1 00:00:05,790 --> 00:00:08,099 Sean Aylmer: Welcome to the Fear and Greed business interview. I'm Sean 2 00:00:08,099 --> 00:00:10,710 Sean Aylmer: Aylmer. One in two people don't know if their money 3 00:00:10,770 --> 00:00:14,370 Sean Aylmer: will last in retirement. And in a reflection, both of 4 00:00:14,370 --> 00:00:17,549 Sean Aylmer: soaring house prices and the rising cost of living, almost 5 00:00:17,549 --> 00:00:20,250 Sean Aylmer: one in three working Australians expect to still be paying 6 00:00:20,250 --> 00:00:24,150 Sean Aylmer: a mortgage once they've retired. These pretty alarming stats come 7 00:00:24,180 --> 00:00:28,440 Sean Aylmer: from the latest How Australia Retires report by investment giant 8 00:00:28,440 --> 00:00:30,869 Sean Aylmer: Vanguard. It might be a wake- up call for plenty 9 00:00:30,870 --> 00:00:33,120 Sean Aylmer: of Australians who don't have a plan for their retirement. 10 00:00:33,179 --> 00:00:35,669 Sean Aylmer: Remember, this is general information only. And you should always 11 00:00:35,670 --> 00:00:39,420 Sean Aylmer: seek professional advice before making investment decisions. Daniel Shrimski is 12 00:00:39,420 --> 00:00:42,690 Sean Aylmer: the Managing Director of Vanguard Australia. Daniel, welcome back to 13 00:00:42,690 --> 00:00:43,348 Sean Aylmer: Fear and Greed. 14 00:00:43,920 --> 00:00:45,960 Daniel Shrimski: Thanks for having me again, Sean. Great to be here. 15 00:00:46,650 --> 00:00:51,389 Sean Aylmer: When I read the report, what kept coming through amid 16 00:00:51,389 --> 00:00:54,690 Sean Aylmer: all those statistics is the fact that people just aren't 17 00:00:54,690 --> 00:00:56,160 Sean Aylmer: planning for retirement properly. 18 00:00:57,030 --> 00:01:01,530 Daniel Shrimski: Yeah. It certainly does come through in the research, Sean. 19 00:01:01,530 --> 00:01:03,570 Daniel Shrimski: I think the good thing is there's still an opportunity 20 00:01:03,570 --> 00:01:07,200 Daniel Shrimski: for most Australians, but there's obviously a lot that the 21 00:01:07,200 --> 00:01:09,449 Daniel Shrimski: system can do, but that there's a lot that individual 22 00:01:09,450 --> 00:01:11,969 Daniel Shrimski: Australians can also do in terms of putting themselves in 23 00:01:11,969 --> 00:01:12,720 Daniel Shrimski: a better position. 24 00:01:13,319 --> 00:01:15,720 Sean Aylmer: Okay. So nearly one in five Australians are renting in 25 00:01:15,720 --> 00:01:19,770 Sean Aylmer: retirement. 30% of working Australians expect to still be paying 26 00:01:19,770 --> 00:01:23,550 Sean Aylmer: a mortgage. I suppose, did the numbers surprise you? But 27 00:01:23,789 --> 00:01:27,239 Sean Aylmer: even before that, how important is it that people do 28 00:01:27,240 --> 00:01:30,839 Sean Aylmer: their best to pay off their house or whatever accommodation they 29 00:01:30,959 --> 00:01:32,280 Sean Aylmer: have before they retire? 30 00:01:32,790 --> 00:01:36,090 Daniel Shrimski: Well, I just think it gives a lot of financial 31 00:01:36,090 --> 00:01:41,699 Daniel Shrimski: freedom to retirees. We've seen that confidence in retirement certainly 32 00:01:41,700 --> 00:01:44,969 Daniel Shrimski: is attached to whether you own your home. And those 33 00:01:44,969 --> 00:01:47,789 Daniel Shrimski: that own their home are more confident in retirement. That those 34 00:01:47,789 --> 00:01:50,400 Daniel Shrimski: that are paying off their mortgage and those that are still 35 00:01:50,400 --> 00:01:53,790 Daniel Shrimski: paying off a mortgage are more confident in retirement than those 36 00:01:53,790 --> 00:01:57,630 Daniel Shrimski: that are renting. And confidence in retirement is certainly about 37 00:01:57,630 --> 00:02:01,379 Daniel Shrimski: a successful retirement. So yeah, it's concerning when there are 38 00:02:01,380 --> 00:02:03,779 Daniel Shrimski: a lot of Australians that are going to still be 39 00:02:04,469 --> 00:02:06,990 Daniel Shrimski: drawing down on savings to pay rent and to pay 40 00:02:06,990 --> 00:02:07,740 Daniel Shrimski: down a mortgage. 41 00:02:08,280 --> 00:02:11,130 Sean Aylmer: What about the number of people worried about running out 42 00:02:11,130 --> 00:02:13,679 Sean Aylmer: of money? Is that kind of what you expected? 43 00:02:14,400 --> 00:02:18,269 Daniel Shrimski: Well, again, this one, for us, was alarming, Sean. And there's 44 00:02:18,270 --> 00:02:21,119 Daniel Shrimski: this thing. People have heard of FOMO, where there's a 45 00:02:21,120 --> 00:02:23,728 Daniel Shrimski: new thing out there, FORO, which is fear of running 46 00:02:23,730 --> 00:02:27,540 Daniel Shrimski: out. And as you rightly said at the outset, one 47 00:02:27,540 --> 00:02:29,580 Daniel Shrimski: in two Australians don't know if their money will last 48 00:02:29,580 --> 00:02:31,530 Daniel Shrimski: in retirement. And the one that jumps out for me 49 00:02:31,530 --> 00:02:35,520 Daniel Shrimski: most concerning is 50% of retirees don't know how much 50 00:02:35,520 --> 00:02:39,179 Daniel Shrimski: they can spend on an annual basis to not outlive 51 00:02:39,179 --> 00:02:41,850 Daniel Shrimski: their savings. And that's a pretty tough position to be 52 00:02:41,850 --> 00:02:44,730 Daniel Shrimski: in if you're a retiree. So a lot of work 53 00:02:44,730 --> 00:02:47,940 Daniel Shrimski: to do from an industry standpoint to put retirees back 54 00:02:48,120 --> 00:02:49,048 Daniel Shrimski: in a better position. 55 00:02:49,680 --> 00:02:52,109 Sean Aylmer: Are people overly worried about that? I think of my 56 00:02:52,410 --> 00:02:55,020 Sean Aylmer: own mother and sort of the older people I know. 57 00:02:55,169 --> 00:02:58,200 Sean Aylmer: Often, they worry about it more than it's actually the reality. 58 00:02:58,650 --> 00:03:02,070 Daniel Shrimski: Yeah. I think when people outlive their savings, that's obviously 59 00:03:02,070 --> 00:03:04,830 Daniel Shrimski: a huge concern. Or maybe people aren't living to their 60 00:03:04,830 --> 00:03:08,219 Daniel Shrimski: means and then they're not living the retirement that they 61 00:03:08,220 --> 00:03:11,190 Daniel Shrimski: deserve and have worked so hard for over time. So 62 00:03:11,520 --> 00:03:15,030 Daniel Shrimski: I think having a plan is so important, Sean. And 63 00:03:15,030 --> 00:03:18,059 Daniel Shrimski: a plan could mean having a financial advisor, but there 64 00:03:18,059 --> 00:03:22,320 Daniel Shrimski: are accessibility and affordability issues with having a financial advisor. 65 00:03:22,470 --> 00:03:24,690 Daniel Shrimski: So for some, it could be just as simple as 66 00:03:25,230 --> 00:03:29,249 Daniel Shrimski: having a spreadsheet and having goals and understanding what you 67 00:03:29,250 --> 00:03:32,518 Daniel Shrimski: can actually spend to live the retirement that you deserve. 68 00:03:33,270 --> 00:03:35,400 Sean Aylmer: What about the cost of living crisis? How does that 69 00:03:35,459 --> 00:03:38,700 Sean Aylmer: play into what you're talking about there and retirement expectations? 70 00:03:38,700 --> 00:03:42,900 Sean Aylmer: Because I'm sure that people today think differently to perhaps 71 00:03:43,020 --> 00:03:44,460 Sean Aylmer: two years ago or three years ago. 72 00:03:44,880 --> 00:03:48,360 Daniel Shrimski: Yeah, absolutely. Cost of living pressures are certainly weighing on 73 00:03:48,360 --> 00:03:51,420 Daniel Shrimski: retirees. It came through very loud and clear in the 74 00:03:51,420 --> 00:03:54,630 Daniel Shrimski: research. Retirees are now saying they're going to need another $ 75 00:03:54,630 --> 00:03:59,130 Daniel Shrimski: 10,000 per annum in retirement based on those cost of 76 00:03:59,130 --> 00:04:02,249 Daniel Shrimski: living pressures. And I think Australia's basically saying they need 77 00:04:02,250 --> 00:04:05,520 Daniel Shrimski: to work harder and potentially work for longer as well 78 00:04:05,520 --> 00:04:09,960 Daniel Shrimski: to live that retirement that they deserve and the retirement 79 00:04:09,960 --> 00:04:11,009 Daniel Shrimski: that makes them feel comfortable. 80 00:04:11,279 --> 00:04:12,840 Sean Aylmer: So I think last year when we spoke, it was 81 00:04:12,840 --> 00:04:14,910 Sean Aylmer: one in three people were expecting to keep working in 82 00:04:14,910 --> 00:04:18,960 Sean Aylmer: some capacity during retirement. Is that still the case, particularly 83 00:04:18,960 --> 00:04:20,730 Sean Aylmer: given this cost of living crisis? 84 00:04:21,059 --> 00:04:23,880 Daniel Shrimski: Yeah. We didn't specifically ask that as part of the 85 00:04:23,880 --> 00:04:26,189 Daniel Shrimski: survey, Sean, but I have no doubt. I have no 86 00:04:26,190 --> 00:04:28,859 Daniel Shrimski: doubt that Australians are feeling as though they're going to 87 00:04:28,859 --> 00:04:32,460 Daniel Shrimski: have to work for longer. And maybe that means part- 88 00:04:32,460 --> 00:04:34,080 Daniel Shrimski: time work even in retirement. 89 00:04:34,560 --> 00:04:36,390 Sean Aylmer: Stay with me, Daniel. We'll be back in a minute. 90 00:04:43,200 --> 00:04:47,189 Sean Aylmer: I'm speaking to Daniel Shrimski, Managing Director of Vanguard Australia. 91 00:04:48,329 --> 00:04:52,230 Sean Aylmer: Okay. So 40% of Australians don't have a clear plan 92 00:04:52,230 --> 00:04:54,659 Sean Aylmer: for retirement. What should they be doing? What should someone 93 00:04:54,660 --> 00:04:57,509 Sean Aylmer: be doing right now to start thinking about it? And 94 00:04:57,510 --> 00:05:02,069 Sean Aylmer: this isn't a 55- year- old's problem. It's a 20- year- 95 00:05:02,070 --> 00:05:02,849 Sean Aylmer: old's problem too. 96 00:05:03,299 --> 00:05:05,759 Daniel Shrimski: Yeah. Well, absolutely. And as you say, I think the 97 00:05:05,760 --> 00:05:08,520 Daniel Shrimski: great thing is that the industry is bringing these issues 98 00:05:08,520 --> 00:05:11,099 Daniel Shrimski: to the surface now. And many Australians can do something 99 00:05:11,100 --> 00:05:14,130 Daniel Shrimski: about it. I think engagement is a big issue in 100 00:05:14,130 --> 00:05:19,020 Daniel Shrimski: the industry. Younger Australians need to engage earlier on. They 101 00:05:19,620 --> 00:05:22,979 Daniel Shrimski: need to understand the investment that is their superannuation. They 102 00:05:22,980 --> 00:05:26,310 Daniel Shrimski: need to understand the fees that they're paying. And I 103 00:05:26,310 --> 00:05:29,880 Daniel Shrimski: think, like many things, preparation is key. And retirement and 104 00:05:29,880 --> 00:05:33,870 Daniel Shrimski: superannuation are one of those things where preparation actually makes 105 00:05:33,870 --> 00:05:36,690 Daniel Shrimski: a difference. So it could be engaging with your super, 106 00:05:36,839 --> 00:05:39,779 Daniel Shrimski: it could be putting a plan together, using a spreadsheet, 107 00:05:39,779 --> 00:05:43,170 Daniel Shrimski: setting out some goals, but people need to ultimately think 108 00:05:43,170 --> 00:05:47,460 Daniel Shrimski: of superannuation as an investment and something that's an investment 109 00:05:47,460 --> 00:05:49,469 Daniel Shrimski: in their future. So I don't think they are ors. 110 00:05:49,469 --> 00:05:52,678 Daniel Shrimski: I think they are ands. 111 00:05:53,790 --> 00:05:55,709 Sean Aylmer: The report actually talks about ... I think it was 50% 112 00:05:55,710 --> 00:05:58,020 Sean Aylmer: of Australians don't know what they're paying super fees. I 113 00:05:58,020 --> 00:06:01,950 Sean Aylmer: think from memory, there's also about that same number who 114 00:06:02,339 --> 00:06:06,930 Sean Aylmer: probably don't fully realize the tax benefits of superannuation versus 115 00:06:06,930 --> 00:06:12,089 Sean Aylmer: the marginal income tax rate. How do we make super 116 00:06:12,089 --> 00:06:14,308 Sean Aylmer: interesting for my 22- year- old son, is probably the 117 00:06:14,309 --> 00:06:17,580 Sean Aylmer: question. How do we get them thinking about this? Because 118 00:06:17,580 --> 00:06:20,070 Sean Aylmer: at 22, if you can minimize fees, that can make 119 00:06:20,070 --> 00:06:21,600 Sean Aylmer: a big difference in 40 years time. 120 00:06:22,230 --> 00:06:25,980 Daniel Shrimski: Absolutely. I think fees make a huge difference. And a small 121 00:06:25,980 --> 00:06:29,219 Daniel Shrimski: difference in fees can make a material difference to one's 122 00:06:29,219 --> 00:06:33,000 Daniel Shrimski: retirement readiness, their retirement income. So how do you make 123 00:06:33,000 --> 00:06:36,089 Daniel Shrimski: it interesting? Look, I look at how I think Australians 124 00:06:36,089 --> 00:06:39,779 Daniel Shrimski: understand to the basis point almost what they're paying in 125 00:06:39,779 --> 00:06:45,690 Daniel Shrimski: mortgage rates for their home. But superannuation are most Australian's second- 126 00:06:45,690 --> 00:06:48,779 Daniel Shrimski: largest asset after their family home. And they should care 127 00:06:48,779 --> 00:06:51,659 Daniel Shrimski: about what they pay for and they should care about 128 00:06:51,660 --> 00:06:54,839 Daniel Shrimski: the fee construction. They should care about the investments that 129 00:06:54,839 --> 00:06:59,130 Daniel Shrimski: they're in. It's not something that's attached to your workplace. 130 00:06:59,130 --> 00:07:02,609 Daniel Shrimski: It's something that is your investment in your retirement future. 131 00:07:02,610 --> 00:07:05,490 Daniel Shrimski: And we need to find a way as an industry 132 00:07:05,490 --> 00:07:07,678 Daniel Shrimski: to get people to lean in and not lean in 133 00:07:07,678 --> 00:07:09,780 Daniel Shrimski: when it's too late. To lean in early on. 134 00:07:10,619 --> 00:07:12,630 Sean Aylmer: I want to talk a little bit about inheritance because 135 00:07:12,630 --> 00:07:15,090 Sean Aylmer: the report has some interesting findings on that. Almost half 136 00:07:15,090 --> 00:07:19,140 Sean Aylmer: of all Australians believe retirees should prioritize their own spending 137 00:07:19,140 --> 00:07:22,469 Sean Aylmer: before leaving money to the kids. Half. That means the 138 00:07:22,469 --> 00:07:24,960 Sean Aylmer: other half aren't thinking that. In fact, 6% still believe 139 00:07:24,960 --> 00:07:29,339 Sean Aylmer: inheritance should be the primary goal. I would've thought in 140 00:07:29,340 --> 00:07:32,670 Sean Aylmer: 2024 when we have a retirement system or a superannuation 141 00:07:32,670 --> 00:07:34,440 Sean Aylmer: system that's been going for as many years as it 142 00:07:34,440 --> 00:07:38,670 Sean Aylmer: has, people should sort of think differently about inheritance because 143 00:07:38,940 --> 00:07:41,399 Sean Aylmer: presumably their kids are going to be paying super all 144 00:07:41,400 --> 00:07:41,970 Sean Aylmer: their lives. 145 00:07:42,660 --> 00:07:48,480 Daniel Shrimski: Yeah. The inheritance one was fascinating in terms of what 146 00:07:48,660 --> 00:07:51,990 Daniel Shrimski: the younger generations expect to receive. A third of them 147 00:07:51,990 --> 00:07:54,960 Daniel Shrimski: expect to receive an inheritance. And then if you ask 148 00:07:55,770 --> 00:08:00,690 Daniel Shrimski: do the expectations match reality, you find that retiring Australians, 149 00:08:01,080 --> 00:08:04,139 Daniel Shrimski: I think 28% of them, have set aside dollars to 150 00:08:04,139 --> 00:08:08,250 Daniel Shrimski: pass on to loved ones, and 47% plan to leave 151 00:08:08,250 --> 00:08:10,680 Daniel Shrimski: an inheritance if there's money left to do so, but 152 00:08:10,950 --> 00:08:16,200 Daniel Shrimski: 23% don't plan to leave anything. So it's an interesting 153 00:08:16,200 --> 00:08:18,329 Daniel Shrimski: one. But I think one thing that came out loud 154 00:08:18,330 --> 00:08:22,589 Daniel Shrimski: and clear, the majority of Australians feel that retirees should 155 00:08:22,590 --> 00:08:26,520 Daniel Shrimski: prioritize their own spending before they leave money to loved 156 00:08:26,520 --> 00:08:28,800 Daniel Shrimski: ones. So I think that's a positive thing. 157 00:08:29,130 --> 00:08:33,270 Sean Aylmer: Yeah, absolutely. Couldn't agree more. Kind of rounding this out 158 00:08:33,270 --> 00:08:38,040 Sean Aylmer: where we started in terms of getting more knowledge about 159 00:08:38,040 --> 00:08:41,489 Sean Aylmer: the superannuation system, about fees, about how much money you 160 00:08:41,490 --> 00:08:45,929 Sean Aylmer: need, et cetera. I suppose that's all about financial advice. 161 00:08:45,929 --> 00:08:49,320 Sean Aylmer: How do we actually make quality financial advice more accessible? 162 00:08:49,559 --> 00:08:52,110 Sean Aylmer: I appreciate, Daniel, this isn't the easiest question. We've been 163 00:08:52,110 --> 00:08:54,569 Sean Aylmer: struggling with it for many, many years. But what are 164 00:08:54,570 --> 00:08:56,970 Sean Aylmer: your thoughts given your role? 165 00:08:57,450 --> 00:09:00,690 Daniel Shrimski: Yeah. Look, I'm cautiously optimistic that some of the reform 166 00:09:01,530 --> 00:09:05,640 Daniel Shrimski: that is going on will lead to more accessible and 167 00:09:05,640 --> 00:09:09,150 Daniel Shrimski: more affordable advice. But I think ... And we, obviously a 168 00:09:09,150 --> 00:09:14,610 Daniel Shrimski: large multinational. In the United States, 60% of Americans are 169 00:09:14,610 --> 00:09:18,449 Daniel Shrimski: advised. And in Australia, it's more like 10% because in 170 00:09:18,450 --> 00:09:22,110 Daniel Shrimski: Australia, it's full service financial advice or nothing. And there 171 00:09:22,110 --> 00:09:26,370 Daniel Shrimski: needs to be something between that caters for some Australians 172 00:09:26,400 --> 00:09:28,620 Daniel Shrimski: that just need simple needs. They have simple needs. They 173 00:09:28,620 --> 00:09:31,620 Daniel Shrimski: have ... They just need some guidance. They need some tools, 174 00:09:31,620 --> 00:09:34,530 Daniel Shrimski: some calculators. They don't need all that comes with a 175 00:09:34,679 --> 00:09:37,228 Daniel Shrimski: full service financial advisor. And I think some of the 176 00:09:37,230 --> 00:09:39,718 Daniel Shrimski: reform is going to tackle this and the reform is going 177 00:09:39,720 --> 00:09:43,650 Daniel Shrimski: to enable people to be met where their needs lie. 178 00:09:43,650 --> 00:09:47,520 Daniel Shrimski: And confident that we'll get to a better place and 179 00:09:47,520 --> 00:09:50,370 Daniel Shrimski: confident that more Australians will be able to have the 180 00:09:50,370 --> 00:09:52,770 Daniel Shrimski: guidance and support that they need to make sure that 181 00:09:52,770 --> 00:09:56,130 Daniel Shrimski: their financial position is much better placed. 182 00:09:57,360 --> 00:10:00,600 Sean Aylmer: Some of the reforms they're talking about in the quality 183 00:10:00,809 --> 00:10:04,559 Sean Aylmer: of advice reviewed, the idea of a qualified advisor, the 184 00:10:04,559 --> 00:10:08,459 Sean Aylmer: term's a bit of a misnomer, they're kind of good 185 00:10:08,460 --> 00:10:11,458 Sean Aylmer: ideas, you think, because it just seems in recent years, 186 00:10:11,458 --> 00:10:14,310 Sean Aylmer: there's been so much red tape around it. So an advisor 187 00:10:14,460 --> 00:10:16,708 Sean Aylmer: trying to make money is really struggling because they can 188 00:10:16,710 --> 00:10:18,540 Sean Aylmer: only service people with a lot of money, not people 189 00:10:18,540 --> 00:10:21,480 Sean Aylmer: with a little amount of money because of the bureaucracy. 190 00:10:21,719 --> 00:10:24,840 Sean Aylmer: Do you think we're making headway in breaking that down? 191 00:10:25,049 --> 00:10:28,228 Daniel Shrimski: I think so. And again, the naming convention qualified advisor 192 00:10:28,230 --> 00:10:32,160 Daniel Shrimski: might need some work. But the ability of superannuation funds 193 00:10:32,160 --> 00:10:36,420 Daniel Shrimski: to provide simple advice, I think, is a positive and 194 00:10:36,420 --> 00:10:39,360 Daniel Shrimski: I think can increase the number of Australians that have 195 00:10:39,360 --> 00:10:43,259 Daniel Shrimski: the support they need. So we are broadly supportive of 196 00:10:43,259 --> 00:10:45,208 Daniel Shrimski: that. Of course, the devil will be in the detail. 197 00:10:45,690 --> 00:10:49,410 Daniel Shrimski: We're looking forward to seeing more detail. But again, the 198 00:10:49,410 --> 00:10:52,800 Daniel Shrimski: financial advisor community is not going to be able to 199 00:10:52,800 --> 00:10:55,230 Daniel Shrimski: serve all the needs of Australians. There's going to need 200 00:10:55,230 --> 00:10:59,608 Daniel Shrimski: to be a situation where other institutions or there are 201 00:10:59,610 --> 00:11:03,419 Daniel Shrimski: other means for Australians to access simple advice and simple 202 00:11:03,420 --> 00:11:06,930 Daniel Shrimski: guidance that will go a long way to helping Australians 203 00:11:06,960 --> 00:11:08,610 Daniel Shrimski: have a more successful retirement. 204 00:11:09,179 --> 00:11:10,950 Sean Aylmer: Daniel, thank you for talking to Fear and Greed. 205 00:11:11,190 --> 00:11:12,120 Daniel Shrimski: Thanks for your time, Sean. 206 00:11:12,450 --> 00:11:15,719 Sean Aylmer: That was Daniel Shrimski, Managing Director of Vanguard Australia. This 207 00:11:15,719 --> 00:11:18,599 Sean Aylmer: is the Fear and Greed business interview. Join us every 208 00:11:18,599 --> 00:11:20,338 Sean Aylmer: morning for the full episode of Fear and Greed, a 209 00:11:20,490 --> 00:11:23,070 Sean Aylmer: daily business news for people who make their own decisions. 210 00:11:23,129 --> 00:11:24,718 Sean Aylmer: I'm Sean Aylmer. Enjoy your day.