1 00:00:03,440 --> 00:00:06,440 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,800 --> 00:00:10,260 Sean Aylmer: Whenever we talk about investing in shares, I usually mention 3 00:00:10,260 --> 00:00:13,460 Sean Aylmer: how important it is to get some professional advice. It's 4 00:00:13,460 --> 00:00:16,610 Sean Aylmer: one of the best ways to ensure you're making good decisions. But 5 00:00:16,610 --> 00:00:19,320 Sean Aylmer: you also need to have a plan, more than just 6 00:00:19,320 --> 00:00:22,160 Sean Aylmer: a loose goal of maximising returns. I'm talking about a 7 00:00:22,160 --> 00:00:26,880 Sean Aylmer: written plan, setting out goals, and the strategies to achieve them. Rachel Waterhouse 8 00:00:26,880 --> 00:00:31,040 Sean Aylmer: is the Chief Executive of the Australian Shareholders' Association. Rachel, welcome to Fear and Greed. 9 00:00:32,030 --> 00:00:33,280 Rachel Waterhouse: Thank you very much. 10 00:00:33,350 --> 00:00:34,850 Sean Aylmer: So why is an investment plan so important? 11 00:00:36,470 --> 00:00:39,449 Rachel Waterhouse: Well, diving into investing in shares without a plan can 12 00:00:39,450 --> 00:00:43,360 Rachel Waterhouse: be a very expensive way to learn. Successful investors know 13 00:00:43,360 --> 00:00:47,349 Rachel Waterhouse: that having a written investment plan is essential. Clearly defining 14 00:00:47,350 --> 00:00:50,310 Rachel Waterhouse: your strategy will put your investment on a solid footing 15 00:00:50,500 --> 00:00:53,600 Rachel Waterhouse: and ensure you have a good understanding. So you really 16 00:00:53,600 --> 00:00:57,230 Rachel Waterhouse: need to think about the objectives of your investing activities, 17 00:00:57,610 --> 00:01:01,190 Rachel Waterhouse: the strategies or actions that will determine how you reach 18 00:01:01,190 --> 00:01:05,209 Rachel Waterhouse: your objectives, the tactics that you will employ to implement 19 00:01:05,209 --> 00:01:09,010 Rachel Waterhouse: them. Having a plan provides you with rational decision- making. 20 00:01:09,090 --> 00:01:12,860 Rachel Waterhouse: It stops you from making emotional investment decisions and not 21 00:01:12,870 --> 00:01:16,050 Rachel Waterhouse: to let fear push you to sell. The share market 22 00:01:16,050 --> 00:01:18,880 Rachel Waterhouse: goes up and down, as we know, and that's why 23 00:01:18,880 --> 00:01:20,360 Rachel Waterhouse: having a plan is good. 24 00:01:20,760 --> 00:01:22,860 Sean Aylmer: So do many people actually have a plan, do you reckon? 25 00:01:23,730 --> 00:01:27,520 Rachel Waterhouse: There has been an influx of first- time investors into the Australian market, 26 00:01:27,620 --> 00:01:31,120 Rachel Waterhouse: and it's important that first time investors also create an 27 00:01:31,120 --> 00:01:36,649 Rachel Waterhouse: investment plan to support their decision making. We know that 900,000 new 28 00:01:36,650 --> 00:01:40,429 Rachel Waterhouse: investors were thinking of purchasing shares over the next 12 months, 29 00:01:40,620 --> 00:01:43,810 Rachel Waterhouse: and what we do know is that one in two investors, 30 00:01:44,020 --> 00:01:46,730 Rachel Waterhouse: they don't have a written plan. Or they have a 31 00:01:46,730 --> 00:01:48,900 Rachel Waterhouse: vague plan floating around in their head. 32 00:01:49,640 --> 00:01:52,240 Sean Aylmer: Okay. So the sort of thing we're talking about is 33 00:01:52,240 --> 00:01:55,250 Sean Aylmer: that on that plan, you should include the sorts of sectors that 34 00:01:55,850 --> 00:01:58,720 Sean Aylmer: you're interested in. It should include a timeframe. It should 35 00:01:58,720 --> 00:02:01,390 Sean Aylmer: include a benchmark return. Is that the sort of thing 36 00:02:01,390 --> 00:02:01,830 Sean Aylmer: we're talking about? 37 00:02:02,620 --> 00:02:06,840 Rachel Waterhouse: Absolutely. So you should really start with understanding your current situation. 38 00:02:06,840 --> 00:02:09,900 Rachel Waterhouse: So what assets do you have? How much do you 39 00:02:09,900 --> 00:02:13,989 Rachel Waterhouse: want to invest? What sectors should you be considering? And 40 00:02:14,070 --> 00:02:17,639 Rachel Waterhouse: then you should consider your strategies. So your share investing 41 00:02:17,639 --> 00:02:21,179 Rachel Waterhouse: plan should identify strategies to make your investments aligned with 42 00:02:21,180 --> 00:02:24,870 Rachel Waterhouse: your objectives, and that's really thinking about things such as 43 00:02:25,080 --> 00:02:27,190 Rachel Waterhouse: how much capital are you going to use for your 44 00:02:27,190 --> 00:02:31,280 Rachel Waterhouse: share investing activities? How will you allocate this capital to 45 00:02:31,280 --> 00:02:34,960 Rachel Waterhouse: different asset classes? And what risks could you face with 46 00:02:34,960 --> 00:02:37,250 Rachel Waterhouse: your investments, and how will you manage them? 47 00:02:37,800 --> 00:02:40,240 Sean Aylmer: Okay, so when you talk about different risks, explain that 48 00:02:40,620 --> 00:02:40,839 Sean Aylmer: to me. 49 00:02:41,270 --> 00:02:44,049 Rachel Waterhouse: Yeah, so as far as risk, you need to consider 50 00:02:44,410 --> 00:02:47,180 Rachel Waterhouse: the risks you're prepared to take. So there will be 51 00:02:47,180 --> 00:02:50,709 Rachel Waterhouse: different risks, depending on who you are. A young investor 52 00:02:50,910 --> 00:02:54,380 Rachel Waterhouse: who's earning a salary, they might take on more risk 53 00:02:54,380 --> 00:02:57,740 Rachel Waterhouse: and have a higher exposure to shares. An investor who 54 00:02:57,860 --> 00:03:00,299 Rachel Waterhouse: is a year out from retirement may want to keep 55 00:03:00,300 --> 00:03:03,450 Rachel Waterhouse: more cash on hand and expose less capital to share 56 00:03:03,450 --> 00:03:06,980 Rachel Waterhouse: investing. So when developing your investment plan, you will need 57 00:03:06,980 --> 00:03:11,650 Rachel Waterhouse: to consider a variety of risks and their implications for your strategy 58 00:03:11,850 --> 00:03:14,440 Rachel Waterhouse: and the risks you are personally willing to take. 59 00:03:14,840 --> 00:03:14,971 Sean Aylmer: Do you think people do that? 60 00:03:14,971 --> 00:03:19,010 Rachel Waterhouse: People should be thinking about that. As far as my 61 00:03:19,530 --> 00:03:24,650 Rachel Waterhouse: own plan, I've identified a risk, and that risk is 62 00:03:24,830 --> 00:03:28,440 Rachel Waterhouse: that I don't have enough global shares. So for me, 63 00:03:28,760 --> 00:03:31,120 Rachel Waterhouse: one of my tactics is to think about how do 64 00:03:31,120 --> 00:03:34,830 Rachel Waterhouse: I access global shares? And the decision that I have 65 00:03:34,830 --> 00:03:38,840 Rachel Waterhouse: made is to purchase exchange traded funds, to get that 66 00:03:38,840 --> 00:03:41,000 Rachel Waterhouse: access to the global market. 67 00:03:41,410 --> 00:03:45,550 Sean Aylmer: Okay. So you've mentioned 900,000 retail investors are thinking about coming 68 00:03:45,550 --> 00:03:48,730 Sean Aylmer: into the market in the next 12 months. We've seen 69 00:03:48,730 --> 00:03:51,410 Sean Aylmer: an influx during COVID. I mean, do you get a 70 00:03:51,410 --> 00:03:55,470 Sean Aylmer: sense that people understand what you're saying here, Rachel? Because 71 00:03:55,760 --> 00:03:58,850 Sean Aylmer: I must say I've never had a plan investing, and I know I should have, and 72 00:03:58,850 --> 00:04:01,590 Sean Aylmer: I just haven't done it. I like the idea of 73 00:04:01,590 --> 00:04:04,540 Sean Aylmer: a certain stock, but there's not much discipline. It seems 74 00:04:04,540 --> 00:04:07,700 Sean Aylmer: to me that many shareholders, they don't have discipline, because 75 00:04:07,700 --> 00:04:09,080 Sean Aylmer: they don't have a plan. 76 00:04:09,560 --> 00:04:13,220 Rachel Waterhouse: Well, it is important to put that plan, and it can be as simple as putting 77 00:04:13,230 --> 00:04:15,610 Rachel Waterhouse: it down on a page. And the importance of a 78 00:04:15,610 --> 00:04:18,950 Rachel Waterhouse: plan is it's there, and it directs your thinking. And 79 00:04:18,950 --> 00:04:22,520 Rachel Waterhouse: as you learn and learn more about the share market, 80 00:04:22,680 --> 00:04:25,340 Rachel Waterhouse: you can update your plan, and you should be constantly 81 00:04:25,400 --> 00:04:26,060 Rachel Waterhouse: reviewing it. 82 00:04:26,630 --> 00:04:28,640 Sean Aylmer: Stay with me, Rachel. We'll be back in a minute. 83 00:04:33,650 --> 00:04:36,710 Sean Aylmer: My guest this morning is Rachel Waterhouse, Chief Executive of 84 00:04:36,710 --> 00:04:41,010 Sean Aylmer: the Australian Shareholders' Association. Okay, Rachel, now you've just taken 85 00:04:41,010 --> 00:04:43,219 Sean Aylmer: this job in the last couple of months. Congratulations on 86 00:04:43,220 --> 00:04:45,279 Sean Aylmer: getting it, but what a time to get it. AGM 87 00:04:45,279 --> 00:04:47,140 Sean Aylmer: season's coming up, and that must be one of the 88 00:04:47,140 --> 00:04:49,880 Sean Aylmer: busiest times for the Australian Shareholders' Association. 89 00:04:50,600 --> 00:04:56,330 Rachel Waterhouse: Absolutely. ASA monitors most ASX 200 companies, and we're heading into 90 00:04:56,330 --> 00:05:00,920 Rachel Waterhouse: the main AGM season. We have monitors who are volunteers, 91 00:05:00,980 --> 00:05:04,140 Rachel Waterhouse: who meet with companies ahead of the AGM and represent 92 00:05:04,140 --> 00:05:09,130 Rachel Waterhouse: retail shareholders at AGMs. The ASA monitors review a company's 93 00:05:09,130 --> 00:05:14,350 Rachel Waterhouse: performance, and they provide voting intentions that reflect how ASA intends 94 00:05:14,630 --> 00:05:19,049 Rachel Waterhouse: to vote proxies on resolutions at AGNs and the rationale. 95 00:05:19,529 --> 00:05:23,080 Rachel Waterhouse: These voting intentions are made available to our members online, 96 00:05:23,160 --> 00:05:27,010 Rachel Waterhouse: and then following the AGM, a report is also made available. 97 00:05:27,580 --> 00:05:28,320 Sean Aylmer: Now, how many members do you have? 98 00:05:29,250 --> 00:05:31,010 Rachel Waterhouse: We have 5,000 members. 99 00:05:31,310 --> 00:05:33,159 Sean Aylmer: Okay, and are they particularly active? 100 00:05:33,810 --> 00:05:38,190 Rachel Waterhouse: Yes, they are. We have 800 to 1,000 members who meet 101 00:05:38,190 --> 00:05:40,159 Rachel Waterhouse: monthly in local groups. 102 00:05:40,200 --> 00:05:40,520 Sean Aylmer: Wow. 103 00:05:40,529 --> 00:05:43,700 Rachel Waterhouse: So that's pretty impressive, when you think 20% of our 104 00:05:43,700 --> 00:05:47,610 Rachel Waterhouse: membership are meeting regularly. And they're sharing ideas, and they're 105 00:05:47,610 --> 00:05:51,370 Rachel Waterhouse: sharing their learning, some of them over 30 to 40 106 00:05:51,370 --> 00:05:54,070 Rachel Waterhouse: years, on what they've learned around the stock market. 107 00:05:54,380 --> 00:05:57,909 Sean Aylmer: I think it is interesting. The Shareholders' Association always played 108 00:05:57,910 --> 00:06:02,570 Sean Aylmer: a role, but increasingly, sort of proxy advisors and Shareholder 109 00:06:02,800 --> 00:06:06,010 Sean Aylmer: Association, they seem to have a bigger role at AGM 110 00:06:06,010 --> 00:06:07,390 Sean Aylmer: time than previous years. 111 00:06:08,070 --> 00:06:13,610 Rachel Waterhouse: Absolutely. So Australian Shareholders' Association, we're the voice of retail 112 00:06:13,610 --> 00:06:18,040 Rachel Waterhouse: investors, and we do encourage all shareholders to provide their 113 00:06:18,040 --> 00:06:21,770 Rachel Waterhouse: proxies to ASA, even if they're not a member yet. 114 00:06:22,130 --> 00:06:24,469 Rachel Waterhouse: And they can do this as a starting proxy or 115 00:06:24,470 --> 00:06:27,470 Rachel Waterhouse: provide it directly within the AGM platform. 116 00:06:31,010 --> 00:06:31,729 Sean Aylmer: Okay, so what are some of the key issues you expect to be providing guidance on this year? 117 00:06:32,040 --> 00:06:35,630 Rachel Waterhouse: Yeah, so because we're a not-for-profit, we are focused on 118 00:06:35,630 --> 00:06:40,440 Rachel Waterhouse: educating investors and advocating for their needs. Our members are very 119 00:06:40,440 --> 00:06:44,950 Rachel Waterhouse: interested in learning about exchange traded funds and listed investment companies, 120 00:06:45,230 --> 00:06:48,110 Rachel Waterhouse: and we have a virtual event coming up in November. 121 00:06:48,260 --> 00:06:51,630 Rachel Waterhouse: And on the advocacy front, we have four key issues 122 00:06:51,630 --> 00:06:55,170 Rachel Waterhouse: we are focused on, one of them being directors and boards: 123 00:06:55,230 --> 00:06:57,409 Rachel Waterhouse: that a board should be made up of directors with 124 00:06:57,410 --> 00:07:01,410 Rachel Waterhouse: diverse skills, including at least one with direct experience in 125 00:07:01,410 --> 00:07:05,130 Rachel Waterhouse: the relevant industry. There should also be a skills matrix, 126 00:07:05,130 --> 00:07:08,839 Rachel Waterhouse: including director skills required in the strategic plan. So that's 127 00:07:08,839 --> 00:07:12,200 Rachel Waterhouse: really as a retail shareholder, making sure that the board 128 00:07:12,200 --> 00:07:15,990 Rachel Waterhouse: is well run, and that each director's workload should allow 129 00:07:15,990 --> 00:07:19,290 Rachel Waterhouse: the director to devote adequate time and attention to the 130 00:07:19,290 --> 00:07:24,730 Rachel Waterhouse: role and company. We're also looking at remuneration and performance, 131 00:07:25,080 --> 00:07:30,770 Rachel Waterhouse: particularly if companies should consider repaying JobKeeper before rewarding executives 132 00:07:30,810 --> 00:07:34,510 Rachel Waterhouse: or paying dividends. So there's a focus there on looking 133 00:07:34,510 --> 00:07:39,120 Rachel Waterhouse: at the company: if it has received JobKeeper, and whether 134 00:07:39,120 --> 00:07:42,870 Rachel Waterhouse: that money has been directed towards incentives or pay. And we 135 00:07:43,110 --> 00:07:46,270 Rachel Waterhouse: are asking companies to pay that back, if they have 136 00:07:46,270 --> 00:07:47,170 Rachel Waterhouse: not paid that back yet. 137 00:07:47,750 --> 00:07:51,020 Sean Aylmer: Are you seeing much of director pay increases while still 138 00:07:51,020 --> 00:07:52,820 Sean Aylmer: keeping JobKeeper? Is that actually happening? 139 00:07:53,230 --> 00:07:56,810 Rachel Waterhouse: Oh, it is something that we are monitoring. As far 140 00:07:56,810 --> 00:08:01,360 Rachel Waterhouse: as JobKeeper, we're looking at it on a company basis. 141 00:08:05,460 --> 00:08:05,731 Sean Aylmer: Yeah, okay. So directors and boards, remuneration and performance. 142 00:08:05,731 --> 00:08:09,620 Rachel Waterhouse: The other one is risk management. We expect directors to identify, manage, 143 00:08:09,620 --> 00:08:15,280 Rachel Waterhouse: and communicate financial cyber security and non-financial risks, including ESG (Environmental Social Governance), 144 00:08:15,720 --> 00:08:21,520 Rachel Waterhouse: and the implications for financing capital requirements. So ESG is 145 00:08:21,600 --> 00:08:27,610 Rachel Waterhouse: an increased focus for retail shareholders and also companies. And 146 00:08:27,610 --> 00:08:31,010 Rachel Waterhouse: the importance of ESG is increasing, and it can impact 147 00:08:31,010 --> 00:08:34,540 Rachel Waterhouse: the cost of capital and the reputation for companies. And 148 00:08:34,710 --> 00:08:38,140 Rachel Waterhouse: we see the role of the board and executive to identify, manage, 149 00:08:38,140 --> 00:08:43,760 Rachel Waterhouse: and communicate ESG strategy, opportunities, and risks to shareholders. And 150 00:08:43,760 --> 00:08:47,570 Rachel Waterhouse: what good ESG looks like will depend on each company 151 00:08:47,660 --> 00:08:52,609 Rachel Waterhouse: and sector. There are no final reporting standards yet, and 152 00:08:52,610 --> 00:08:56,340 Rachel Waterhouse: companies are working out how to advance their ESG status. 153 00:08:56,530 --> 00:08:59,750 Rachel Waterhouse: So it's tough for retail shareholders to be able to say, 154 00:08:59,950 --> 00:09:02,520 Rachel Waterhouse: "This is how it should be done." but we can 155 00:09:02,520 --> 00:09:06,300 Rachel Waterhouse: let companies know whether their reports and progress is up 156 00:09:06,300 --> 00:09:06,880 Rachel Waterhouse: to the mark. 157 00:09:13,860 --> 00:09:13,861 Sean Aylmer: Are companies making adequate moves in the ESG area, do you think? 158 00:09:13,861 --> 00:09:17,540 Rachel Waterhouse: We are seeing that companies are focusing more on ESG, but as far as the 159 00:09:17,540 --> 00:09:21,610 Rachel Waterhouse: consistency of reporting, that's what we are looking at. And we 160 00:09:21,610 --> 00:09:25,719 Rachel Waterhouse: are looking at how they identify the risks, but also 161 00:09:25,720 --> 00:09:29,410 Rachel Waterhouse: the opportunities, because opportunities do come out of ESG. 162 00:09:29,790 --> 00:09:31,620 Sean Aylmer: How are you enjoying the new job, Rachel? You've been in it for a couple of months. 163 00:09:33,260 --> 00:09:36,849 Rachel Waterhouse: I'm really enjoying it; it's great. We have a fantastic 164 00:09:36,870 --> 00:09:40,920 Rachel Waterhouse: group of members that are highly engaged. Our organisation has 165 00:09:40,960 --> 00:09:45,470 Rachel Waterhouse: over 200 members that are involved in organising meetings and 166 00:09:45,470 --> 00:09:49,319 Rachel Waterhouse: also monitoring of companies. So loving it. The team are great, 167 00:09:50,350 --> 00:09:52,939 Rachel Waterhouse: and we have a really good purpose of what we're 168 00:09:53,070 --> 00:09:53,640 Rachel Waterhouse: hoping to achieve. 169 00:09:54,400 --> 00:09:56,500 Sean Aylmer: Fantastic. Good luck with it, Rachel. Thank you for talking 170 00:09:56,500 --> 00:09:57,040 Sean Aylmer: to Fear and Greed. 171 00:09:57,690 --> 00:09:57,939 Rachel Waterhouse: Thank you, Sean. 172 00:09:58,460 --> 00:10:01,400 Sean Aylmer: That was Rachel Waterhouse, Chief Executive of the Australian Shareholders' 173 00:10:01,540 --> 00:10:04,460 Sean Aylmer: Association. This is the Fear and Greed Daily Interview. Join 174 00:10:04,460 --> 00:10:06,830 Sean Aylmer: me every morning for the full Fear and Greed Podcast, 175 00:10:07,120 --> 00:10:09,410 Sean Aylmer: with all the business news you need to know. I'm 176 00:10:09,410 --> 00:10:10,770 Sean Aylmer: Sean Aylmer. Enjoy your day.