1 00:00:04,170 --> 00:00:06,629 Sam Hallinan: Welcome to the Fear and Greed daily interview. I'm Sean 2 00:00:06,630 --> 00:00:10,200 Sam Hallinan: Aylmer. In case we needed more evidence of how turbulent 3 00:00:10,200 --> 00:00:13,500 Sam Hallinan: financial markets have been in recent times, it seems even 4 00:00:13,500 --> 00:00:18,029 Sam Hallinan: experienced investors are now turning to financial planners for advice. 5 00:00:18,300 --> 00:00:21,329 Sam Hallinan: The Global Investor Study by Schroders, one of Europe's largest 6 00:00:21,329 --> 00:00:24,599 Sam Hallinan: independent investment management firms, has found that more than a 7 00:00:24,600 --> 00:00:28,920 Sam Hallinan: third of expert or advanced investors say they're more likely 8 00:00:28,920 --> 00:00:31,950 Sam Hallinan: to speak to a financial advisor as interest rates rise. 9 00:00:32,220 --> 00:00:35,460 Sam Hallinan: Naturally, investment strategies are also changing with government bonds, digital 10 00:00:35,460 --> 00:00:38,610 Sam Hallinan: assets, and cash, less attractive than they were six months 11 00:00:38,610 --> 00:00:41,729 Sam Hallinan: ago. Remember, this is general information only and doesn't take 12 00:00:41,729 --> 00:00:44,970 Sam Hallinan: into account your own circumstances. You should speak to a 13 00:00:44,970 --> 00:00:49,800 Sam Hallinan: professional before making investment decisions. Sam Hallinan is the CEO 14 00:00:49,800 --> 00:00:53,280 Sam Hallinan: of Schroders, Australia. Sam, welcome to Fear and Greed. Thanks, 15 00:00:53,280 --> 00:00:54,120 Sam Hallinan: Sean. Good to be here. 16 00:00:54,870 --> 00:00:58,560 Sean Aylmer: Were you surprised so many professional investors, so- called professional 17 00:00:58,560 --> 00:01:02,190 Sean Aylmer: investors, are looking for advice from financial planners? 18 00:01:02,820 --> 00:01:05,069 Sam Hallinan: No, I don't think so. I mean the last 12 19 00:01:05,069 --> 00:01:08,490 Sam Hallinan: months have been brutal in terms of investment markets. Interest 20 00:01:08,490 --> 00:01:11,459 Sam Hallinan: rates have really played havoc across the board. And I 21 00:01:11,459 --> 00:01:15,240 Sam Hallinan: think for people who are investors or who are invested, 22 00:01:15,780 --> 00:01:19,050 Sam Hallinan: they realize the power and importance of advice at times 23 00:01:19,050 --> 00:01:22,680 Sam Hallinan: when things feel most out of control. So I think 24 00:01:22,680 --> 00:01:24,600 Sam Hallinan: it's a case of if you know the value of 25 00:01:24,600 --> 00:01:28,710 Sam Hallinan: advice, you value advice at times when it's most important. 26 00:01:28,770 --> 00:01:32,339 Sam Hallinan: So I guess I'm not surprised in many ways, but 27 00:01:32,340 --> 00:01:33,600 Sam Hallinan: we've seen this time and time again. 28 00:01:34,170 --> 00:01:36,300 Sean Aylmer: So I suppose that it comes to the point, we're 29 00:01:36,300 --> 00:01:40,230 Sean Aylmer: big fans of financial advisors on Fear and Greed, and 30 00:01:40,230 --> 00:01:43,620 Sean Aylmer: I truly think even if a third of the professional 31 00:01:43,620 --> 00:01:47,490 Sean Aylmer: advisors saying, " I need one," then the intermediate group and 32 00:01:47,580 --> 00:01:50,400 Sean Aylmer: even the moms and dads who only have passing interest 33 00:01:50,400 --> 00:01:53,850 Sean Aylmer: in it, it really does show the value of getting 34 00:01:53,850 --> 00:01:55,860 Sean Aylmer: someone who lives and breathes it every day to help 35 00:01:55,860 --> 00:01:56,310 Sean Aylmer: you out. 36 00:01:56,760 --> 00:01:59,310 Sam Hallinan: Oh, absolutely. And I think the other thing that this 37 00:01:59,310 --> 00:02:02,550 Sam Hallinan: year's study really stood out for me was the link 38 00:02:02,550 --> 00:02:07,410 Sam Hallinan: between the importance of financial advice, financial health, and mental 39 00:02:07,410 --> 00:02:13,109 Sam Hallinan: health. We saw directly that 64% of Australian investors believe 40 00:02:13,110 --> 00:02:15,540 Sam Hallinan: that the performance of their investment has a direct impact 41 00:02:15,540 --> 00:02:20,100 Sam Hallinan: on their mental wellbeing. And I think that's a really important stat. 42 00:02:20,100 --> 00:02:26,820 Sam Hallinan: The importance of financial advisors helping people manage the mental 43 00:02:26,820 --> 00:02:30,780 Sam Hallinan: aspect of investing, which time and time again is proven 44 00:02:30,780 --> 00:02:33,870 Sam Hallinan: to be one of the most important contributors to either 45 00:02:33,870 --> 00:02:40,410 Sam Hallinan: people achieving superior long- term performance or seeing behavior negatively 46 00:02:40,410 --> 00:02:41,399 Sam Hallinan: impact their returns. 47 00:02:42,720 --> 00:02:46,290 Sean Aylmer: I used to have a DIY super fund and just 48 00:02:46,350 --> 00:02:48,600 Sean Aylmer: the fact that I wasn't doing enough about it worried 49 00:02:48,600 --> 00:02:50,730 Sean Aylmer: me. So in the end, I put it into a 50 00:02:50,730 --> 00:02:53,609 Sean Aylmer: large industry fund. But it's kind of the same theory, 51 00:02:53,610 --> 00:02:56,910 Sean Aylmer: isn't it? Just if you have someone managing your money, 52 00:02:57,419 --> 00:02:59,489 Sean Aylmer: you kind of have peace of mind, somewhat. 53 00:03:00,240 --> 00:03:02,639 Sam Hallinan: I mean, you do. I think there's two things. There's 54 00:03:02,639 --> 00:03:05,190 Sam Hallinan: definitely the peace of mind because you know that you 55 00:03:05,190 --> 00:03:07,950 Sam Hallinan: can feel comfortable that someone is looking after this for 56 00:03:07,950 --> 00:03:11,730 Sam Hallinan: you. But I think probably more importantly, it's having someone 57 00:03:11,790 --> 00:03:14,760 Sam Hallinan: to stop you doing the things you shouldn't at the 58 00:03:14,760 --> 00:03:18,570 Sam Hallinan: worst possible time. And we've seen markets come off across 59 00:03:18,600 --> 00:03:23,609 Sam Hallinan: 2022, and it is entirely normal. And history has proven 60 00:03:23,970 --> 00:03:27,899 Sam Hallinan: to be entirely predictable that people will make poor decisions 61 00:03:27,900 --> 00:03:30,570 Sam Hallinan: at the worst possible time. So I think what financial 62 00:03:30,570 --> 00:03:34,470 Sam Hallinan: advisors can do during those times of tumults is get 63 00:03:34,470 --> 00:03:38,369 Sam Hallinan: their arms around their clients and encourage them to stay 64 00:03:38,370 --> 00:03:41,520 Sam Hallinan: the course. And again, history has shown that if you 65 00:03:41,520 --> 00:03:45,089 Sam Hallinan: do that, you give yourself the chance of producing superior returns. 66 00:03:45,450 --> 00:03:49,200 Sean Aylmer: How do we get people to see a financial advisor? 67 00:03:49,200 --> 00:03:53,640 Sean Aylmer: Because we've seen legislative changes in recent years has not 68 00:03:54,090 --> 00:03:56,910 Sean Aylmer: upped the number of people using financial advisors. It's gone 69 00:03:56,910 --> 00:03:58,110 Sean Aylmer: the other way. What do we do? 70 00:03:58,710 --> 00:04:02,640 Sam Hallinan: Yeah, look, I think the government has recognized that issue 71 00:04:03,090 --> 00:04:08,580 Sam Hallinan: and their reform inquiry, which Michelle Levy is heading up, 72 00:04:08,940 --> 00:04:12,930 Sam Hallinan: is looking at some fairly significant reforms to how financial 73 00:04:12,930 --> 00:04:16,890 Sam Hallinan: advice could be provided to Australians. And I think collectively 74 00:04:16,890 --> 00:04:21,870 Sam Hallinan: across the industry, everyone is cheering that reform process on. 75 00:04:22,200 --> 00:04:25,260 Sam Hallinan: There's been a huge amount of regulation that's been applied 76 00:04:25,260 --> 00:04:27,539 Sam Hallinan: to financial advice over the last 15 years for a whole bunch 77 00:04:27,540 --> 00:04:30,510 Sam Hallinan: of really sensible reasons and consumer protections at the core. 78 00:04:30,900 --> 00:04:33,779 Sam Hallinan: But I think everyone also acknowledges that that has created 79 00:04:33,779 --> 00:04:36,390 Sam Hallinan: an environment where it is incredibly expensive for people to 80 00:04:36,390 --> 00:04:39,960 Sam Hallinan: seek financial advice with not many other alternatives available if 81 00:04:39,960 --> 00:04:44,670 Sam Hallinan: they don't want full holistic advice. So hopefully these reforms, 82 00:04:44,940 --> 00:04:46,859 Sam Hallinan: this review will come up with some recommendations to the 83 00:04:46,860 --> 00:04:49,950 Sam Hallinan: government, which allow different forms of advice to be provided 84 00:04:49,950 --> 00:04:53,250 Sam Hallinan: at different price points, which is all to the goal 85 00:04:53,250 --> 00:04:55,080 Sam Hallinan: of making financial advice more accessible. 86 00:04:55,500 --> 00:04:57,450 Sean Aylmer: Stay with me, Sam. We'll be back in a minute. 87 00:05:03,660 --> 00:05:07,770 Sean Aylmer: My guest today is Sam Hallinan, CEO of Schroders, Australia. 88 00:05:08,970 --> 00:05:12,989 Sean Aylmer: Okay. So back to Schroders Global Investor Survey. We are 89 00:05:12,990 --> 00:05:17,160 Sean Aylmer: seeing interest rates rise. So what's that making people do 90 00:05:17,160 --> 00:05:19,380 Sean Aylmer: behavior wise in terms of investing? 91 00:05:20,460 --> 00:05:22,860 Sam Hallinan: Well, I think a couple of different things. First and 92 00:05:22,860 --> 00:05:26,460 Sam Hallinan: foremost, when interest rates rise, people's attention turn to the 93 00:05:26,460 --> 00:05:29,940 Sam Hallinan: area where they will most be hurt, which is around 94 00:05:29,940 --> 00:05:33,839 Sam Hallinan: debt. So what you'll see immediately is people tightening their 95 00:05:33,839 --> 00:05:36,330 Sam Hallinan: belts in terms of cash flow, which then does limit 96 00:05:36,390 --> 00:05:41,130 Sam Hallinan: the likelihood of them looking to invest. There are corresponding 97 00:05:41,160 --> 00:05:45,659 Sam Hallinan: impacts on people's returns. Fixed income returns, which are directly 98 00:05:45,660 --> 00:05:49,049 Sam Hallinan: linked to interest rates, have had a big correction in 99 00:05:49,050 --> 00:05:53,850 Sam Hallinan: price across 2022. For those companies that are particularly sensitive 100 00:05:53,850 --> 00:05:55,740 Sam Hallinan: to interest rate rises, we've seen a lot of those 101 00:05:55,740 --> 00:05:58,890 Sam Hallinan: companies come off in value. Technology stocks are a great 102 00:05:58,890 --> 00:06:01,860 Sam Hallinan: example of that. We've seen massive declines in tech company 103 00:06:01,860 --> 00:06:06,510 Sam Hallinan: values across 2022. All of that has contributed to... Even 104 00:06:06,510 --> 00:06:09,630 Sam Hallinan: diversified portfolios because bonds have come off, inequities have come 105 00:06:09,630 --> 00:06:12,419 Sam Hallinan: off, portfolios across the board have come off, which then 106 00:06:12,420 --> 00:06:16,380 Sam Hallinan: contributes to how people feel about whether their portfolios are 107 00:06:16,380 --> 00:06:20,460 Sam Hallinan: meeting their return expectations. And interestingly, the feedback from the survey is 108 00:06:21,120 --> 00:06:24,450 Sam Hallinan: that investors will sometimes make decisions under pressure that they 109 00:06:24,810 --> 00:06:27,480 Sam Hallinan: look back on with regret. And I think that is 110 00:06:27,480 --> 00:06:30,510 Sam Hallinan: to the point we said earlier, these times will certainly 111 00:06:30,510 --> 00:06:34,890 Sam Hallinan: heighten people's concern and likely contribute to decisions that they'd 112 00:06:34,890 --> 00:06:36,390 Sam Hallinan: make, and in the future, likely regret 113 00:06:36,930 --> 00:06:39,060 Sean Aylmer: One of the findings of the surveys, that people are 114 00:06:39,420 --> 00:06:42,929 Sean Aylmer: thinking about taking on more risk and that's in an 115 00:06:42,930 --> 00:06:45,630 Sean Aylmer: effort to find yield, in an effort to find better 116 00:06:45,630 --> 00:06:48,270 Sean Aylmer: returns. I'm not sure whether that's a good or a 117 00:06:48,270 --> 00:06:51,120 Sean Aylmer: bad idea when you have rising interest rates and potential 118 00:06:51,120 --> 00:06:53,250 Sean Aylmer: of an economic slowdown to take on more risk. 119 00:06:54,150 --> 00:06:56,520 Sam Hallinan: I think that's probably right. People are saying to us 120 00:06:56,520 --> 00:06:58,890 Sam Hallinan: that they're likely to take on more risk because their 121 00:06:58,890 --> 00:07:03,660 Sam Hallinan: returns have come off significantly across 2022. Maybe it's that, 122 00:07:03,660 --> 00:07:06,839 Sam Hallinan: maybe it's also a fact of people, particularly those who 123 00:07:06,839 --> 00:07:09,060 Sam Hallinan: are more experienced and do have the guidance of financial 124 00:07:09,060 --> 00:07:11,730 Sam Hallinan: advice to recognize a lot of the assets are much 125 00:07:11,730 --> 00:07:14,880 Sam Hallinan: cheaper today than they were 12 months ago, and therefore 126 00:07:14,940 --> 00:07:17,370 Sam Hallinan: could be a good buying opportunity for good quality companies. 127 00:07:17,790 --> 00:07:21,420 Sam Hallinan: So again, it might not be a sensible decision for 128 00:07:21,420 --> 00:07:23,760 Sam Hallinan: an individual investor, but important for them to get some 129 00:07:23,760 --> 00:07:25,440 Sam Hallinan: guidance as to whether it makes sense for them. 130 00:07:26,400 --> 00:07:28,590 Sean Aylmer: And are Australians roughly in line with other parts of 131 00:07:28,590 --> 00:07:30,810 Sean Aylmer: the world in terms of how they're thinking about risk 132 00:07:30,810 --> 00:07:32,250 Sean Aylmer: and investing at the moment? 133 00:07:32,940 --> 00:07:35,250 Sam Hallinan: Yeah, broadly. Yeah, there's not a huge degree of difference 134 00:07:35,250 --> 00:07:37,350 Sam Hallinan: from the study that we're seeing in terms of attitudes 135 00:07:37,350 --> 00:07:39,720 Sam Hallinan: to risk, what people are expecting to do over the 136 00:07:39,720 --> 00:07:42,360 Sam Hallinan: next few years, what they expect to see in terms 137 00:07:42,360 --> 00:07:45,450 Sam Hallinan: of returns relative to global. It's interesting though, if you 138 00:07:45,450 --> 00:07:47,790 Sam Hallinan: actually look at what people are expecting over the next 139 00:07:47,790 --> 00:07:50,190 Sam Hallinan: five years in terms of return, the study is suggesting 140 00:07:50,520 --> 00:07:54,660 Sam Hallinan: that people are still expecting returns on average of around 10. 141 00:07:54,660 --> 00:07:57,300 Sam Hallinan: 4% over the next five years, which is a really 142 00:07:57,300 --> 00:08:00,780 Sam Hallinan: big number. And it is, I guess not surprising giving 143 00:08:00,780 --> 00:08:04,200 Sam Hallinan: that we've seen returns on average over the last five 144 00:08:04,200 --> 00:08:07,710 Sam Hallinan: years of about 10.7%. So they're extrapolating out what they've 145 00:08:07,710 --> 00:08:10,620 Sam Hallinan: seen over the last five years and carrying that forward 146 00:08:10,620 --> 00:08:14,100 Sam Hallinan: to the next five. But we see some challenges ahead 147 00:08:14,100 --> 00:08:18,180 Sam Hallinan: for markets, and as per usual, we're seeing an inherent 148 00:08:18,180 --> 00:08:20,790 Sam Hallinan: optimism in what people think that they will achieve over 149 00:08:20,790 --> 00:08:21,690 Sam Hallinan: the coming years ahead. 150 00:08:22,080 --> 00:08:26,010 Sean Aylmer: I mean, 10% plus. That would be fantastic return over 151 00:08:26,010 --> 00:08:27,720 Sean Aylmer: the next year or two or three, wouldn't you think? 152 00:08:27,900 --> 00:08:31,740 Sam Hallinan: Yeah, it would be. We've seen returns in the mid 153 00:08:31,770 --> 00:08:35,250 Sam Hallinan: single digits negative across 2022 if you look at the 154 00:08:35,250 --> 00:08:39,330 Sam Hallinan: average balance portfolio. So yeah, the markets would really need 155 00:08:39,330 --> 00:08:44,490 Sam Hallinan: to deliver some supernormal growth taking into consideration 2022 as 156 00:08:44,490 --> 00:08:46,890 Sam Hallinan: part of that five- year period. So yeah, that would 157 00:08:46,890 --> 00:08:48,000 Sam Hallinan: be a big number. 158 00:08:48,600 --> 00:08:52,650 Sean Aylmer: Sam, the bottom line in this is get some help, 159 00:08:52,650 --> 00:08:55,080 Sean Aylmer: get financial advice if you're a mom and dad investor. 160 00:08:55,380 --> 00:08:58,709 Sean Aylmer: But just from where you stand, how should people think 161 00:08:58,710 --> 00:09:01,380 Sean Aylmer: about markets and opportunities and investing in the next year 162 00:09:01,380 --> 00:09:01,800 Sean Aylmer: or two? 163 00:09:02,760 --> 00:09:07,110 Sam Hallinan: Look, as an organization that invests for people every day, 164 00:09:07,140 --> 00:09:12,480 Sam Hallinan: we are very firmly focused on identifying opportunities, and opportunities 165 00:09:12,480 --> 00:09:17,670 Sam Hallinan: present themselves when you see aspects of market volatility. So 166 00:09:18,000 --> 00:09:22,500 Sam Hallinan: I think a very disciplined and considered investor who is 167 00:09:22,500 --> 00:09:25,350 Sam Hallinan: capable of either sourcing their own insights or sourcing them 168 00:09:25,350 --> 00:09:29,700 Sam Hallinan: from appointed experts like financial advisors or fund managers should 169 00:09:29,700 --> 00:09:32,730 Sam Hallinan: see some real opportunities for making money over the coming 170 00:09:32,730 --> 00:09:36,689 Sam Hallinan: years. But you do need to be very specific as 171 00:09:36,690 --> 00:09:40,650 Sam Hallinan: to where you think those opportunities might present themselves. And 172 00:09:40,650 --> 00:09:45,780 Sam Hallinan: so I think from our perspective, these market environments do 173 00:09:45,780 --> 00:09:49,410 Sam Hallinan: present opportunities to get yourself set for a number of 174 00:09:49,410 --> 00:09:53,910 Sam Hallinan: years ahead. And if you are in the right part 175 00:09:53,910 --> 00:09:55,439 Sam Hallinan: of the market at the right point in time, which 176 00:09:55,440 --> 00:09:58,559 Sam Hallinan: as I say typically comes through insight, there are some 177 00:09:58,559 --> 00:10:01,260 Sam Hallinan: opportunities for people to generate some good returns over the 178 00:10:01,260 --> 00:10:01,800 Sam Hallinan: coming years. 179 00:10:02,190 --> 00:10:05,189 Sean Aylmer: Sam, I have to ask you, whereabouts do you think 180 00:10:05,190 --> 00:10:06,630 Sean Aylmer: there are opportunities at the moment? 181 00:10:07,410 --> 00:10:12,090 Sam Hallinan: Well, unsurprisingly, having seen fixed income markets come off to 182 00:10:12,090 --> 00:10:16,200 Sam Hallinan: the tune of plus 10% across 2022, we're really starting 183 00:10:16,200 --> 00:10:21,120 Sam Hallinan: to see some interest in fixed income, particularly investment grade 184 00:10:21,179 --> 00:10:24,030 Sam Hallinan: credit is a part of the fixed income market that 185 00:10:24,030 --> 00:10:28,199 Sam Hallinan: we're seeing some attraction in. So from our perspective, if 186 00:10:28,200 --> 00:10:30,120 Sam Hallinan: you were to look at all of the different asset 187 00:10:30,120 --> 00:10:34,110 Sam Hallinan: classes, we see some genuine value in fixed income. Across 188 00:10:34,110 --> 00:10:37,109 Sam Hallinan: companies and the stock market, we think there's still a 189 00:10:37,110 --> 00:10:39,780 Sam Hallinan: little way to play out with regards to the interest 190 00:10:39,780 --> 00:10:43,320 Sam Hallinan: rate increases into '23, which is likely to put some 191 00:10:43,320 --> 00:10:47,460 Sam Hallinan: continued pressure on those companies that are sensitive to interest 192 00:10:47,460 --> 00:10:50,040 Sam Hallinan: rate rises. So we think there's a little bit more 193 00:10:50,040 --> 00:10:52,920 Sam Hallinan: to play out in terms of some market volatility and 194 00:10:52,920 --> 00:10:56,190 Sam Hallinan: potential downside risk in the stock market. But then once 195 00:10:56,190 --> 00:10:58,260 Sam Hallinan: that gets set, you're going to be buying some good 196 00:10:58,260 --> 00:11:01,410 Sam Hallinan: quality companies at some really good multiples. And if you 197 00:11:01,410 --> 00:11:03,660 Sam Hallinan: can pick the right parts of the market over this period 198 00:11:03,660 --> 00:11:06,480 Sam Hallinan: of time, then you should, as I say, get yourself 199 00:11:06,480 --> 00:11:07,800 Sam Hallinan: nicely set for the next few years. 200 00:11:08,280 --> 00:11:10,080 Sean Aylmer: Sam, thank you for talking to Fear and Greed. 201 00:11:10,380 --> 00:11:11,969 Sam Hallinan: Absolute pleasure, Sean. Nice to be here. 202 00:11:12,600 --> 00:11:16,380 Sean Aylmer: That was Sam Hallinan, CEO of Schroders, Australia. This is 203 00:11:16,380 --> 00:11:18,750 Sean Aylmer: the Fear and Greed daily interview. Remember, this is general 204 00:11:18,780 --> 00:11:22,260 Sean Aylmer: information only and you should seek professional advice before making 205 00:11:22,260 --> 00:11:25,020 Sean Aylmer: any investment decisions. Join us every morning for the full 206 00:11:25,020 --> 00:11:28,559 Sean Aylmer: episode of Fear and Greed, Australia's most popular business podcast. 207 00:11:28,559 --> 00:11:30,300 Sean Aylmer: I'm Sean Aylmer. Enjoy your day.