2: And I'm just saying a lot of my clients are
Speaker 2: in pension phase, so there's no CGT, so I'm able
Speaker 2: to take some money out of there, and just I'm
Speaker 2: looking for opportunities of where to place that.
Speaker 1: Okay, that's right, Okay, very interesting two issues there. One
Speaker 1: is obviously that idea that the fixed interest has the
Speaker 1: cycle has topped, as you say, and you said at
Speaker 1: the start, perhaps if you still want that, perhaps you
Speaker 1: fix at the inn and around these levels, knowing that
Speaker 1: you know, there's very few times in history really where
Speaker 1: you get where your cash rad is above this to say,
Speaker 1: four to six percent. That's a sort of standard range,
Speaker 1: isn't it.
Speaker 2: And I was just getting some quotes this morning, James.
Speaker 2: So you can get a four year annuity for four
Speaker 2: point nine percent, or a five year one at four
Speaker 2: point nine to five. So that's locking in four point
Speaker 2: nine five percent paid each year for the next five years.
Speaker 2: You know, if you're somebody in pension phase that needs
Speaker 2: to fund your your pensions, that's a lovely guarantee for
Speaker 2: the next time.
Speaker 1: That's you said, a newity. That's not a fix. That's
Speaker 1: not that cash deposit.
Speaker 2: Yeah, the term deposits. For the same time, you're looking
Speaker 2: at four point five to four point seven, So you
Speaker 2: can get that a little bit extra by going through
Speaker 2: an annuity provided and there's challenger and resolution life and comeback.
Speaker 2: So just shop around and just have a look.
Speaker 1: You're putting cash with the annuity provider, is.
Speaker 2: It, yes, into a fixed term annuity?
Speaker 1: Yes, I see a right, okay, and they tend to
Speaker 1: pay a little more, do they.
Speaker 2: Yeah, well, at the moment they do. Okay, you can
Speaker 2: still get The trick is you can open an incentive
Speaker 2: save over with one of the banks, or you know,
Speaker 2: a high interest savings acount and still get over five.
Speaker 2: But we know at some stage during the year that's
Speaker 2: going to drop. Even if interest rates don't drop, the
Speaker 2: banks will start dropping them themselves. You had three months
Speaker 2: ago the term deposit rates dropped the four point seventy
Speaker 2: five because the thought rates would really start dropping from February.
Speaker 2: Now we're back up to where we can get five
Speaker 2: percent for term deposits at the moment for one year,
Speaker 2: four point nine for two years, and then it starts
Speaker 2: dropping off. But when I was so I was looking
Speaker 2: for alternatives. And I looked at some the nudities over
Speaker 2: the last few days and I can get four point
Speaker 2: seven to four point nine to five from two year
Speaker 2: to five years. So you talk about laddering to make
Speaker 2: sure that you're covering your future capital needs to pay
Speaker 2: pensions or to pay your living expenses. And by using
Speaker 2: those term the puzzles and the nudies over twelve twenty four, yeah,
Speaker 2: three years, four years, and five years, they can lock
Speaker 2: in and be sure that then with the rest of
Speaker 2: their money, they don't have to react to market changes.
Speaker 2: They can invest longer term knowing that they've covered their.
Speaker 1: Cost, they've got this core and they know they're going
Speaker 1: to get for it over a period of time. Very yeah,
Speaker 1: very interesting. Okay, all right, And just on the other issue,
Speaker 1: just before we go to the break, taking some off
Speaker 1: the table. Obviously, after a very good year on equity markets,
Speaker 1: there are certainly a very good year when we look
Speaker 1: at it, it was only it was a goodish year
Speaker 1: for equity markets, but it was a spectacularly year for
Speaker 1: bank stocks. So you're talking about taking a little bit
Speaker 1: off the top of the bank stocks.
Speaker 2: Yeah, and look last year I was winging that back
Speaker 2: in nab and an Ain said, we're so far behind
Speaker 2: and they just had they had a great year and
Speaker 2: they've pulled up. I don't understand Commonell Bank at the
Speaker 2: moment why it's up where it is. So I am
Speaker 2: taking profits on that, but you know, I'm not coming
Speaker 2: out of them. I'm just saying, you know, let's just
Speaker 2: take a bit of a risk off the table. It's
Speaker 2: been a good run and you know, you know, in
Speaker 2: a lot of cases now I need to prepare for
Speaker 2: future pension payments and things like that. So I am
Speaker 2: just building up that cash with the idea that if
Speaker 2: the market does take a big drop, I have the
Speaker 2: option to go in and get in a little low
Speaker 2: price if I need to.
Speaker 1: Right, Okay, very good, Very good. All right, we'll take
Speaker 1: short break, Folks'll be back in a minute. Hello, Welcome
Speaker 1: back to the Australians and Honey Puzzle podcast. I'm James Kirby,
Speaker 1: was editor at The Australian, talking to financial advisor Liam
Speaker 1: Short of the Sonas Group, who's often on the show.
Speaker 1: Always a popular guest. I'm one of my first guests
Speaker 1: of the year for the Money Puzzle. Okay, Liam, I've
Speaker 1: collected quite a few questions for you. We may not
Speaker 1: get through them all, and keep the questions coming everybody.
Speaker 1: They're really good, and I've noticed that they're getting more
Speaker 1: and more diverse in nature, which is great actually, and
Speaker 1: all sorts of Sometimes people literally just make a comment
Speaker 1: or an observation. That's all welcome. Okay, Catherine says, I
Speaker 1: love the podcast. I'm so glad. I wish I'd come
Speaker 1: across this sort of information years ago. Thank you, Catherine.
Speaker 1: The hard part for me was understanding and making the
Speaker 1: first investment, taking that initial plunge, then coping with everything else.
Speaker 1: I guess I learned by doing, But in hindsight I
Speaker 1: really had issues finding good, clean information and independent advice.
Speaker 1: I do not really think it is possible to make
Speaker 1: good decisions without having basic knowledge, given the number of
Speaker 1: bad operators out there. Okay, Catherine, now can you please
Speaker 1: talk about it realistic long term journey to financial literacy
Speaker 1: and security. Please and recommend basic courses on finance because
Speaker 1: I have found there is a lot of bad advice
Speaker 1: out there. Okay. It's a great question, you know, with
Speaker 1: something we should cover more often. Someone who's starting or
Speaker 1: is somewhere near the start of an investment journey. And
Speaker 1: I wish I do wish I could tell you there's
Speaker 1: a course that you can sign up for. I really do.
Speaker 1: I don't know it, and I hate to tell you
Speaker 1: that a lot of the private courses are deeply skeptical
Speaker 1: about courses offered by anyone selling anything. What do you think, Liam, Yeah.
Speaker 2: Well look for me. There's two things you need to
Speaker 2: start with. One, understand your cash flow. So just go
Speaker 2: to moneysmart dot co the you and look for the
Speaker 2: budget planner.
Speaker 1: It's good, Yeah, to download that.
Speaker 2: Budget planner spreadsheet and get out six months of credit
Speaker 2: card and debit card and expenses and put it into there.
Speaker 2: Have a glass of wine, just take your time doing it.
Speaker 2: But the value of understanding whether or not you've got
Speaker 2: spare money to save or whether you've got commitments that
Speaker 2: mean you can't take a risk, that's the first a
Speaker 2: deal goal. And then go back to that money Smart
Speaker 2: website and start reading some of the articles on different
Speaker 2: things in there.
Speaker 1: Okay, I mean we should tell listeners that the particular
Speaker 1: attraction of the money Smart website is said, it's from
Speaker 1: the government, it's from ask and it's something that Acik
Speaker 1: has done and stuck with and it's evolved and it
Speaker 1: is damn good. So money Smart, which is money smart
Speaker 1: dot gov dot au, the ACIIC website where whatever else
Speaker 1: is going on at that website and whatever is the
Speaker 1: nature or the articulation of ideas And initially, if you
Speaker 1: like basic elementary investment ideas and protections for you, it
Speaker 1: is from the government and they are not selling anything.
Speaker 2: And then move on from there when you're ready to
Speaker 2: start learning about investing. Then if you want to know
Speaker 2: about shares and listed products, the ASEX have courses on shares, ETFs,
Speaker 2: bonds and they're all split down into nice little short
Speaker 2: modules of about ten to fifteen minutes each, really easy
Speaker 2: to understand. If you're interested in SMSF, the ATO have
Speaker 2: a set of about twenty six little two to three
Speaker 2: minute videos on every aspect of running an SMSF. And
Speaker 2: they've also now just issued a course. The course, I'm
Speaker 2: afraid is not what I expected. It's they've designed it
Speaker 2: as the one to punish people who broke the rules
Speaker 2: and force.
Speaker 1: Them to read it, so they spend all their time
Speaker 1: thinking of telling you what not to do.
Speaker 2: Yeah, well, it's just it's very boring. It's all written,
Speaker 2: whereas those videos were excellent. So I would start with
Speaker 2: the videos and then move to the thing, and then
Speaker 2: just start going. If you're interested in something specific, go
Speaker 2: onto a forum maybe on Facebook or somewhere that's talking
Speaker 2: about those forget about what they're recommending on there. Listen
Speaker 2: look for what people say where they learned from. You know,
Speaker 2: they if they the course they did or a book
Speaker 2: that they read. And that's why I go back to
Speaker 2: that money Smart. I know a lot of people love
Speaker 2: Scott Papes Pare for the Investor and things like that.
Speaker 2: I believe now he might be doing a lot of
Speaker 2: work with money Smart. So you're looking for your places
Speaker 2: where you're getting educational content and no one's trying to
Speaker 2: sell you anything. Like as a financial advisor, I'm not
Speaker 2: licensed to sell property or to advise on property. But
Speaker 2: because I do SMSFS, I've got a whole section on
Speaker 2: my SMSF coach, So I have fifteen different articles on
Speaker 2: everything to do with property in an SMSF purely because
Speaker 2: if I have someone who comes to me and wants
Speaker 2: to know whether it's right for them, I want them
Speaker 2: to be educated about it and know the risks and
Speaker 2: know what they can do before they commit to doing
Speaker 2: something like that.
Speaker 1: Terrific Okay, yeah, yeah, Catherine, keep that in mind and
Speaker 1: everyone keep that in mind. So I did like the
Speaker 1: ideas they're the money Smart okay, which is on by ASIC,
Speaker 1: which is own by the government, as the sort of
Speaker 1: elementary protect yourself because you've got to protect first for
Speaker 1: do anything. I think that's a very well good way.
Speaker 1: In Liam, the ATO, the Australian Tax Office on this
Speaker 1: is on super and on SMS in particular, as Liam
Speaker 1: says that I imagine the weakness of the ATO delivery of
Speaker 1: information is that they're so concentrated on what you're not
Speaker 1: allowed to do they might forget to tell you what
Speaker 1: you can do. That's because they are the regulator as well.
Speaker 1: But anyway, it is the government rather than someone's selling something.
Speaker 1: You mentioned the AX, which is a course a listed company,
Speaker 1: but nonetheless, traditionally it was very strong on education, used
Speaker 1: to be very good. I went through a patch where
Speaker 1: they were where they weren't very good, and I think
Speaker 1: they definitely have revived considerably the AX. And it's interesting
Speaker 1: to hear that they have those short videos, courses and modules.
Speaker 1: So that's another place you could look, and I would
Speaker 1: trust them on that issue of education and education alone
Speaker 1: very good. So hopefully that's a start, Catherine. I mean, yes,
Speaker 1: there's books, Yes, there are courses, extreame. I think the
Speaker 1: talking off the cuff here. Scariest thing I see in
Speaker 1: terms of people getting to know investing is people who
Speaker 1: don't know anything starting into something ridiculously elaborate, like trading
Speaker 1: CFOs or warrants or options. As if you could walk
Speaker 1: off the street and do that. I mean, I'm doing
Speaker 1: this for thirty thirty years, and I would be very
Speaker 1: and I'm qualified as a security advisor. I still wouldn't
Speaker 1: do it that way. So so let me just put
Speaker 1: that on the table or yes, thank you Catherine. Okay,
Speaker 1: a question from Brett there.
Speaker 2: Liam, Yeah, I'll read this one. Ut I have an
Speaker 2: internal debate on continuing my financial advisor, who currently manages
Speaker 2: my portfolio of three hundred and ninety thousand. I've worked
Speaker 2: out I can do it myself using index funds and
Speaker 2: morning Star services for tracking in re search, saving one
Speaker 2: point zero five in fees. My main concern is my
Speaker 2: own time. I work more than fifty hours a week
Speaker 2: in my current job, and with kids, I'm not sure
Speaker 2: I can devote enough time to manage the portfolio successfully.
Speaker 2: How much time should I expect to set aside each
Speaker 2: week to manage this myself. That goes back to what
Speaker 2: he mentioned about moving to index funds and using some
Speaker 2: morning start to manage is your portfolio or the research
Speaker 2: on it. It's whether he is he going to start trading,
Speaker 2: which you've just mentioned is a really hard thing to do.
Speaker 1: How active is he or is he going.
Speaker 2: To choose some decent diversified index funds and maybe some
Speaker 2: satellite funds and some individual stocks and just you know,
Speaker 2: keep an eye on them, but not be looking to
Speaker 2: flip them every time, you know, the market moves, so
Speaker 2: you know, if he sets it up properly, be aware
Speaker 2: that I would not do this with just individual shares themselves.
Speaker 2: I would be using index funds or managed funds. You
Speaker 2: could set them up and the most you would have
Speaker 2: to do is want to two hours a week, and
Speaker 2: most of that would be reading about what's happening in
Speaker 2: the world and understanding what's happened in the world, Even
Speaker 2: something as simple as watching Alan Coler on the seven
Speaker 2: o'clock news to understand what's going on and the effect
Speaker 2: on your portfolio. So and it may be something that
Speaker 2: he does as a bit of downtime for himself from
Speaker 2: the from working the kids. But really it comes back
Speaker 2: to that, why are you doing it if you think
Speaker 2: you can trade and beat the market? I'd say, because
Speaker 2: you're busy gonna It's gonna end up being one of
Speaker 2: those things that falls in the background. You'll have gone
Speaker 2: into some stupid stock that you had great somebody said
Speaker 2: as a great outlook, and then you go back and
Speaker 2: look at it two months later and you've lost sixty
Speaker 2: percent of your mind.
Speaker 1: Sir, you didn't look at it for a month and
Speaker 1: you said, what on earth, Oh, what's going on? Fifty percent? Yes, okay, Brett.
Speaker 1: So I hope you hear that. I would just add
Speaker 1: one thing about morning Star, and I like morning Star
Speaker 1: and I have a lot of respect from morning Star. However,
Speaker 1: I would tell you that, you know, no researcher is perfect,
Speaker 1: and their analysis is, in my experience, it's a heavily
Speaker 1: it's heavily quant it's heavily numbers based. And often I
Speaker 1: see sometimes this stuff makes perfect sense, and sometimes I
Speaker 1: see they have a stock recommended and I say, oh God,
Speaker 1: how could you recommend that, but they're working entirely on
Speaker 1: the numbers, and the numbers might well be very interesting,
Speaker 1: but I might be familiar with the company and the
Speaker 1: people and the history of that particular company, and it
Speaker 1: will completely change my view. So just keep that in
Speaker 1: mind about that sort of thing. Research. It's a straight
Speaker 1: quand research.
Speaker 2: Yeah. One thing to mention there, James, is whichever broker
Speaker 2: or online trading platform you're using, normally they'll have a
Speaker 2: research and a news section for each stock, a lot
Speaker 2: of the better ones. They'll also have a consensus section,
Speaker 2: which shows you what all the brokers are thinking about it.
Speaker 2: They may not name the brokers, see that all look,
Speaker 2: seven brokers have it as a hold, two have it
Speaker 2: as a strong buy, and one has it as a
Speaker 2: strong sell. That gives you an idea that, yes, it's
Speaker 2: probably not a bad one to get into, and then
Speaker 2: you could do a bit more research and try and
Speaker 2: find out why a few of them are recommending it.
Speaker 2: Really well. But if you suddenly find a morning starts
Speaker 2: recommending something and six other brokers are saying sell, that's fine.
Speaker 2: So that's your safety blanket to check, you know, is
Speaker 2: the thinking that of the research house I'm using, is
Speaker 2: it way out of whack with what the market thinks.
Speaker 1: And to be fair, they are not brokers in the
Speaker 1: sense they're not they're raising money for anybody, so you
Speaker 1: don't have any of those complications with morning Star. Wars
Speaker 1: is a very good thing. They're doing some very good work.
Speaker 1: I will put that down. But I personally have an
Speaker 1: observation that sometimes there's almost a certain myopic aspect to
Speaker 1: the work which is so heavily based on numbers and
Speaker 1: not what's going on around that particular stock. That's just
Speaker 1: something you see sometimes with all sorts of people, including
Speaker 1: some fund managers to who are again good, but have
Speaker 1: that issue that completely believe the numbers and the other
Speaker 1: thing is that the numbers are not true. I give
Speaker 1: the companies bullsheitting on the numbers. Well you know, I'm sorry,
Speaker 1: but the whole estimation goes out the window. Okay, we'll
Speaker 1: take short break back in a moment. Hello and welcome
Speaker 1: back to The Australian's Money Puzzle podcast. James Kirby talking
Speaker 1: to Liam Short of the Sonas Group. Sonas Group. He's
Speaker 1: a financial advisor regular on the show. So I'll just
Speaker 1: start with the one from Ranjeev, who says I would
Speaker 1: appreciate it if you could send me the list of
Speaker 1: top financial advisors published by the Australian. Yes, well, now, Rangjiev,
Speaker 1: I can't do that, but I can only point you
Speaker 1: to to how that comes out. So that's the Baron's
Speaker 1: list of the top one hundred and fifty advisor which
Speaker 1: is put together by the Australian in conjunction with Barons
Speaker 1: of New York every year. If you're really quick and clever,
Speaker 1: I would say to any listener, it's a great list
Speaker 1: worth getting, and you could just buy the magazine on
Speaker 1: the day, which is in September every year it comes out.
Speaker 1: But if you miss the magazine in paper, then the
Speaker 1: only way to see that list in its entirety one
Speaker 1: hundred and fifty advisors is to go onto the Australian
Speaker 1: and to subscribe. Nothing is free. I'm afraid someone has
Speaker 1: to pay somewhere for all this. So that's how it goes,
Speaker 1: all right for tax, Randjiev, And hopefully that would be
Speaker 1: useful to you when you do that, all right? Question
Speaker 1: from Bruce Liam.
Speaker 2: Yeah, so, Bruce asks, I always enjoy your too weekly podcast,
Speaker 2: but something that stirs me up every time that I
Speaker 2: hear you say it is that a person can only
Speaker 2: have a maximum of one point nine million in their
Speaker 2: superannuation tax free pension phase account. That is not true.
Speaker 2: So that's what he's saying, And what is true is
Speaker 2: that you can only start a pension with one point
Speaker 2: nine and they can, which you know it's correct on
Speaker 2: that point. It's called a transfer balance cap, and that's
Speaker 2: the maximum amount that you can move from accumulation to
Speaker 2: pension phase to start a pension. And at the moment
Speaker 2: that's one point nine million, probably going to go up
Speaker 2: to two million on the first of July. But yes,
Speaker 2: if it grows and let's say you earn seven percent
Speaker 2: and you're only taking four percent pension, yes your balance
Speaker 2: can go up. So that's not an issue. One of
Speaker 2: the catches that he probably you've probably been talking about
Speaker 2: is there's also called a total superbalance. Once your balance
Speaker 2: and super hits one point nine million, you can no
Speaker 2: longer put any more non concessional amounts into your super.
Speaker 2: You can only do the thirty thousand concessional each year.
Speaker 2: So there are two different limits, but unfortunes are set
Speaker 2: at the same amounts and they cause a lot of confusion.
Speaker 2: But you can only put a maximum of one point
Speaker 2: nine in before you're stopped pulling any voluntary contributions, and
Speaker 2: you can only start a pension with a maximum of
Speaker 2: one point nine million at the moment. So that answers
Speaker 2: the first part of his question.
Speaker 1: Yeah, so you can read the second part in the moment.
Speaker 1: I might just add it for Bruce and everyone else
Speaker 1: on this one. The Super arrangements, as I so often mentioned,
Speaker 1: are ridiculously absurdly complex, often contradictory, and it's just a
Speaker 1: patchwork quid that's been designed over the year, over the years,
Speaker 1: and people keep getting ideas to add and subtract to it,
Speaker 1: and it's just ridiculous. It's like learning another language. I
Speaker 1: have learned the language as many people have need to,
Speaker 1: but I can't explain the whole thing every time. That's
Speaker 1: the problem, Bruce. I mean, if I's been asked, if
Speaker 1: I give the proper answer, the full comprehensive answer to
Speaker 1: every question on Super, honestly, everyone would just fall asleep,
Speaker 1: they'd walk away, and no one would listen to the show.
Speaker 1: So we use this sort of shorthand, like one point
Speaker 1: nine is the most you can have in super before
Speaker 1: you start paying tax. One point we should say one
Speaker 1: point nine is the most you can have and your
Speaker 1: transfer balance when you speak, when you move from miccuing
Speaker 1: relation to the pension, as Liam just said, and then
Speaker 1: from then on it actually can get bigger. So yes,
Speaker 1: you can have, over the fullness of time more than
Speaker 1: one point nine as it grows. Yes you can, but.
Speaker 2: We just can't.
Speaker 1: It's just it's impractical for commentators like myself to spell
Speaker 1: that out each time. So so that's the explanation. I
Speaker 1: hope it's good enough for you, all right. The rest
Speaker 1: of that question from Bruce Liam, if you would.
Speaker 2: Yes, he says, also, yes, perhaps AUSSI shares might have
Speaker 2: had less favorable in these recent years compared with US shares,
Speaker 2: but I also recall how around year two thousand, US
Speaker 2: shares were not doing as well as Aussie shares, and
Speaker 2: I reasoned at the time that Ozzie shares would always
Speaker 2: do okay because all the money that lands on our
Speaker 2: superannuation fund managers desks every day and which they need
Speaker 2: to do something with like buying Aussie shares. Anyway, so
Speaker 2: may I suggest that you add some nuance when you
Speaker 2: tell listeners about this so again he's right. Two thousand
Speaker 2: was a very volatile time for US stocks, but that's
Speaker 2: because there was opportunities in the tech stocks at those
Speaker 2: times it was the tech bubble. There was no access
Speaker 2: in Australia to any of those opportunities. So in the
Speaker 2: run up to it, international shares were doing brilliantly because
Speaker 2: they were invested in these shares, But there was a risk,
Speaker 2: And that's why you've always got to look at the
Speaker 2: risk of what you're getting yourself into. At the moment,
Speaker 2: you'd be really worried about getting into AI is such
Speaker 2: a good run, you'd be worried about you'd be worried
Speaker 2: about putting more money into international tech stocks. But for
Speaker 2: people who understand that area, have done their research, they
Speaker 2: may be comfortable to do so.
Speaker 1: Can I just do you think there's any merit in
Speaker 1: Bluth's line of thinking that there's so much money in
Speaker 1: the superinnuation funds that Australian shares will be okay because
Speaker 1: they need to do something with it. Is there is
Speaker 1: that a reliable way of not anymore?
Speaker 2: Because you look at Australian Super it's got its own
Speaker 2: office in New York and London. Now same with a
Speaker 2: lot of the other companies. Probably sixty to seventy five
Speaker 2: percent of every dollar that comes in in super now
Speaker 2: is going overseas in either international bonds, international government bonds,
Speaker 2: international shares, infrastructure. Look at the amount of you know,
Speaker 2: international investments and that all of these super funds are
Speaker 2: involved in nowadays. So the problem in Australia, I feel
Speaker 2: is yes it everyone feels it's fairly secure because you know,
Speaker 2: you've got thirty two percent in banks and insurances in
Speaker 2: our index, you've got our long term big resource stock companies.
Speaker 2: But that's probably our biggest risk is that we're such
Speaker 2: a focused, small in a small, fun country that if
Speaker 2: one or two sectors take a hit, it can really
Speaker 2: put Australia shares on in the bad books.
Speaker 1: Half half the market it is two sectors, and half
Speaker 1: the market is four banks and three miners. Really yeah,
Speaker 1: and banks and miners are forty five percent or.
Speaker 2: So of the market cap. And one of the things
Speaker 2: I'm really talking to my clients about is talk to
Speaker 2: your children and understand the next generation and their loyalty
Speaker 2: to the banks. Okay, they have not grown up with
Speaker 2: A and Z and CBA and all of those being
Speaker 2: in their ear they will move for a five dollars
Speaker 2: voucher or something exciting that's offered free as part of
Speaker 2: an app to a company. When they're going for a mortgage,
Speaker 2: they're going to a mortgage broker. I think seventy two
Speaker 2: percent of loans now are done to mortgage brokers. So
Speaker 2: they're not having contact, well, they can't even have contact
Speaker 2: with their bank manager because there is no bank manager
Speaker 2: in the local branch anymore and they've got no authority.
Speaker 2: So you know, all big four banks at the moment,
Speaker 2: I really worry about who is going to be our
Speaker 2: big four banks in ten years time, because it's who
Speaker 2: has your data? Is the one that's going to be
Speaker 2: selling to you and the one that you're going to
Speaker 2: be because they'll be sending messages to you and texts
Speaker 2: and emails and you know, three your searches, they will
Speaker 2: be targeting you. And this is the Amazon banks and
Speaker 2: the Apple banks and the paypals, and they have so
Speaker 2: much information. And look, I know our own banks have
Speaker 2: that information from the FBOs machines and things like that.
Speaker 2: And I've seen CommonWell Banks computer studio where they can
Speaker 2: see when people are spending in different suburbs at different times.
Speaker 2: But it's once you step up to the information that
Speaker 2: Apple has from people's Apple Pay and iPhones and their searches.
Speaker 2: You know, I know in the US at the moment,
Speaker 2: Apple have their savings account that they've opened up and
Speaker 2: are letting people invest. It's paying about one to one
Speaker 2: point five percent above the normal big bank right, So
Speaker 2: then you.
Speaker 1: Just wouldn't you just eat that up if you could
Speaker 1: have that. I mean, I'm on the phone all day,
Speaker 1: I use it for all my payments basically, and if
Speaker 1: I was getting one and a half percent above above
Speaker 1: the official rate.
Speaker 2: They're targeting the people they want as customers because they've
Speaker 2: seen it their spend history, and so I do worry
Speaker 2: about who's going to be the big banks in ten
Speaker 2: years time.
Speaker 1: M M okay, interesting and that and that in some
Speaker 1: way makes you feel more comfortable in taking some profit
Speaker 1: off your com bank shares that went up fifty percent
Speaker 1: last exactly, Okay, terrific. Hey, we might leave it at that,
Speaker 1: Liam for today. Thank you very much, Liam of Sona's Group.
Speaker 2: No worries. Always enjoy James.
Speaker 1: I always enjoy having you on, Liam, and thank you
Speaker 1: for listening. And remember We're wide open for some more
Speaker 1: very clever questions, like the ones we had today the
Speaker 1: money puzzle at the Australian dot com dot au. Talk
Speaker 1: to you soon, h