1 00:00:10,320 --> 00:00:13,360 Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. 2 00:00:13,440 --> 00:00:15,760 Speaker 2: I'm James Kirby. Welcome aboard everybody. 3 00:00:15,920 --> 00:00:18,000 Speaker 1: These are good times. You know them when you see them, right. 4 00:00:18,079 --> 00:00:21,400 Speaker 1: We have red hot markets. We really do, share markets 5 00:00:21,440 --> 00:00:25,640 Speaker 1: on listed markets, improving property markets even. But you really 6 00:00:25,720 --> 00:00:29,800 Speaker 1: must be careful about what's put in front of you, okay, 7 00:00:29,840 --> 00:00:31,720 Speaker 1: and what products are put in front of you, and 8 00:00:31,760 --> 00:00:34,360 Speaker 1: what notions and schemes are put in front of you, 9 00:00:34,440 --> 00:00:37,559 Speaker 1: because when you're at the top of a market, and 10 00:00:37,640 --> 00:00:39,800 Speaker 1: we are at the top of a bull market. We 11 00:00:39,880 --> 00:00:43,440 Speaker 1: don't know how long this will last. No one knows, 12 00:00:43,479 --> 00:00:46,760 Speaker 1: but it is clear that we are in a distinct 13 00:00:47,080 --> 00:00:50,440 Speaker 1: bull phase, a quality bull phase, I see they like 14 00:00:50,479 --> 00:00:52,720 Speaker 1: to call it. At the moment, you can argue that 15 00:00:52,760 --> 00:00:55,480 Speaker 1: one if you like. But my guest today is an 16 00:00:55,480 --> 00:01:00,080 Speaker 1: independent financial advisor, Andy Daruk, and he had. 17 00:01:00,080 --> 00:01:01,200 Speaker 2: Previously worked for Deloitte. 18 00:01:01,200 --> 00:01:03,400 Speaker 1: He's worked from a quarry and then he struck out 19 00:01:03,440 --> 00:01:06,679 Speaker 1: on his own with his own company, which whose name 20 00:01:06,760 --> 00:01:09,039 Speaker 1: he will give us in a moment, because it's just 21 00:01:09,080 --> 00:01:11,440 Speaker 1: passed me by and he is going to talk to us, 22 00:01:11,480 --> 00:01:15,560 Speaker 1: I hope. With his trademark frankness and occasional streak of 23 00:01:15,760 --> 00:01:19,759 Speaker 1: mischievous humor. Certainly that comes up on your social media activity. 24 00:01:19,800 --> 00:01:21,280 Speaker 2: Andy, how are you very well? 25 00:01:21,319 --> 00:01:23,640 Speaker 3: Thanks, James, glad to be here. And I run my 26 00:01:23,680 --> 00:01:25,399 Speaker 3: own business called Independent Wealth of. 27 00:01:25,520 --> 00:01:28,040 Speaker 2: Vice, Independent Wealth Advice. 28 00:01:28,080 --> 00:01:35,759 Speaker 1: There is a very original, creative name, imaginative. So now 29 00:01:36,200 --> 00:01:37,920 Speaker 1: one of the reasons I want to talk to you 30 00:01:38,240 --> 00:01:43,240 Speaker 1: because it is difficult. Actually, you know the independent financial advisors. 31 00:01:43,240 --> 00:01:45,240 Speaker 1: I can bring in top advisors. I can get any 32 00:01:45,240 --> 00:01:48,559 Speaker 1: of them in here, and they'd have a house view. Okay, 33 00:01:48,560 --> 00:01:51,760 Speaker 1: so they're in this big operation. It's a machine, and 34 00:01:51,800 --> 00:01:55,280 Speaker 1: they've got billions under management and there's a house view, right, 35 00:01:55,320 --> 00:01:58,080 Speaker 1: So they're really careful about what they say. And one 36 00:01:58,080 --> 00:01:59,680 Speaker 1: of the reasons they have to be so careful is 37 00:01:59,720 --> 00:02:04,440 Speaker 1: that they might contradict another partner perhaps etc. But what 38 00:02:04,480 --> 00:02:07,200 Speaker 1: I like about the botterly independent advisor is they have 39 00:02:07,240 --> 00:02:12,240 Speaker 1: that freedom to speak on any issue. Now, first of all, actually, 40 00:02:12,240 --> 00:02:15,560 Speaker 1: even before we start, what did you think of what 41 00:02:15,639 --> 00:02:18,560 Speaker 1: I said there about a board market? Maybe it's quality 42 00:02:18,600 --> 00:02:21,720 Speaker 1: board market, I don't know. Do you think we're at 43 00:02:21,720 --> 00:02:23,440 Speaker 1: the opper fees. 44 00:02:24,600 --> 00:02:25,600 Speaker 2: Of a board market? 45 00:02:26,600 --> 00:02:29,160 Speaker 3: Find me someone who knows, and I'll find someone over 46 00:02:29,200 --> 00:02:31,440 Speaker 3: confident who doesn't know what they're talking about. I mean, 47 00:02:31,600 --> 00:02:34,440 Speaker 3: like you say, everything is at all time highs and 48 00:02:34,480 --> 00:02:38,560 Speaker 3: it doesn't matter where you look, listed, unlisted property, gold 49 00:02:38,919 --> 00:02:41,399 Speaker 3: even so I don't know what else you could call 50 00:02:41,440 --> 00:02:45,400 Speaker 3: it but an exuberant bullmarket. And whether it keeps going, 51 00:02:46,000 --> 00:02:49,200 Speaker 3: no one knows, whether it plateaus, whether we get a correction, 52 00:02:49,880 --> 00:02:53,200 Speaker 3: nobody knows. But one thing's for certain. There is a 53 00:02:53,440 --> 00:02:55,920 Speaker 3: huge amount of money sloshing around in the world and 54 00:02:55,960 --> 00:02:57,519 Speaker 3: it's finding its way into assets. 55 00:02:58,280 --> 00:03:02,240 Speaker 1: Yes it is, and obviously risk acids being particularly popular. 56 00:03:02,280 --> 00:03:07,280 Speaker 1: Though interestingly contradiction to that is the enthusiasm around gold. 57 00:03:07,840 --> 00:03:08,560 Speaker 2: I want to talk to you. 58 00:03:08,639 --> 00:03:12,040 Speaker 1: One of the things that floods my desk, and I 59 00:03:12,040 --> 00:03:19,079 Speaker 1: imagine floods your desk is this theme of the unlisted right, 60 00:03:19,320 --> 00:03:26,799 Speaker 1: unlisted funds, private equity, private credit. And yes, this has 61 00:03:26,840 --> 00:03:30,559 Speaker 1: been very successful from major super funds and high network individuals. 62 00:03:31,040 --> 00:03:34,280 Speaker 1: That success is now percolating through the system, not to 63 00:03:34,400 --> 00:03:38,200 Speaker 1: success for mom and dad investors, but to access from 64 00:03:38,240 --> 00:03:42,920 Speaker 1: mom and dad investors. I had Charlie Viola on the 65 00:03:43,040 --> 00:03:48,960 Speaker 1: show and he was actively defending I don''t even say 66 00:03:48,960 --> 00:03:54,040 Speaker 1: defending right, describing why he is enthusiastic for that area, 67 00:03:54,800 --> 00:03:58,920 Speaker 1: defending metrics credit partners in particular, which was interesting because 68 00:03:58,960 --> 00:04:01,600 Speaker 1: they are in a spot of trouble at the moment, and. 69 00:04:01,480 --> 00:04:03,240 Speaker 2: So are other groups in this area. 70 00:04:03,400 --> 00:04:06,320 Speaker 1: Latrobe for instances also, I think we could fairly see 71 00:04:06,320 --> 00:04:08,120 Speaker 1: in the spot of trouble. But what I want to 72 00:04:08,160 --> 00:04:11,280 Speaker 1: ask you is, so his point of view was this 73 00:04:11,360 --> 00:04:13,960 Speaker 1: is a good area if you know what you're doing. 74 00:04:15,480 --> 00:04:16,400 Speaker 2: What's your view on that. 75 00:04:17,960 --> 00:04:20,479 Speaker 3: I'd probably take the other side of the equation, so 76 00:04:21,800 --> 00:04:25,560 Speaker 3: I could accept the argument that, yeah, there are returns 77 00:04:25,600 --> 00:04:29,560 Speaker 3: to be made, there's premiums to be harvested, in efficiencies 78 00:04:29,600 --> 00:04:33,320 Speaker 3: to be capitalized, et cetera, et cetera. I'd say almost 79 00:04:33,640 --> 00:04:36,720 Speaker 3: no one actually knows what they're doing in that space. 80 00:04:36,839 --> 00:04:41,960 Speaker 3: There is just a chasm between what institutional investors get 81 00:04:42,000 --> 00:04:46,400 Speaker 3: and what even ultra high net worth investors get. I'd 82 00:04:46,440 --> 00:04:51,159 Speaker 3: also say that there is a huge difference between the 83 00:04:51,240 --> 00:04:55,960 Speaker 3: incentives of the managers themselves in both of those individual classes, 84 00:04:56,080 --> 00:05:00,120 Speaker 3: meaning private equity in private credit, and the investors. And 85 00:05:00,120 --> 00:05:03,440 Speaker 3: then what just adds fuel to that already quite pretty 86 00:05:03,440 --> 00:05:08,160 Speaker 3: big fire is the fact that liquidity is a major concern. 87 00:05:08,560 --> 00:05:13,520 Speaker 3: Fees are a major concern. The opaqueness and byzantine structures 88 00:05:13,520 --> 00:05:18,279 Speaker 3: and encountering chicanery are major concerns. And then you've also 89 00:05:18,400 --> 00:05:21,400 Speaker 3: kind of got this situation. Where to put it crudely, 90 00:05:21,880 --> 00:05:25,680 Speaker 3: I think often retail and even wholesale investors are used 91 00:05:25,720 --> 00:05:29,960 Speaker 3: as exit liquidity. Probably the biggest, most talked about, most 92 00:05:29,960 --> 00:05:32,880 Speaker 3: written about, most prevalent problem with private equity at the 93 00:05:32,880 --> 00:05:36,920 Speaker 3: moment is getting these assets out of the funds. And 94 00:05:36,960 --> 00:05:41,920 Speaker 3: you're just seeing that globally, so, whether it's continuation funds, 95 00:05:42,000 --> 00:05:45,200 Speaker 3: the death of the IPO pipeline, just you know, inability 96 00:05:45,240 --> 00:05:48,120 Speaker 3: to get assets off at the values that they're carried. 97 00:05:48,680 --> 00:05:51,320 Speaker 3: All of this is very problematic when you bring it 98 00:05:51,360 --> 00:05:54,479 Speaker 3: into individual investors and you try and slice and dice 99 00:05:54,560 --> 00:05:58,160 Speaker 3: these things into very much more marketable parcels. 100 00:05:59,120 --> 00:06:00,240 Speaker 2: I really don't. 101 00:06:01,880 --> 00:06:08,960 Speaker 1: Like the sound of a continuity. 102 00:06:06,920 --> 00:06:11,120 Speaker 3: Via continuation fund. Yeah, and again like these. 103 00:06:11,240 --> 00:06:13,520 Speaker 1: You explain to the listeners what it is, and can 104 00:06:13,560 --> 00:06:15,880 Speaker 1: you experience to the listeners why it's sort of almost 105 00:06:15,920 --> 00:06:20,600 Speaker 1: anathema to a conservative investor because because probably undested, the 106 00:06:20,600 --> 00:06:22,840 Speaker 1: whole thing was you fixed it up and then you 107 00:06:22,960 --> 00:06:25,640 Speaker 1: fliltered it, and the floating on the stock market, if 108 00:06:25,640 --> 00:06:28,480 Speaker 1: nothing else was the confirmation that the company. 109 00:06:28,120 --> 00:06:32,839 Speaker 3: Had improved exactly right. So like you can argue what 110 00:06:32,920 --> 00:06:35,240 Speaker 3: a house in Sydney or Melbourne is worth, but you 111 00:06:35,240 --> 00:06:37,080 Speaker 3: can have a pretty good idea of it because there's 112 00:06:37,400 --> 00:06:40,640 Speaker 3: hundreds or thousands being sold every day. You can't dispute 113 00:06:40,640 --> 00:06:44,440 Speaker 3: what a single share in CBA is worth. With private equity, 114 00:06:44,680 --> 00:06:47,800 Speaker 3: businesses are more esoteric. So I might have a you 115 00:06:48,279 --> 00:06:50,600 Speaker 3: insert any kind of company, and I might say it's 116 00:06:50,600 --> 00:06:53,839 Speaker 3: worth X million dollars, But unless someone's willing to pay 117 00:06:53,920 --> 00:06:56,839 Speaker 3: for it, you know that there's an argument whether I'm 118 00:06:56,880 --> 00:07:00,240 Speaker 3: over or undervaluing it. Now, this is where incentives come 119 00:07:00,279 --> 00:07:03,120 Speaker 3: back into the piece as well. So private equity managers 120 00:07:03,160 --> 00:07:08,080 Speaker 3: and there are thousands of them. They have varying fee structures, 121 00:07:08,080 --> 00:07:11,600 Speaker 3: but they're incentivized to carry those assets at high values 122 00:07:11,640 --> 00:07:14,200 Speaker 3: and that's all well and good unless they're not able 123 00:07:14,240 --> 00:07:17,520 Speaker 3: to sell them at those values. So typically the way 124 00:07:17,560 --> 00:07:20,920 Speaker 3: these things work is a private equity manager might raise 125 00:07:21,600 --> 00:07:25,680 Speaker 3: X million or billion dollars for a fixed term, and 126 00:07:25,720 --> 00:07:28,920 Speaker 3: so they'll typically have five, seven, ten year terms and 127 00:07:28,960 --> 00:07:31,680 Speaker 3: the idea is they'll go out find a bunch of businesses, 128 00:07:31,760 --> 00:07:34,960 Speaker 3: buy them, typically fill them up with debt fix them up, 129 00:07:35,040 --> 00:07:38,680 Speaker 3: apply their razzle, dazzle, get some master of the Universe 130 00:07:38,920 --> 00:07:42,560 Speaker 3: management consultant in and sell it at a profit. Now, 131 00:07:43,400 --> 00:07:47,760 Speaker 3: since that has become in vogue, I think one argument 132 00:07:47,880 --> 00:07:50,960 Speaker 3: is that there's a lot more people hunting these things, 133 00:07:51,000 --> 00:07:53,840 Speaker 3: so there's a lot more but less bargains to be had. 134 00:07:54,320 --> 00:07:58,200 Speaker 3: And then fundamentally as well, a continuation fund, which again 135 00:07:58,240 --> 00:08:01,080 Speaker 3: we're seeing because at the end of this ten year period, 136 00:08:01,160 --> 00:08:05,360 Speaker 3: many funds either aren't or won't sell the companies that 137 00:08:05,400 --> 00:08:08,280 Speaker 3: they own, and that might be an inability to do so, 138 00:08:09,320 --> 00:08:12,320 Speaker 3: or commonly, it might be the fact that they're waiting 139 00:08:12,360 --> 00:08:15,600 Speaker 3: to get the full value realized from the business. I'm 140 00:08:15,600 --> 00:08:18,600 Speaker 3: sure there's plenty of examples where it's completely bona fide, 141 00:08:18,640 --> 00:08:22,520 Speaker 3: but more and more you're seeing fund AI that had 142 00:08:22,520 --> 00:08:25,680 Speaker 3: a ten year time frame being squished into fun Bee 143 00:08:25,760 --> 00:08:29,160 Speaker 3: that's got another ten year time horizon. And one of 144 00:08:29,160 --> 00:08:32,480 Speaker 3: the problems here, one of the biggest problems is fees, 145 00:08:32,559 --> 00:08:36,560 Speaker 3: because private equity managers really do layer on the fees 146 00:08:36,640 --> 00:08:38,800 Speaker 3: or they have the ability to, and they come in 147 00:08:39,280 --> 00:08:42,840 Speaker 3: amazing array of things, so consulting fees, they might have 148 00:08:42,920 --> 00:08:45,840 Speaker 3: debt origination fees. You might also have funds that are 149 00:08:46,520 --> 00:08:49,800 Speaker 3: kind of playing both sides because almost always these transactions 150 00:08:49,840 --> 00:08:52,960 Speaker 3: involve debt, and commonly with some of the bigger houses, 151 00:08:53,000 --> 00:08:55,120 Speaker 3: particularly out of the States, you've got them kind of 152 00:08:55,840 --> 00:08:58,640 Speaker 3: operating on both sides of the ledger. So all of 153 00:08:58,640 --> 00:09:02,120 Speaker 3: this kind of isn't ideal. But if it's making plenty 154 00:09:02,120 --> 00:09:05,080 Speaker 3: of money for investors, it's fine. But now we're kind 155 00:09:05,080 --> 00:09:07,920 Speaker 3: of saying that the liquidity paces really come to the 156 00:09:07,960 --> 00:09:11,240 Speaker 3: fore and basically investors in some cases aren't getting their 157 00:09:11,240 --> 00:09:13,520 Speaker 3: money back as quickly as I would like, and they 158 00:09:13,520 --> 00:09:16,760 Speaker 3: don't have access to it, which is problematic for a 159 00:09:16,880 --> 00:09:17,960 Speaker 3: number of reasons. 160 00:09:18,240 --> 00:09:21,440 Speaker 1: So once upon a time, the deal was as private 161 00:09:21,679 --> 00:09:24,280 Speaker 1: until it became public. So you put the money in 162 00:09:24,320 --> 00:09:29,040 Speaker 1: for five years, and these funds they bought whatever, you know, 163 00:09:29,120 --> 00:09:31,960 Speaker 1: the airline that had got into trouble, the department store 164 00:09:31,960 --> 00:09:33,840 Speaker 1: that had got into trouble, and then five years later, 165 00:09:33,960 --> 00:09:36,760 Speaker 1: guess what it floated on the stock market. And whether 166 00:09:36,800 --> 00:09:38,560 Speaker 1: that was a dog of a stock or a great 167 00:09:38,559 --> 00:09:40,920 Speaker 1: stock didn't really matter. The point was they got it 168 00:09:40,960 --> 00:09:45,800 Speaker 1: away and that was the confirmation. The continuity vehicle disturbs 169 00:09:45,840 --> 00:09:53,200 Speaker 1: that almost like extremely long running principle and says Actually, 170 00:09:53,240 --> 00:09:56,679 Speaker 1: you know what, don't worry about it. We can trade, 171 00:09:56,800 --> 00:09:59,959 Speaker 1: we can find you a buyer, and here's the here 172 00:10:00,000 --> 00:10:04,400 Speaker 1: medical value, but it remains unlisted. I presume their defense, Andy, 173 00:10:04,600 --> 00:10:07,719 Speaker 1: is it's a new liquidity, so don't worry about it. 174 00:10:09,240 --> 00:10:12,440 Speaker 3: Yeah, I couldn't tell you what. And I'm sure there's 175 00:10:12,559 --> 00:10:15,640 Speaker 3: a range of different arguments. And I suppose it pays 176 00:10:15,679 --> 00:10:19,040 Speaker 3: to understand there's different investors, right, and also it pays 177 00:10:19,080 --> 00:10:22,840 Speaker 3: to understand what's the smart money doing. So what's the 178 00:10:22,880 --> 00:10:24,920 Speaker 3: top end of town doing. And I think something that 179 00:10:24,960 --> 00:10:27,960 Speaker 3: caught a lot of headlines in the last twelve eighteen 180 00:10:28,040 --> 00:10:32,400 Speaker 3: months is that US college endowments typically don't have a 181 00:10:32,440 --> 00:10:35,240 Speaker 3: lot of liquidity needs. So they're really well suited to, 182 00:10:35,440 --> 00:10:37,319 Speaker 3: you know, giving someone a big pot of money and 183 00:10:37,400 --> 00:10:39,600 Speaker 3: letting it run for quite a while because they don't 184 00:10:39,640 --> 00:10:44,040 Speaker 3: typically need access to it, and they're typically quite savvy investors. 185 00:10:44,080 --> 00:10:45,839 Speaker 3: I mean a lot of people that manage these funds 186 00:10:45,920 --> 00:10:48,000 Speaker 3: tend to come out of Ivy League schools, so you'd 187 00:10:48,080 --> 00:10:51,959 Speaker 3: argue that they're quite clued in. So both Yale and 188 00:10:52,160 --> 00:10:56,240 Speaker 3: Harvard made headlines when they opted to redeem. Depending on 189 00:10:56,280 --> 00:10:58,120 Speaker 3: the reports you read in the time at which you 190 00:10:58,200 --> 00:11:01,040 Speaker 3: read them, you know, at least half or up to 191 00:11:01,160 --> 00:11:04,000 Speaker 3: the entire amount that they hold in private equity, which is, 192 00:11:04,160 --> 00:11:07,439 Speaker 3: you know, in Yale's case, if I recall correctly, something 193 00:11:07,480 --> 00:11:12,880 Speaker 3: like six billion dollars. And incidentally, Yale are regarded as 194 00:11:12,960 --> 00:11:15,599 Speaker 3: the start of portfolio management, where you do put a 195 00:11:15,679 --> 00:11:17,840 Speaker 3: chunk in you know, domestic shares and a chunk in 196 00:11:17,840 --> 00:11:21,000 Speaker 3: international and so on and so forth. David Swenson, their 197 00:11:21,040 --> 00:11:23,920 Speaker 3: CIO is kind of regarded as you know, coming up 198 00:11:23,960 --> 00:11:26,520 Speaker 3: with what was called the Yale model. So just the 199 00:11:26,640 --> 00:11:29,840 Speaker 3: fact that they're you know, one of the investors that's 200 00:11:29,880 --> 00:11:31,600 Speaker 3: out there saying, hey, we want to get out of 201 00:11:31,600 --> 00:11:34,679 Speaker 3: this asset class is quite interesting. And I suppose it 202 00:11:34,720 --> 00:11:36,400 Speaker 3: doesn't have to be the end of the world kind 203 00:11:36,480 --> 00:11:39,360 Speaker 3: of thing. It's more it more just might come back to, hey, 204 00:11:39,400 --> 00:11:42,480 Speaker 3: if I'm giving someone, you know, all this money, I'm 205 00:11:42,520 --> 00:11:46,640 Speaker 3: foregoing my liquidity, I'm paying sometimes quite egregious fees. And 206 00:11:46,960 --> 00:11:49,679 Speaker 3: typically these companies are quite geared up too, so one 207 00:11:49,720 --> 00:11:52,480 Speaker 3: could make the argument that they do carry slightly more 208 00:11:52,559 --> 00:11:54,920 Speaker 3: risks than just the average stock market, and they're also 209 00:11:55,000 --> 00:11:57,600 Speaker 3: more concentrated. You might say, well, hang on, I don't 210 00:11:57,640 --> 00:12:01,360 Speaker 3: think I'm getting renumerated appropriate for the risks I'm taking. 211 00:12:01,400 --> 00:12:04,400 Speaker 3: And I think that's the kind of jungle, the drum 212 00:12:04,400 --> 00:12:06,800 Speaker 3: beat that we're seeing in private equity at the moment. 213 00:12:07,000 --> 00:12:09,480 Speaker 1: So you're saying that the point you making, I suppose 214 00:12:09,520 --> 00:12:12,079 Speaker 1: is that the endowment funds, by the time everyone found 215 00:12:12,120 --> 00:12:15,600 Speaker 1: out just how successful they had been in private equity, 216 00:12:16,360 --> 00:12:18,839 Speaker 1: they were getting outs just as mom and Dad are 217 00:12:18,880 --> 00:12:21,600 Speaker 1: going in. And when I say just about that, I'm 218 00:12:21,600 --> 00:12:24,200 Speaker 1: referring to a flood of retail products in this area 219 00:12:24,240 --> 00:12:27,400 Speaker 1: and advertisements in this area that everybody would be seeing. 220 00:12:28,120 --> 00:12:29,920 Speaker 1: So do you see any place for it at all 221 00:12:30,000 --> 00:12:34,400 Speaker 1: in smsfs or in just at retail investment portfolios? 222 00:12:34,880 --> 00:12:37,880 Speaker 3: Truthfully, I don't. I think it's one of those ones 223 00:12:38,000 --> 00:12:41,600 Speaker 3: that twenty years ago there was probably a lot more 224 00:12:41,920 --> 00:12:45,400 Speaker 3: low hanging fruit to be harvested. I think if you're 225 00:12:45,400 --> 00:12:49,359 Speaker 3: a big institutional investor, you can seek out the top performers. 226 00:12:49,360 --> 00:12:51,600 Speaker 3: A lot of people will say that private equity and 227 00:12:51,679 --> 00:12:53,760 Speaker 3: private credit as well as one of these things that 228 00:12:54,040 --> 00:12:57,439 Speaker 3: the very top performers really do leave their peers behind. 229 00:12:57,840 --> 00:13:00,400 Speaker 3: The analogy that I usually give to people and some 230 00:13:00,520 --> 00:13:03,840 Speaker 3: might say a hyperbolic and that's fine, but I'd say 231 00:13:03,840 --> 00:13:06,959 Speaker 3: that if you know, private equity was the pizza by 232 00:13:07,000 --> 00:13:10,199 Speaker 3: the time it makes it down to the individual investor, 233 00:13:10,360 --> 00:13:13,800 Speaker 3: Mom and Dad, SMSFS, high net worth whatever, I'd argue 234 00:13:13,920 --> 00:13:16,840 Speaker 3: that you're not only not just getting the crust, you're 235 00:13:16,880 --> 00:13:19,480 Speaker 3: probably getting the cheese stuck to the top of the 236 00:13:19,520 --> 00:13:22,880 Speaker 3: box because all that good stuff has just been nibbled 237 00:13:23,200 --> 00:13:25,719 Speaker 3: because the amount of palms you know, that need to 238 00:13:25,760 --> 00:13:30,480 Speaker 3: be greased between X y Z manager overseas and individual 239 00:13:30,520 --> 00:13:34,000 Speaker 3: investors see down the bottom are a lot. And then 240 00:13:34,040 --> 00:13:38,320 Speaker 3: fundamentally as well, these things are complicated. They're extremely complicated. 241 00:13:38,559 --> 00:13:41,080 Speaker 3: They're often filled with debt, they're often cross border, all 242 00:13:41,080 --> 00:13:43,920 Speaker 3: these kinds. They are more complicated than just in equity 243 00:13:43,960 --> 00:13:46,800 Speaker 3: fund where I know I've got liquidity, I know I 244 00:13:46,840 --> 00:13:49,280 Speaker 3: can see what the manager is doing, I know that 245 00:13:49,280 --> 00:13:52,080 Speaker 3: they're very transparent about the fees that they charge in 246 00:13:52,160 --> 00:13:56,160 Speaker 3: the conflicts of interest versus private equity is by definition 247 00:13:56,280 --> 00:14:00,400 Speaker 3: and design a lot murkier, a lot more opaque. And 248 00:14:01,520 --> 00:14:04,800 Speaker 3: you know where we are today, where there's a lot 249 00:14:04,800 --> 00:14:07,920 Speaker 3: of dead there's been a lot of funds launch. I 250 00:14:07,960 --> 00:14:10,800 Speaker 3: think it's fair to say that we're just over the 251 00:14:10,800 --> 00:14:13,360 Speaker 3: tip of peak private equity, and I'd say that it's 252 00:14:13,400 --> 00:14:16,240 Speaker 3: not something that the average investor can get a good 253 00:14:16,320 --> 00:14:18,280 Speaker 3: deal out of, in my opinion. 254 00:14:17,920 --> 00:14:19,320 Speaker 2: Okay, terrific. 255 00:14:20,120 --> 00:14:22,640 Speaker 1: And on top of that, folks, just in case you 256 00:14:22,640 --> 00:14:25,840 Speaker 1: weren't skeptical by now, and of course those good deals 257 00:14:25,880 --> 00:14:28,440 Speaker 1: and of course those good funds, and of course those winners. 258 00:14:28,880 --> 00:14:30,600 Speaker 1: I think Andy's point is that there's going to be 259 00:14:30,600 --> 00:14:33,240 Speaker 1: a lot of losers. Not the point, of course, which 260 00:14:33,280 --> 00:14:37,920 Speaker 1: is absolutely crucial, is that if we get a crash, 261 00:14:38,160 --> 00:14:41,560 Speaker 1: private equity will crash. It will crash in its own way, 262 00:14:41,560 --> 00:14:44,480 Speaker 1: in its own time. The difference is you can't get 263 00:14:44,520 --> 00:14:46,360 Speaker 1: your money out or if you can get like, you know, 264 00:14:46,440 --> 00:14:47,360 Speaker 1: ten cents in the dollar. 265 00:14:47,440 --> 00:14:49,560 Speaker 2: We'll take a break, we'll be back in a moment. 266 00:14:57,760 --> 00:15:01,560 Speaker 1: Hello, Welcome back to the Australians Money Puzzle podcast. I'm 267 00:15:01,560 --> 00:15:03,320 Speaker 1: talking to Andy Dorock. He's been on the show before. 268 00:15:03,360 --> 00:15:05,920 Speaker 1: It's been a while. Sorry I left it so long, Andy, 269 00:15:06,440 --> 00:15:08,280 Speaker 1: but we've got a chance to get you on again today. 270 00:15:08,680 --> 00:15:11,360 Speaker 1: We don't want to be utterly sort of one way 271 00:15:11,520 --> 00:15:15,560 Speaker 1: negative here. So you're skeptical about these products. In fact, 272 00:15:15,680 --> 00:15:20,880 Speaker 1: you're quite skeptical about money products funds in particular, fashionable 273 00:15:20,880 --> 00:15:23,520 Speaker 1: funds that come out that might be one sort of 274 00:15:23,560 --> 00:15:28,480 Speaker 1: another listed equities at least I should say licks, right, licks. 275 00:15:28,760 --> 00:15:31,000 Speaker 1: But I want to ask you then, what are you 276 00:15:31,080 --> 00:15:33,160 Speaker 1: enthusiastic about it? As an advise, I commend to you 277 00:15:33,200 --> 00:15:35,560 Speaker 1: and I say, hey, you know, times are pretty good. 278 00:15:35,960 --> 00:15:37,920 Speaker 1: I want in why would you god me? 279 00:15:39,280 --> 00:15:43,000 Speaker 3: Well, I'm going to answer with the least sexy, most 280 00:15:43,040 --> 00:15:46,360 Speaker 3: boring answer, and truthfully, I think we're kind of in 281 00:15:46,360 --> 00:15:51,040 Speaker 3: the golden age of big super And I'm an ex stockbroker, 282 00:15:51,080 --> 00:15:54,120 Speaker 3: so I'm programmed against this statement. But I think index 283 00:15:54,200 --> 00:15:57,600 Speaker 3: ETFs I think if you look around, so going back 284 00:15:57,640 --> 00:15:59,600 Speaker 3: to what we're discussing earlier, and you're right, I was 285 00:15:59,600 --> 00:16:02,440 Speaker 3: a born cynic. I'm a very lucky person. But you know, 286 00:16:02,720 --> 00:16:05,560 Speaker 3: whilst there is a lot of you know, these complicated 287 00:16:05,600 --> 00:16:08,200 Speaker 3: products like private equity et cetera, I think it's hard 288 00:16:08,200 --> 00:16:10,640 Speaker 3: to get a good deal. I think the big institutions 289 00:16:10,640 --> 00:16:14,239 Speaker 3: in Australia probably do the best work of anyone globally 290 00:16:14,760 --> 00:16:18,720 Speaker 3: at getting really good investments at really low prices and 291 00:16:19,000 --> 00:16:21,640 Speaker 3: put lots of different eggs in lots of different baskets. 292 00:16:21,680 --> 00:16:25,840 Speaker 3: So I'd honestly just add the industry funds I think 293 00:16:25,920 --> 00:16:29,640 Speaker 3: have just pointed out how dominant they are at designing 294 00:16:29,680 --> 00:16:33,880 Speaker 3: investment portfolios and delivering good returns. And then outside of 295 00:16:33,920 --> 00:16:36,480 Speaker 3: that is again being a you know, someone who's spent 296 00:16:36,640 --> 00:16:39,280 Speaker 3: more than a third of his life trying to work 297 00:16:39,440 --> 00:16:42,400 Speaker 3: in active investment management in some way, shape or form. 298 00:16:42,440 --> 00:16:44,760 Speaker 3: I think that we're kind of coming into a new 299 00:16:44,800 --> 00:16:48,720 Speaker 3: paradigm where index investing is really going to show its stripes. 300 00:16:48,760 --> 00:16:52,520 Speaker 3: And I just adore Victor Schwetz of Macquarie, and he 301 00:16:52,640 --> 00:16:55,360 Speaker 3: recently did a speech where he was basically talking about, like, 302 00:16:55,400 --> 00:16:57,440 Speaker 3: how do you invest in a market like today right 303 00:16:57,480 --> 00:16:59,840 Speaker 3: where you've got something like planet here just taking a 304 00:17:00,000 --> 00:17:04,520 Speaker 3: company complete random trading, it just imaginary multiples. 305 00:17:04,480 --> 00:17:07,600 Speaker 1: Which which is currently been shortened by Michael Bury of 306 00:17:07,760 --> 00:17:09,960 Speaker 1: oh short theme worth mentioning. 307 00:17:10,080 --> 00:17:12,920 Speaker 3: One hundred percent, and you wouldn't want And now it's 308 00:17:12,960 --> 00:17:15,439 Speaker 3: not a great time to be a shorter, like, for instance, 309 00:17:15,520 --> 00:17:18,920 Speaker 3: we've got John Hampton here in Sydney, who's globally regarded 310 00:17:18,960 --> 00:17:21,239 Speaker 3: as one of, if not the best, you know up 311 00:17:21,280 --> 00:17:23,560 Speaker 3: there with the top short sellers, and you know, Jim 312 00:17:23,640 --> 00:17:26,960 Speaker 3: Chainos and all the rest. It's a horrific time in 313 00:17:27,560 --> 00:17:30,000 Speaker 3: society to be a short seller because again you've just 314 00:17:30,040 --> 00:17:33,440 Speaker 3: got this wall of money, and you know, take Michael 315 00:17:33,480 --> 00:17:36,040 Speaker 3: Bory for example, like Jim Chaine, it's a very famous 316 00:17:36,080 --> 00:17:38,639 Speaker 3: short seller, has been sitting there agitating for the death 317 00:17:38,680 --> 00:17:42,159 Speaker 3: of Tesla for years, and you could not come up 318 00:17:42,200 --> 00:17:46,000 Speaker 3: with a company that's got uglier financial metrics or a 319 00:17:46,040 --> 00:17:50,680 Speaker 3: more you know, more combative model at generating money. And 320 00:17:50,760 --> 00:17:54,080 Speaker 3: yet here it is still persevering. It still I wouldn't 321 00:17:54,160 --> 00:17:56,880 Speaker 3: accuse it of being a magnificent company, but it's included 322 00:17:56,920 --> 00:17:59,560 Speaker 3: in the mag seven. So you kind of take that 323 00:17:59,640 --> 00:18:01,600 Speaker 3: lens and you go, all right, what can I do? 324 00:18:01,800 --> 00:18:05,920 Speaker 3: And fundamentally you want to diversify because again you are 325 00:18:06,320 --> 00:18:11,320 Speaker 3: seeing returns spread out globally but really concentrated in the 326 00:18:11,440 --> 00:18:14,720 Speaker 3: US at the moment, So you really want to diversify offshore. 327 00:18:15,400 --> 00:18:17,239 Speaker 3: And then I think the best way to do that 328 00:18:17,359 --> 00:18:21,520 Speaker 3: is just via index ETFs if we're talking outside of Super, 329 00:18:22,480 --> 00:18:25,280 Speaker 3: inside of Super. I do think that the industry funds, 330 00:18:25,320 --> 00:18:28,040 Speaker 3: with their kind of model of being able to access 331 00:18:28,080 --> 00:18:31,840 Speaker 3: that top flight investments overseas, but also having the gift 332 00:18:31,920 --> 00:18:36,040 Speaker 3: and somewhat curse of just ongoing contributions, allows them to 333 00:18:36,119 --> 00:18:39,760 Speaker 3: play in these unlisted spaces, they can buy infrastructure assets. 334 00:18:40,160 --> 00:18:43,800 Speaker 3: I'd say they're probably the best designed to whether the 335 00:18:43,840 --> 00:18:47,119 Speaker 3: biggest threat we're all facing at the moment, which is inflation, 336 00:18:47,680 --> 00:18:50,160 Speaker 3: you know, by virtue of real assets and inflation link 337 00:18:50,240 --> 00:18:52,680 Speaker 3: leases and all these kinds of things, of all manner 338 00:18:52,680 --> 00:18:55,919 Speaker 3: of properties underneath their bonnets. So those are two that 339 00:18:55,960 --> 00:18:58,679 Speaker 3: I'm quite positive on. I would love to see a 340 00:18:58,680 --> 00:19:03,320 Speaker 3: return of the short seller and market fundamentals. But if 341 00:19:03,320 --> 00:19:05,919 Speaker 3: you're trying to pick stocks on fundamentals, good luck to here. 342 00:19:05,960 --> 00:19:08,080 Speaker 3: I mean, look at the domestic market here. 343 00:19:08,480 --> 00:19:11,520 Speaker 2: Yes, I see some value investors drifting. I put it 344 00:19:11,560 --> 00:19:11,840 Speaker 2: that way. 345 00:19:11,920 --> 00:19:14,879 Speaker 1: That's for sure after a many years. But tell me, 346 00:19:15,480 --> 00:19:17,040 Speaker 1: apart from those, what else do you like. 347 00:19:17,600 --> 00:19:21,920 Speaker 3: I'd invest in our therapists that caters exclusively to value managers. 348 00:19:21,920 --> 00:19:24,360 Speaker 3: I think they'd be doing a good trade at the moment. Yeah, 349 00:19:24,440 --> 00:19:27,879 Speaker 3: So outside of that, I think cash It really comes 350 00:19:27,920 --> 00:19:29,800 Speaker 3: back to when you look at everything at the moment, 351 00:19:29,920 --> 00:19:32,479 Speaker 3: everything's at all time highs, and so you know, all 352 00:19:32,480 --> 00:19:35,120 Speaker 3: these acronyms get thrown around. I think one that came 353 00:19:35,240 --> 00:19:38,080 Speaker 3: up years ago and it's really proof that it's not 354 00:19:38,160 --> 00:19:41,160 Speaker 3: going anywhere is the TEENA trade. There is no alternative. 355 00:19:41,600 --> 00:19:43,720 Speaker 3: So if we think about like what's gotten us to 356 00:19:43,720 --> 00:19:47,119 Speaker 3: where we are, I mean, some people might argue its 357 00:19:47,160 --> 00:19:49,840 Speaker 3: earnings growth. I'd probably dispute that. I think it's that 358 00:19:49,920 --> 00:19:53,280 Speaker 3: we've just had a wall of money come at markets, 359 00:19:53,320 --> 00:19:56,680 Speaker 3: particularly since COVID. You just look at you know, global 360 00:19:57,080 --> 00:19:59,880 Speaker 3: money growth M two. However you want to measure it, 361 00:20:00,000 --> 00:20:03,000 Speaker 3: it's enormous and it is flowing into financial assets of 362 00:20:03,040 --> 00:20:06,880 Speaker 3: all regards. And so I would say that just diversification 363 00:20:07,080 --> 00:20:09,320 Speaker 3: is your best friend in the context that you don't 364 00:20:09,359 --> 00:20:12,399 Speaker 3: just want to bet on one single sector or geography 365 00:20:12,480 --> 00:20:14,960 Speaker 3: or currency. You really want to spread it far and wide, 366 00:20:14,960 --> 00:20:18,399 Speaker 3: because fundamentally as well, everything brings something to the table 367 00:20:18,400 --> 00:20:21,360 Speaker 3: in one shape, one way, shape or form. So Europe's 368 00:20:21,400 --> 00:20:23,760 Speaker 3: got its positives, it's got plenty of negatives as well, 369 00:20:23,880 --> 00:20:27,920 Speaker 3: Japan the same, Australia the same, US, et cetera, et cetera. 370 00:20:28,040 --> 00:20:30,040 Speaker 3: So I think it's one of these things that now 371 00:20:30,119 --> 00:20:32,800 Speaker 3: more than ever, you really want to invest in a 372 00:20:32,880 --> 00:20:35,960 Speaker 3: really cold shower and a bit of patience. You really 373 00:20:36,040 --> 00:20:38,920 Speaker 3: want to make sure you're as well diversified as possible. 374 00:20:39,320 --> 00:20:41,440 Speaker 3: And then the best way to play that is by 375 00:20:41,440 --> 00:20:43,520 Speaker 3: making sure that you're invested in as many things that 376 00:20:43,600 --> 00:20:46,399 Speaker 3: you can access at a fair value, and equities is 377 00:20:46,440 --> 00:20:49,360 Speaker 3: one of those things, going back to, you know, private assets. 378 00:20:49,359 --> 00:20:50,639 Speaker 3: In this kind of thing, it's hard to get a 379 00:20:50,640 --> 00:20:53,359 Speaker 3: good deal. It's hard to get cutting edge. Any person 380 00:20:53,400 --> 00:20:56,439 Speaker 3: off the street can get an A plus index fund 381 00:20:56,440 --> 00:20:59,639 Speaker 3: of some variety. You need about fifty bucks to go 382 00:20:59,680 --> 00:21:02,040 Speaker 3: and do it. So it is one of those things 383 00:21:02,040 --> 00:21:05,520 Speaker 3: that anyone can access and counter injuritively. It really doesn't 384 00:21:05,520 --> 00:21:09,119 Speaker 3: matter whether he got one hundred million dollars or even 385 00:21:09,200 --> 00:21:14,199 Speaker 3: ten thousand dollars. It really does a fantastic job of 386 00:21:14,240 --> 00:21:15,359 Speaker 3: both investors. 387 00:21:15,720 --> 00:21:16,600 Speaker 2: Okay, very good. 388 00:21:16,840 --> 00:21:19,800 Speaker 1: Interesting, and it's interesting to hear you say that it's 389 00:21:19,840 --> 00:21:22,000 Speaker 1: easy to get an index fund manager to come on 390 00:21:22,040 --> 00:21:24,720 Speaker 1: the show and say indexing is good. It's a different 391 00:21:24,720 --> 00:21:27,040 Speaker 1: thing to get an independent advisor. Okay, we'll have a 392 00:21:27,040 --> 00:21:29,000 Speaker 1: short break and we have some questions. 393 00:21:29,320 --> 00:21:31,320 Speaker 2: We'll try and get through a few. 394 00:21:31,800 --> 00:21:35,040 Speaker 1: One in particular, I want to go through to immediately 395 00:21:35,119 --> 00:21:37,359 Speaker 1: which everyone's been waiting for, I think to some extent, 396 00:21:37,480 --> 00:21:39,200 Speaker 1: on how the new supertax works. 397 00:21:39,240 --> 00:21:40,200 Speaker 2: Okay, back in the moment. 398 00:21:47,800 --> 00:21:51,320 Speaker 1: Hello, Welcome back to The Australian's Money Puzzle podcast. James 399 00:21:51,440 --> 00:21:55,600 Speaker 1: Kirby with Andy Darroch, independent financial Advisor. Now, and you 400 00:21:55,640 --> 00:21:59,520 Speaker 1: have a question from Thomas, and this came about in 401 00:21:59,560 --> 00:22:02,960 Speaker 1: the exportation of how the new super tax Division two 402 00:22:03,040 --> 00:22:07,119 Speaker 1: ninety six is going to work now okay now on 403 00:22:07,160 --> 00:22:10,560 Speaker 1: actual earnings rather than on realized earnings, on the basis 404 00:22:10,560 --> 00:22:13,200 Speaker 1: that it makes it through Parliament politically, which it probably 405 00:22:13,240 --> 00:22:14,840 Speaker 1: will though the Coalition. 406 00:22:14,480 --> 00:22:16,679 Speaker 2: I'm not going to vote for it. I see that now. 407 00:22:17,240 --> 00:22:19,440 Speaker 1: Also, I'll just preface this by saying on the show, 408 00:22:19,480 --> 00:22:22,520 Speaker 1: sometimes it's you know, in talking about these things, it's 409 00:22:22,600 --> 00:22:26,160 Speaker 1: quite difficult because it's extraordinary complex and when you write 410 00:22:26,160 --> 00:22:28,520 Speaker 1: them in print you very carefully get everything all your 411 00:22:28,560 --> 00:22:31,520 Speaker 1: docs in a row. Sometimes we can oversimplify. And this 412 00:22:31,640 --> 00:22:34,000 Speaker 1: is the background to this. Thomas says, I've been a 413 00:22:34,040 --> 00:22:36,760 Speaker 1: long term listener. Thank you for your sessions. You've really 414 00:22:36,760 --> 00:22:39,399 Speaker 1: confused me on the new division two ninety six super 415 00:22:39,440 --> 00:22:41,640 Speaker 1: tax I spent I was googling this because you kept 416 00:22:41,840 --> 00:22:46,640 Speaker 1: talking about fifteen percent on super above two million. Jim 417 00:22:46,720 --> 00:22:49,840 Speaker 1: Chalmers on the new tax only talked about fifteen percent 418 00:22:51,160 --> 00:22:57,040 Speaker 1: over three million. The situation is about the total superbalans 419 00:22:57,119 --> 00:23:02,119 Speaker 1: cap and it seems to have been over interpreted by yourself. 420 00:23:03,320 --> 00:23:04,040 Speaker 2: Here he says. 421 00:23:04,119 --> 00:23:06,120 Speaker 1: This is what Thomas says. If I have two point 422 00:23:06,119 --> 00:23:10,320 Speaker 1: four million and super accumulation phase, I transfer two million 423 00:23:10,840 --> 00:23:14,400 Speaker 1: into account based pension at the age of sixty five, 424 00:23:14,880 --> 00:23:17,800 Speaker 1: I will have four hundred thousand in accumulation. Okay, he's 425 00:23:17,800 --> 00:23:20,320 Speaker 1: got four hundred thousand in accumulation because it's four hundred 426 00:23:20,320 --> 00:23:23,399 Speaker 1: thousand over the two million. But my two million in 427 00:23:23,480 --> 00:23:30,080 Speaker 1: retirement phase can grow organically higher. And the earnings it's 428 00:23:30,160 --> 00:23:34,920 Speaker 1: tax free, not fifteen percent on the money inaccumulate only 429 00:23:34,920 --> 00:23:37,520 Speaker 1: the money in accumulation is at fifteen percent. Okay, So 430 00:23:37,600 --> 00:23:41,560 Speaker 1: what he's saying is the day you retire transfer a 431 00:23:41,560 --> 00:23:44,880 Speaker 1: superbands cap, you can put in two million. That two 432 00:23:44,960 --> 00:23:47,720 Speaker 1: million is tax free. Not only that, but it's tax 433 00:23:47,760 --> 00:23:54,160 Speaker 1: free forever. And the amount over that over two million 434 00:23:54,240 --> 00:23:58,359 Speaker 1: is what's tax which is just to clarify, Andy, is 435 00:23:58,400 --> 00:24:01,119 Speaker 1: he correct and could you explain how all that works? 436 00:24:01,560 --> 00:24:04,240 Speaker 3: Yes, yes, he is correct. So again let's use that 437 00:24:04,320 --> 00:24:06,960 Speaker 3: exact example. So I've got two million, I've got two 438 00:24:07,000 --> 00:24:11,920 Speaker 3: point four million dollars in super I'm sixty, I'm retired today. Excellent. 439 00:24:13,520 --> 00:24:16,840 Speaker 3: Two million of my two point four goes into a pension. 440 00:24:16,960 --> 00:24:19,159 Speaker 3: And this is where as I was joking to you 441 00:24:19,320 --> 00:24:21,639 Speaker 3: a lot of acronyms, I'll be honest. It keeps me 442 00:24:21,640 --> 00:24:25,080 Speaker 3: in a job. So we've got the TSB, which is 443 00:24:25,119 --> 00:24:28,720 Speaker 3: your total superbalance, and then we've also got the imaginatively 444 00:24:28,800 --> 00:24:32,320 Speaker 3: named Transfer balance cap. So the transfer balance cap is 445 00:24:32,359 --> 00:24:34,760 Speaker 3: how much you can put into a tax free pension. 446 00:24:34,920 --> 00:24:37,400 Speaker 3: It used to be as much as you wanted. Many 447 00:24:37,440 --> 00:24:40,720 Speaker 3: years ago this cap was introduced. It started life at 448 00:24:40,760 --> 00:24:44,240 Speaker 3: one point six it's index to CPI. Today it's two 449 00:24:44,280 --> 00:24:48,600 Speaker 3: million bucks. So using Thomas's example, he's got two point 450 00:24:48,680 --> 00:24:51,880 Speaker 3: four million dollars in super. Two million goes into the pension. 451 00:24:52,240 --> 00:24:56,040 Speaker 3: Two million has completely tax free earnings. That could grow. 452 00:24:56,240 --> 00:24:58,680 Speaker 3: So when you're in pension, you've got to withdraw some, right, 453 00:24:58,760 --> 00:25:01,520 Speaker 3: But let's just for argument SA say that he's drawing 454 00:25:01,560 --> 00:25:04,440 Speaker 3: out four percent and it's growing at ten and so 455 00:25:04,720 --> 00:25:08,080 Speaker 3: five ten years down the path, that two million dollars 456 00:25:08,080 --> 00:25:11,760 Speaker 3: that he put into pension after all these withdrawals has 457 00:25:11,840 --> 00:25:15,160 Speaker 3: grown to two point five million dollars. That is still 458 00:25:15,200 --> 00:25:19,879 Speaker 3: tax free, and in today's legislation, like right now in 459 00:25:19,920 --> 00:25:23,560 Speaker 3: November twenty twenty five, that could grow quite seriously to 460 00:25:24,080 --> 00:25:26,720 Speaker 3: a billion dollars and it would still be tax free. 461 00:25:27,160 --> 00:25:30,159 Speaker 1: Wouldn't make it clear that, first of all, Thomas, you 462 00:25:30,240 --> 00:25:35,399 Speaker 1: are correct, at the risk of simplification. The first tax 463 00:25:35,880 --> 00:25:42,800 Speaker 1: that you hit on super is over two million when 464 00:25:42,840 --> 00:25:46,359 Speaker 1: you transfer on the day of your retirement. If you 465 00:25:46,400 --> 00:25:48,640 Speaker 1: put in whatever, you put in over two million, that 466 00:25:48,800 --> 00:25:53,159 Speaker 1: bit hangs in there inside the system at fifteen percent. 467 00:25:53,720 --> 00:25:58,439 Speaker 1: And if that bit swells to over three there's a 468 00:25:58,480 --> 00:25:59,560 Speaker 1: new fifteen percent tax. 469 00:25:59,560 --> 00:26:00,560 Speaker 2: So we've got that rate. 470 00:26:02,080 --> 00:26:04,080 Speaker 3: More or less, and we don't quite know how that 471 00:26:04,160 --> 00:26:06,560 Speaker 3: extra fifteen would work. And so a good way to 472 00:26:06,600 --> 00:26:09,639 Speaker 3: think about it is you've got a two million dollar 473 00:26:09,720 --> 00:26:12,760 Speaker 3: allowance for tax free that you can spend. So for 474 00:26:12,840 --> 00:26:15,760 Speaker 3: some people they won't. They won't spend all of it. Right, 475 00:26:15,840 --> 00:26:18,840 Speaker 3: So if someone's got one and a half million dollars 476 00:26:18,960 --> 00:26:21,960 Speaker 3: and they turn sixty, kickoff a pension, and then five 477 00:26:22,040 --> 00:26:24,399 Speaker 3: ten years down the path they get an inheritance or 478 00:26:24,440 --> 00:26:26,760 Speaker 3: sell an asset or whatever and have more money come in, 479 00:26:27,080 --> 00:26:31,200 Speaker 3: well they're allowed potentially another five hundred potentially more because 480 00:26:31,359 --> 00:26:34,399 Speaker 3: this two million dollar figure is indexed to CPI. So 481 00:26:34,520 --> 00:26:37,040 Speaker 3: going back to all the doom and gloom about you know, 482 00:26:37,119 --> 00:26:40,440 Speaker 3: investments and bull markets and all the rest well, retirees 483 00:26:40,480 --> 00:26:43,320 Speaker 3: who are on that cusp of the transfer balance cap 484 00:26:43,359 --> 00:26:46,040 Speaker 3: can know that it's probably going to get indexed, you know, 485 00:26:46,160 --> 00:26:48,719 Speaker 3: quite healthily over the next five to ten years. So 486 00:26:49,359 --> 00:26:51,679 Speaker 3: and again, you could turn it off and turn it 487 00:26:51,720 --> 00:26:53,800 Speaker 3: on and it doesn't matter. So let's go back to 488 00:26:53,920 --> 00:26:57,840 Speaker 3: Thomas's example. He kicks off a pension with two million dollars. 489 00:26:58,119 --> 00:27:01,000 Speaker 3: It grows over time to turn a half million dollars 490 00:27:01,040 --> 00:27:03,720 Speaker 3: even after he's taken out his withdrawals. If for any 491 00:27:03,760 --> 00:27:05,560 Speaker 3: reason he wanted to turn it off and turn it 492 00:27:05,640 --> 00:27:08,280 Speaker 3: on again, he would still be able to take everything 493 00:27:08,320 --> 00:27:11,040 Speaker 3: that he originally put into that pension in and out, 494 00:27:11,080 --> 00:27:13,560 Speaker 3: whether it's two and a half, two point two or 495 00:27:13,600 --> 00:27:17,720 Speaker 3: even two point eight. So it sounds more complicated than 496 00:27:17,760 --> 00:27:20,520 Speaker 3: it is, and it sounds scarier than it is commonly. 497 00:27:21,080 --> 00:27:24,240 Speaker 1: Yeah, very good, okay, And the as you say, the 498 00:27:24,280 --> 00:27:27,240 Speaker 1: point is that it's indexed. As Andy was saying there, 499 00:27:27,400 --> 00:27:29,359 Speaker 1: I think it started at one point six, that it 500 00:27:29,400 --> 00:27:32,040 Speaker 1: was the first budget did Yeah, and it actually did 501 00:27:32,480 --> 00:27:36,240 Speaker 1: in one hundred thousand dollars segments and it is now 502 00:27:36,320 --> 00:27:37,960 Speaker 1: sitting at two million. 503 00:27:38,400 --> 00:27:39,320 Speaker 2: Okay. 504 00:27:39,400 --> 00:27:42,120 Speaker 3: It actually skipped too. It went straight from one point seven. 505 00:27:42,960 --> 00:27:46,320 Speaker 3: That's about we had all the inflation, revenge flation out 506 00:27:46,320 --> 00:27:47,120 Speaker 3: of that's right. 507 00:27:47,400 --> 00:27:50,480 Speaker 1: I remember, yes, I remember reporting on that and nothing 508 00:27:50,520 --> 00:27:53,119 Speaker 1: to say it will kick on again, all right. I 509 00:27:53,200 --> 00:27:55,800 Speaker 1: think that's all we've time for. That was a question 510 00:27:55,840 --> 00:27:57,800 Speaker 1: that needed to be answered in the context of the 511 00:27:57,800 --> 00:27:59,919 Speaker 1: new supertext. A lot of the attention of the new 512 00:28:00,000 --> 00:28:01,679 Speaker 1: super tax, by the way, folks, is for people with 513 00:28:01,760 --> 00:28:04,080 Speaker 1: really big balances. And there's people, of course in this 514 00:28:04,160 --> 00:28:06,800 Speaker 1: super system that have more than two million, and they're 515 00:28:06,840 --> 00:28:09,879 Speaker 1: not even retired, right, so that they immediately find themselves 516 00:28:09,960 --> 00:28:12,800 Speaker 1: hit by this tax. That's worth's knowing as well. Okay, 517 00:28:13,040 --> 00:28:14,960 Speaker 1: thank you very much, Andy, great to have you on 518 00:28:15,000 --> 00:28:16,920 Speaker 1: the show. We'll have you on again. Give us the 519 00:28:17,000 --> 00:28:18,640 Speaker 1: name of your enterprise once more. 520 00:28:19,520 --> 00:28:21,240 Speaker 3: Eddie Derek, Independent Wealth of. 521 00:28:21,240 --> 00:28:25,919 Speaker 1: US, Independent Wealth Advice. Andy Direck there and he will 522 00:28:25,920 --> 00:28:28,439 Speaker 1: be with us again. As I say, let's have some 523 00:28:29,080 --> 00:28:34,200 Speaker 1: correspondence on any issue, including the supertax, because it's amazing, 524 00:28:34,240 --> 00:28:37,880 Speaker 1: isn't it. I mean it's tortuous. Basically, it's a tortuously 525 00:28:38,000 --> 00:28:42,200 Speaker 1: complex issue. It's extremely difficult to grab it. It's like 526 00:28:42,280 --> 00:28:44,160 Speaker 1: learning a language, I think, and if you don't speak 527 00:28:44,160 --> 00:28:45,920 Speaker 1: it every day it fades. 528 00:28:46,240 --> 00:28:47,480 Speaker 2: All right, talk to you soon.