1 00:00:09,360 --> 00:00:12,400 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:12,480 --> 00:00:16,880 Speaker 1: James Kirkby, the Welt editor at the Australian. Welcome aboard everybody. 3 00:00:17,000 --> 00:00:19,520 Speaker 1: A little later this year, the Australians going to publish 4 00:00:19,520 --> 00:00:23,480 Speaker 1: its annual list of top financial Advisors, which is expanding 5 00:00:23,560 --> 00:00:27,200 Speaker 1: this time to one hundred and fifty advisors. It used 6 00:00:27,200 --> 00:00:29,440 Speaker 1: to be one hundred advisers, and once upon a time 7 00:00:29,480 --> 00:00:32,800 Speaker 1: when it started back in two seventeen or so, there 8 00:00:32,840 --> 00:00:35,239 Speaker 1: was only fifty advisers. And one of the advisors that 9 00:00:35,240 --> 00:00:37,600 Speaker 1: has managed to stay on that list every single year, 10 00:00:38,640 --> 00:00:41,760 Speaker 1: and I might add in the upper reaches of that 11 00:00:41,880 --> 00:00:46,320 Speaker 1: list every single year is Charlie Viola from Pitcher Partners. 12 00:00:46,360 --> 00:00:48,559 Speaker 1: He's been on the show before. Love to have him on. 13 00:00:48,600 --> 00:00:50,520 Speaker 1: He's my guest today. How are you, Charlie? 14 00:00:51,240 --> 00:00:52,839 Speaker 2: Well, James, how are you? Mate? 15 00:00:53,200 --> 00:00:54,680 Speaker 1: We're going to talk about a couple of things, but 16 00:00:55,120 --> 00:00:57,800 Speaker 1: news wise, and I can't help but I'm sorry, but 17 00:00:57,840 --> 00:01:02,720 Speaker 1: I'm a news driven to this day never ends. And 18 00:01:03,240 --> 00:01:08,440 Speaker 1: we have been covering a super of course regularly, and everybody, 19 00:01:08,480 --> 00:01:12,160 Speaker 1: I suppose, in many ways, aspires to have lots in Super. 20 00:01:13,000 --> 00:01:16,280 Speaker 1: We'd all like to have three million in Super. Not 21 00:01:16,400 --> 00:01:19,520 Speaker 1: many do, but many may have in the future. And 22 00:01:19,600 --> 00:01:23,000 Speaker 1: some big news this week in that the independence the Teals, 23 00:01:23,720 --> 00:01:26,360 Speaker 1: all of them plus a couple of their friends, Helen 24 00:01:26,440 --> 00:01:31,840 Speaker 1: Haynes Kaylie A Tink have issued a quite unusual unprecedented 25 00:01:31,880 --> 00:01:36,399 Speaker 1: statement that they are calling for amendments as a group honest. 26 00:01:36,720 --> 00:01:39,080 Speaker 1: Two important they're calling for all sorts of things, but 27 00:01:39,120 --> 00:01:41,959 Speaker 1: in terms. But I call them and asked, what are 28 00:01:41,959 --> 00:01:44,600 Speaker 1: the actual amendments you're going to put through in Parliament. 29 00:01:44,640 --> 00:01:47,920 Speaker 1: There's two important ones, once from Kylie a Tink, which 30 00:01:47,960 --> 00:01:51,280 Speaker 1: is that this notion of that the new tax, which 31 00:01:51,360 --> 00:01:56,480 Speaker 1: is fifteen percent on earnings on amounts above three million 32 00:01:56,520 --> 00:01:59,680 Speaker 1: and super would be based on realized paper games, which 33 00:01:59,720 --> 00:02:04,000 Speaker 1: is really controversial. And the second one, which would be 34 00:02:04,040 --> 00:02:09,400 Speaker 1: put forward by Alec Respender, is that if you were 35 00:02:09,480 --> 00:02:11,519 Speaker 1: hit with this bill it would be deferred, that you 36 00:02:11,520 --> 00:02:14,320 Speaker 1: would have the ability to defer it for the simple 37 00:02:14,360 --> 00:02:17,040 Speaker 1: reason that people could get really caught if you had 38 00:02:17,120 --> 00:02:20,239 Speaker 1: one investment and it was a property, it was worth 39 00:02:20,240 --> 00:02:23,440 Speaker 1: three million, and you had to sell it for some reason. 40 00:02:23,560 --> 00:02:26,359 Speaker 1: That might be a bit unfair on some people. I 41 00:02:26,400 --> 00:02:29,440 Speaker 1: think the real problem with the tax, it's not so 42 00:02:29,520 --> 00:02:32,800 Speaker 1: much that there's going to be another tax on super 43 00:02:33,480 --> 00:02:37,520 Speaker 1: although that obviously breaking an election promise, but the nature 44 00:02:37,639 --> 00:02:41,120 Speaker 1: of this tax was seen to be on fair in 45 00:02:41,120 --> 00:02:44,799 Speaker 1: relation to tax as it exists for everything else. What's 46 00:02:44,840 --> 00:02:47,440 Speaker 1: your view on it, Charlie on the three million, and 47 00:02:47,520 --> 00:02:50,239 Speaker 1: what are you saying to your wealthy clients, of which 48 00:02:50,240 --> 00:02:51,160 Speaker 1: I'm sure you have many? 49 00:02:52,400 --> 00:02:55,600 Speaker 3: Yeah, well, I think personally it just doesn't affect that 50 00:02:55,639 --> 00:02:58,280 Speaker 3: many people. So the political capital that's being used on 51 00:02:58,360 --> 00:03:00,560 Speaker 3: this seems to me to be a massive over each. 52 00:03:00,639 --> 00:03:02,560 Speaker 3: But we're not a political. 53 00:03:02,200 --> 00:03:04,760 Speaker 2: Show here, so we'll move on from that. 54 00:03:05,520 --> 00:03:11,000 Speaker 3: It does tend to impact a fair number of our clients. 55 00:03:11,720 --> 00:03:14,840 Speaker 3: Our advice up until now, until we've understood really what 56 00:03:14,919 --> 00:03:16,560 Speaker 3: the impact of this is going to be, has to 57 00:03:16,600 --> 00:03:19,040 Speaker 3: be to sit tight and just to see how it's 58 00:03:19,080 --> 00:03:23,280 Speaker 3: applied in reality. It is likely though, that we will 59 00:03:23,320 --> 00:03:26,640 Speaker 3: start reverting some of those excess amounts over and above 60 00:03:26,680 --> 00:03:29,440 Speaker 3: the three mile back into their sort of trust and 61 00:03:29,520 --> 00:03:32,880 Speaker 3: company structures, so that we are only ever paying tax 62 00:03:32,919 --> 00:03:35,880 Speaker 3: on the income and realize gains and not that arbitrary 63 00:03:36,240 --> 00:03:41,520 Speaker 3: uplifting value. I understand what the government is doing here, right, 64 00:03:41,520 --> 00:03:44,120 Speaker 3: They're saying, well, you only haven't need so much to 65 00:03:44,160 --> 00:03:47,920 Speaker 3: be able to fund a really healthy, happy retirement. The 66 00:03:47,960 --> 00:03:50,600 Speaker 3: whole purpose of super was to make it concessionally taxed 67 00:03:50,640 --> 00:03:53,080 Speaker 3: so you weren't leaning on the welfare system, so the 68 00:03:53,120 --> 00:03:57,240 Speaker 3: age pension. So those tax concessions fundamentally should go away, 69 00:03:57,320 --> 00:03:59,440 Speaker 3: or at least some of them should go away if 70 00:03:59,440 --> 00:04:01,560 Speaker 3: you've gotten more than what you need, because you've now 71 00:04:01,600 --> 00:04:02,880 Speaker 3: got more than what you need, so you should be 72 00:04:02,880 --> 00:04:05,320 Speaker 3: adding back to the public perse. We sort of understand 73 00:04:05,360 --> 00:04:09,040 Speaker 3: what they're doing. The application of it, though, has. 74 00:04:09,000 --> 00:04:09,840 Speaker 2: Just been terrible. 75 00:04:10,920 --> 00:04:13,040 Speaker 3: And again we understand why they're trying to make sure 76 00:04:13,080 --> 00:04:14,840 Speaker 3: that self managed super funds are treated the same way 77 00:04:14,880 --> 00:04:17,719 Speaker 3: as industry funds and public offer funds, and they're taxing 78 00:04:17,720 --> 00:04:21,159 Speaker 3: the increase in a member's balance, but really they should 79 00:04:21,160 --> 00:04:24,480 Speaker 3: have just kept it simple and provided a surcharge tax 80 00:04:24,600 --> 00:04:28,440 Speaker 3: on the realized gains and income over that three million, 81 00:04:28,520 --> 00:04:30,440 Speaker 3: and an additional kind of fifteen percent, and it would 82 00:04:30,440 --> 00:04:33,880 Speaker 3: have simplified it for everybody, and we would have all gone, right, Okay, well, 83 00:04:33,880 --> 00:04:36,920 Speaker 3: we know we're paying thirty percent surch charge on that portion. 84 00:04:37,720 --> 00:04:39,479 Speaker 3: The way they've done it, they've made a real hash 85 00:04:39,520 --> 00:04:42,080 Speaker 3: of it, and it's going to be really hard to administer. 86 00:04:42,520 --> 00:04:46,440 Speaker 3: The issue of deferral that came out today deferred Is 87 00:04:46,480 --> 00:04:49,960 Speaker 3: there interest payable on the deferral? Can we defer it forever? 88 00:04:50,440 --> 00:04:54,320 Speaker 3: So uncertainty is not loved by anyone, and you'll just 89 00:04:54,440 --> 00:04:57,320 Speaker 3: have people ripping that extra portion out sticking it back, 90 00:04:57,440 --> 00:05:00,280 Speaker 3: especially if people have got lots and lots of money out, 91 00:05:00,279 --> 00:05:02,280 Speaker 3: putting it back in their trust and company structures and 92 00:05:02,360 --> 00:05:03,840 Speaker 3: ending up with a thirty percent tax rate. 93 00:05:03,880 --> 00:05:07,520 Speaker 1: Anyway, it sounds to me when we jump over all 94 00:05:07,560 --> 00:05:12,800 Speaker 1: the technicals and details that really what's going on here 95 00:05:12,880 --> 00:05:17,719 Speaker 1: is people like you and your investors, your clients are saying, look, 96 00:05:18,120 --> 00:05:21,239 Speaker 1: they call this a threshold, this three million in Super, 97 00:05:21,279 --> 00:05:24,800 Speaker 1: but in effect it's a cap. In effect, it's the 98 00:05:24,920 --> 00:05:28,240 Speaker 1: end after three million. You would be silly to have 99 00:05:28,360 --> 00:05:29,479 Speaker 1: more than that in Super. 100 00:05:30,320 --> 00:05:32,000 Speaker 2: Well, not really. It just makes it more complex. 101 00:05:32,040 --> 00:05:35,680 Speaker 3: It just means calculating your after attack returns slightly more complex. 102 00:05:36,320 --> 00:05:39,400 Speaker 3: And if there is an alternative, if the assets within 103 00:05:39,440 --> 00:05:41,840 Speaker 3: your fund are liquid enough, and there is an alternative, 104 00:05:42,320 --> 00:05:44,599 Speaker 3: and there's an alternative to only paying tax on the 105 00:05:44,640 --> 00:05:48,520 Speaker 3: realized gains and income as it's received, like you. 106 00:05:48,520 --> 00:05:49,800 Speaker 2: Otherwise normally would. 107 00:05:50,200 --> 00:05:53,080 Speaker 3: If we have an option, then we're probably going to 108 00:05:53,080 --> 00:05:53,719 Speaker 3: take that option. 109 00:05:53,960 --> 00:05:54,200 Speaker 2: Right. 110 00:05:54,240 --> 00:05:56,280 Speaker 3: There are going to be some people, as you say, 111 00:05:56,320 --> 00:05:58,800 Speaker 3: who are caught with no option because they have one 112 00:05:59,279 --> 00:06:02,680 Speaker 3: significant property in there or a set of liquid assets 113 00:06:02,960 --> 00:06:06,000 Speaker 3: that are in there. So it's not so much as 114 00:06:06,080 --> 00:06:10,000 Speaker 3: as a cap, but it's just made the whole thing 115 00:06:10,080 --> 00:06:12,360 Speaker 3: far more complex and more complex than it needs to be. 116 00:06:12,640 --> 00:06:16,440 Speaker 1: If I had a startup and I put my shares 117 00:06:16,480 --> 00:06:21,520 Speaker 1: in the startup in Super and the years went by 118 00:06:21,600 --> 00:06:25,880 Speaker 1: and the startup really started it really worked, I'd be 119 00:06:25,920 --> 00:06:28,320 Speaker 1: caught right. I couldn't get it out because it's in Super, 120 00:06:28,839 --> 00:06:32,680 Speaker 1: and I'd have to pay tax on the assumption the 121 00:06:32,800 --> 00:06:35,159 Speaker 1: assumed increase in value even though I hadn't got any 122 00:06:35,160 --> 00:06:36,840 Speaker 1: money out of it. Is that it is that it 123 00:06:36,880 --> 00:06:37,640 Speaker 1: at its worst. 124 00:06:38,360 --> 00:06:39,839 Speaker 2: Is that an issue for people? 125 00:06:39,960 --> 00:06:42,599 Speaker 1: Or are money people put put startups in Super? 126 00:06:43,240 --> 00:06:48,039 Speaker 3: You probably rarely see people put startups in just because 127 00:06:48,040 --> 00:06:51,320 Speaker 3: of the high risk nature. We like to enshrine clients 128 00:06:51,320 --> 00:06:53,840 Speaker 3: super money because you're obviously limited as to what you 129 00:06:53,880 --> 00:06:56,599 Speaker 3: can put in into Super and it becomes the most 130 00:06:56,600 --> 00:07:00,520 Speaker 3: tax effective money in our tax system. So really high 131 00:07:00,640 --> 00:07:03,720 Speaker 3: risk assets like that, unless someone is super sure that 132 00:07:03,760 --> 00:07:06,800 Speaker 3: they're going to get a really significant outcome out of 133 00:07:06,839 --> 00:07:09,240 Speaker 3: something like that, then we don't tend to put it 134 00:07:09,760 --> 00:07:12,720 Speaker 3: in super The arbitrage doesn't tend to be that great 135 00:07:12,800 --> 00:07:14,560 Speaker 3: in terms of doing it in a family trust and 136 00:07:14,600 --> 00:07:17,560 Speaker 3: getting the CGT discount somewhere down the line. But yeah, 137 00:07:17,600 --> 00:07:19,240 Speaker 3: look at its worst, you end up with this kind 138 00:07:19,280 --> 00:07:23,280 Speaker 3: of really liquid asset which has been revalued by virtue 139 00:07:23,320 --> 00:07:26,000 Speaker 3: of other capital raises or that, or they're. 140 00:07:25,840 --> 00:07:27,120 Speaker 2: Sitting in escrow. I e. 141 00:07:27,280 --> 00:07:29,200 Speaker 3: They've done really well, they've gone to a startup, that 142 00:07:29,200 --> 00:07:31,960 Speaker 3: have gone to listing. Now they're in escrow for twelve 143 00:07:32,080 --> 00:07:35,119 Speaker 3: or eight eight months. You're now paying this latent tax 144 00:07:35,200 --> 00:07:38,480 Speaker 3: bill on a really liquid asset. And that's I'm not 145 00:07:38,520 --> 00:07:42,040 Speaker 3: sure that's been thought through particularly. I think it was 146 00:07:42,080 --> 00:07:45,320 Speaker 3: done in an effort to ensure that self managed super funds, 147 00:07:45,360 --> 00:07:49,560 Speaker 3: which have got obviously all of the individual assets, to 148 00:07:49,640 --> 00:07:52,840 Speaker 3: be aligned with public offer funds and industry funds, where 149 00:07:52,840 --> 00:07:55,280 Speaker 3: it is simply the change in the member balance that's 150 00:07:55,280 --> 00:07:56,000 Speaker 3: being taxed. 151 00:07:56,560 --> 00:07:57,000 Speaker 2: All right. 152 00:07:57,200 --> 00:08:02,560 Speaker 1: More generally, again, with worthier invest I read everywhere that 153 00:08:02,680 --> 00:08:08,240 Speaker 1: they are more and more engrossed and occupied with alternatives, 154 00:08:08,240 --> 00:08:11,360 Speaker 1: which is such a wide fuzzy term, but I also 155 00:08:11,400 --> 00:08:13,280 Speaker 1: read that they are more and more putting their money 156 00:08:13,280 --> 00:08:18,800 Speaker 1: off Sure broadly is that the case in among Australian 157 00:08:18,840 --> 00:08:21,400 Speaker 1: investors today that they are more likely to put money 158 00:08:21,440 --> 00:08:21,880 Speaker 1: off shore? 159 00:08:23,280 --> 00:08:25,840 Speaker 3: I think it's certainly more it's more prevalent now than 160 00:08:25,840 --> 00:08:27,920 Speaker 3: it was ten to fifteen years ago. Right, So ten 161 00:08:27,960 --> 00:08:29,720 Speaker 3: to fifteen years ago with twenty years ago, when I 162 00:08:29,760 --> 00:08:33,079 Speaker 3: probably started my career and we started building portfolios, we 163 00:08:33,080 --> 00:08:36,040 Speaker 3: were probably having an almost kind of two thirds domestic 164 00:08:36,080 --> 00:08:38,880 Speaker 3: one third international exposure to equities. 165 00:08:38,960 --> 00:08:40,640 Speaker 2: We were all in love with the kind. 166 00:08:40,480 --> 00:08:43,679 Speaker 3: Of dividend paying shares that Australia has, and we were 167 00:08:43,720 --> 00:08:46,400 Speaker 3: all in love with kind of the imputation credits and 168 00:08:46,400 --> 00:08:49,880 Speaker 3: the level of revenue that was being generated by Australian equities. 169 00:08:50,360 --> 00:08:52,360 Speaker 3: I think as time has gone on and we've realized 170 00:08:52,360 --> 00:08:54,280 Speaker 3: that the world is a big place and that Australia 171 00:08:54,320 --> 00:08:56,480 Speaker 3: is quite a small place, and that there is lots 172 00:08:56,480 --> 00:08:58,800 Speaker 3: of growth and activity, and especially in the tech and 173 00:08:58,880 --> 00:09:02,760 Speaker 3: AI space globally, that what you're finding now is that 174 00:09:02,960 --> 00:09:06,760 Speaker 3: certainly portfolios are much more closely aligned in terms of 175 00:09:06,800 --> 00:09:11,080 Speaker 3: their kind of domestic exposure versus international exposure. I know, 176 00:09:11,200 --> 00:09:15,280 Speaker 3: certainly we here have probably if we're putting portfolios together, 177 00:09:15,320 --> 00:09:17,920 Speaker 3: we're forty percent in terms of our equity exposure. We're 178 00:09:17,960 --> 00:09:20,760 Speaker 3: probably forty percent domestic because we still like them. We 179 00:09:20,800 --> 00:09:23,720 Speaker 3: still think that they're good companies that are well run 180 00:09:23,800 --> 00:09:26,240 Speaker 3: and good balance sheets, and we like the income. 181 00:09:26,520 --> 00:09:28,800 Speaker 2: But we probably have a slightly bigger waiting. 182 00:09:28,880 --> 00:09:32,160 Speaker 3: So sixty percent to global equities because we tend to 183 00:09:32,200 --> 00:09:35,280 Speaker 3: believe that those businesses that continue to do things and 184 00:09:35,480 --> 00:09:37,679 Speaker 3: continue to buy our market share and gobble up their 185 00:09:37,679 --> 00:09:41,160 Speaker 3: competitors will generate the best kind of medium to long 186 00:09:41,280 --> 00:09:42,040 Speaker 3: term returns. 187 00:09:42,440 --> 00:09:43,880 Speaker 1: That's a big point, isn't it. Really? 188 00:09:43,960 --> 00:09:47,160 Speaker 3: The other piece, James, is that accessibility now is far 189 00:09:47,200 --> 00:09:50,120 Speaker 3: greater than it ever was. Fifteen years ago, you had Platinum, Magellana, 190 00:09:50,200 --> 00:09:54,120 Speaker 3: not much else in terms of global equities. Now we 191 00:09:54,160 --> 00:09:56,400 Speaker 3: can all trade Apple, and. 192 00:09:56,720 --> 00:09:58,640 Speaker 1: I can buy and video after this show. I can 193 00:09:58,679 --> 00:10:01,760 Speaker 1: play Google after this show. Five minutes, two minutes. Okay, 194 00:10:02,200 --> 00:10:06,280 Speaker 1: about that that asset allocation and the majority, So you're 195 00:10:06,280 --> 00:10:09,440 Speaker 1: telling me the majority of their shares in your clients, 196 00:10:09,440 --> 00:10:12,640 Speaker 1: the majority of the shares are overseas. That means the 197 00:10:12,679 --> 00:10:14,720 Speaker 1: majority are in the US, right, Because the US is 198 00:10:14,800 --> 00:10:18,800 Speaker 1: seventy two percent of the August Sandy Capital International Index. 199 00:10:18,920 --> 00:10:21,200 Speaker 3: Now, I would probably say that we've still probably got 200 00:10:21,280 --> 00:10:24,599 Speaker 3: some domestic bias because we're probably living with fifteen or 201 00:10:24,640 --> 00:10:27,440 Speaker 3: twenty years of gains on the Australian market. So it's 202 00:10:27,480 --> 00:10:30,120 Speaker 3: more about where we're allocating new money as opposed to 203 00:10:30,720 --> 00:10:34,000 Speaker 3: one portfolios look like. But to your point, there is 204 00:10:34,040 --> 00:10:38,199 Speaker 3: still a fairly significant US bias to any global allocation 205 00:10:38,320 --> 00:10:42,680 Speaker 3: that we make. We still very much like those big 206 00:10:42,960 --> 00:10:47,040 Speaker 3: sort of mega cap AI companies and tech companies, and 207 00:10:47,400 --> 00:10:50,400 Speaker 3: because as I said before, they're gobbling up competitors, they 208 00:10:50,520 --> 00:10:54,320 Speaker 3: protect their margins and they're probably able to trade for 209 00:10:54,480 --> 00:10:58,040 Speaker 3: very long periods of time at very big multiples, which 210 00:10:58,080 --> 00:11:01,200 Speaker 3: means that we tend to get that kind of valuate 211 00:11:01,280 --> 00:11:04,080 Speaker 3: in a thematic run that we've had and it'll likely 212 00:11:04,120 --> 00:11:06,640 Speaker 3: continue for a period of for a period of time. 213 00:11:06,760 --> 00:11:09,280 Speaker 1: Okay. On the flip side, does it mean that frank 214 00:11:09,480 --> 00:11:11,520 Speaker 1: dividends are less important than they used to be? 215 00:11:12,800 --> 00:11:15,760 Speaker 3: So I guess the way that we construct portfolios, we 216 00:11:15,800 --> 00:11:18,960 Speaker 3: want to generate client returns in all different ways. The 217 00:11:19,320 --> 00:11:23,640 Speaker 3: revenue production from portfolios, which should absolutely come from shares, 218 00:11:23,679 --> 00:11:27,720 Speaker 3: but also comes from private debt, private credit, syndicated property, 219 00:11:27,920 --> 00:11:29,840 Speaker 3: we'll get income in in all different ways. 220 00:11:30,240 --> 00:11:31,680 Speaker 2: We still like Australian shares. 221 00:11:31,720 --> 00:11:34,200 Speaker 3: We are still an investor in Australian shares, and we 222 00:11:34,240 --> 00:11:38,719 Speaker 3: still like the nature of those companies, especially the large cap, defensive, 223 00:11:38,840 --> 00:11:43,439 Speaker 3: blue chip revenue producing companies. So it's not less important. 224 00:11:43,480 --> 00:11:45,280 Speaker 3: We just don't want to leave the return on the 225 00:11:45,320 --> 00:11:49,360 Speaker 3: table available to us. In terms of global equities, we 226 00:11:49,400 --> 00:11:53,079 Speaker 3: also want to be genuinely diversified, right, so we want 227 00:11:53,120 --> 00:11:55,600 Speaker 3: to make sure that we're giving the clients a spread 228 00:11:55,600 --> 00:11:58,280 Speaker 3: of their risk. If we do nothing but go on 229 00:11:58,320 --> 00:12:02,000 Speaker 3: by CBA and BHP share, then we are always only 230 00:12:02,040 --> 00:12:03,720 Speaker 3: exposed to what's happening domestically. 231 00:12:04,000 --> 00:12:06,120 Speaker 1: Okay, very good. Hey, we'll take short break and we'll 232 00:12:06,120 --> 00:12:17,680 Speaker 1: be back in a moment. Hello, and welcome back to 233 00:12:17,720 --> 00:12:21,160 Speaker 1: the Australian's Money Puzzle. I'm James Kirby talking to Charlie 234 00:12:21,240 --> 00:12:25,000 Speaker 1: Viola of Picture Partners. Hey, Charlie, you just mentioned, just 235 00:12:25,000 --> 00:12:29,160 Speaker 1: in passing reference there about diversification and it doesn't really matter. 236 00:12:29,760 --> 00:12:31,360 Speaker 1: The next question I'm going to throw it. She doesn't 237 00:12:31,360 --> 00:12:33,920 Speaker 1: really matter whether the person has one hundred thousand in 238 00:12:34,040 --> 00:12:38,720 Speaker 1: super or ten million in super. But regardless of what 239 00:12:38,720 --> 00:12:42,960 Speaker 1: you're offering them or is being offered through you. It 240 00:12:43,000 --> 00:12:46,000 Speaker 1: could be private credit, private equity, pick anything you like, 241 00:12:46,400 --> 00:12:52,760 Speaker 1: or futures whatever. Nothing is guaranteed, right, Nothing except Australian 242 00:12:52,840 --> 00:12:57,440 Speaker 1: cash in the bank guaranteed by the government is guaranteed 243 00:12:57,480 --> 00:12:59,960 Speaker 1: to the tune of two hundred and fifty grand per 244 00:12:59,720 --> 00:13:03,719 Speaker 1: person per account. And I'm sure your clients can have 245 00:13:03,840 --> 00:13:07,319 Speaker 1: ten different bank accounts. We're two fifty grand in each 246 00:13:07,360 --> 00:13:11,560 Speaker 1: one of their ones. Point time making is do we, 247 00:13:11,600 --> 00:13:16,720 Speaker 1: in our excitement about what has been a good share 248 00:13:16,760 --> 00:13:21,600 Speaker 1: market for since COVID, do we underestimate cash now that 249 00:13:21,640 --> 00:13:26,800 Speaker 1: it's paying good money on any measure, even against impletion. 250 00:13:28,679 --> 00:13:30,520 Speaker 3: So I think the best way to answer this is 251 00:13:30,559 --> 00:13:33,000 Speaker 3: number one, We never underestimate cash. It's where we park 252 00:13:33,080 --> 00:13:35,800 Speaker 3: money before we invest it somewhere else. I'm probably on 253 00:13:35,880 --> 00:13:38,160 Speaker 3: record a lot as saying that we're big ones for 254 00:13:38,240 --> 00:13:40,600 Speaker 3: having power to dry because we want to be able 255 00:13:40,600 --> 00:13:43,000 Speaker 3: to invest into weakness and opportunity as things come along 256 00:13:43,040 --> 00:13:46,800 Speaker 3: and as cycles change. But your point is a well 257 00:13:46,840 --> 00:13:49,959 Speaker 3: made one where the risk free rate at five percent 258 00:13:50,200 --> 00:13:52,880 Speaker 3: is quite high, so it is easier for us to 259 00:13:52,960 --> 00:13:55,720 Speaker 3: leave powder dry and not have clients feel like they're 260 00:13:55,720 --> 00:13:59,679 Speaker 3: having their returns dragged. But also with the risk free 261 00:13:59,760 --> 00:14:02,199 Speaker 3: rate being five percent, we now need to work out 262 00:14:02,240 --> 00:14:04,640 Speaker 3: whether or not we're actually being rewarded for the additional 263 00:14:04,720 --> 00:14:09,480 Speaker 3: risk that we're taking by investing anywhere else. So previously 264 00:14:09,679 --> 00:14:13,200 Speaker 3: when we were buying possibly I don't know, cool, just 265 00:14:13,200 --> 00:14:14,840 Speaker 3: one of the flavors of the month, or what's been 266 00:14:14,840 --> 00:14:16,640 Speaker 3: the flavor of the last couple of years has clearly 267 00:14:16,679 --> 00:14:20,040 Speaker 3: been private debt. Private debt where it has always felt 268 00:14:20,080 --> 00:14:22,800 Speaker 3: like the risk versus return was a bit asymmetric. You're 269 00:14:22,800 --> 00:14:25,120 Speaker 3: getting good returns for the risk that you were taking 270 00:14:25,160 --> 00:14:28,920 Speaker 3: with LBRs sort of sixty percent good sponsors loans are 271 00:14:28,920 --> 00:14:31,880 Speaker 3: turned over all of the time, where you were getting 272 00:14:31,920 --> 00:14:34,200 Speaker 3: six or seven or eight percent above the cash rate, 273 00:14:34,640 --> 00:14:36,760 Speaker 3: Now are you're getting three or four percent above the 274 00:14:36,800 --> 00:14:39,240 Speaker 3: cash rate for the additional risk that you're taking. Given 275 00:14:39,240 --> 00:14:42,880 Speaker 3: the environment where rates are up, construction are struggling, people 276 00:14:42,880 --> 00:14:46,440 Speaker 3: are struggling to borrow money, etc. It feels like the 277 00:14:46,520 --> 00:14:50,280 Speaker 3: five percent given the risk, which is no risk, versus 278 00:14:50,320 --> 00:14:53,760 Speaker 3: getting seven or eight percent for a good deal of risk, 279 00:14:54,200 --> 00:14:57,040 Speaker 3: is actually a good outcome. So I think cash is 280 00:14:57,080 --> 00:14:59,520 Speaker 3: really two things. One, it's waiting there to be invested 281 00:14:59,520 --> 00:15:02,520 Speaker 3: in another thing, and right now it's not particularly dragging 282 00:15:02,520 --> 00:15:04,960 Speaker 3: on portfolios, So it's not the worst thing in the 283 00:15:05,000 --> 00:15:07,160 Speaker 3: world to have some cash sitting in portfolios. 284 00:15:07,960 --> 00:15:11,000 Speaker 1: Do you think that will be the case? In a way, 285 00:15:11,000 --> 00:15:13,520 Speaker 1: I'm asking you the outlook for reds or the or 286 00:15:13,560 --> 00:15:16,640 Speaker 1: at least the outlook for rates, which you must if 287 00:15:16,680 --> 00:15:18,960 Speaker 1: I'm sitting across from your desk and I'm a time 288 00:15:19,000 --> 00:15:20,440 Speaker 1: to you, is I'm going to say orre do you 289 00:15:20,440 --> 00:15:22,480 Speaker 1: think rates are going to I don't know what you're 290 00:15:22,480 --> 00:15:25,840 Speaker 1: going to say. Maybe you say, well, we follow whatever 291 00:15:26,120 --> 00:15:28,800 Speaker 1: Morgan stand here. We follow Goldman Sacks in terms of 292 00:15:28,880 --> 00:15:31,960 Speaker 1: their team or whatever. What do you say when someone says, hey, 293 00:15:31,960 --> 00:15:33,640 Speaker 1: I like to five percent, Should I lock it in 294 00:15:33,680 --> 00:15:36,440 Speaker 1: for a few years because maybe this is as high 295 00:15:36,440 --> 00:15:37,080 Speaker 1: as it gets. 296 00:15:37,720 --> 00:15:41,720 Speaker 3: We'll still be runs for normal fundamental kind of portfolio construction. 297 00:15:41,920 --> 00:15:45,320 Speaker 3: We are still generally speaking, investors, so we want the 298 00:15:45,360 --> 00:15:47,720 Speaker 3: money out and invested. We just want to make sure 299 00:15:47,720 --> 00:15:49,720 Speaker 3: that we're picking our timing and we're picking our market 300 00:15:49,720 --> 00:15:52,640 Speaker 3: in terms of when to deploy that capital into markets 301 00:15:53,040 --> 00:15:56,320 Speaker 3: again in terms sort of weakness and when opportunity kind 302 00:15:56,360 --> 00:15:59,160 Speaker 3: of presents itself in terms of what we think from 303 00:15:59,200 --> 00:16:01,280 Speaker 3: a right outlook of you, we're probably the same as 304 00:16:01,320 --> 00:16:03,400 Speaker 3: everybody else. We think domestically, we're not going to get 305 00:16:03,400 --> 00:16:05,120 Speaker 3: a rate cup for a period of time, and it'll 306 00:16:05,160 --> 00:16:05,760 Speaker 3: probably be. 307 00:16:05,840 --> 00:16:06,720 Speaker 2: Into next year. 308 00:16:07,160 --> 00:16:10,080 Speaker 3: So where we know that we're probably deploying money over 309 00:16:10,160 --> 00:16:12,320 Speaker 3: a period of time, we're happy to lock rates in 310 00:16:12,400 --> 00:16:15,120 Speaker 3: for three and six and kind of nine months to 311 00:16:15,200 --> 00:16:18,360 Speaker 3: try and achieve a reasonable return on that money that. 312 00:16:18,320 --> 00:16:20,000 Speaker 2: We're still yet to deploy. 313 00:16:20,560 --> 00:16:23,400 Speaker 3: But I make the point that every client that we see, 314 00:16:23,880 --> 00:16:26,640 Speaker 3: whether they are thirty or whether they are fifty, or 315 00:16:26,640 --> 00:16:30,320 Speaker 3: whether they are sixty, have got thirty plus year timeframes. 316 00:16:30,720 --> 00:16:33,280 Speaker 3: Over a thirty year plus time frame, because remember even 317 00:16:33,280 --> 00:16:35,360 Speaker 3: a sixty year old is a live for a period 318 00:16:35,400 --> 00:16:37,320 Speaker 3: of time, we still want to invest this money for 319 00:16:37,400 --> 00:16:39,280 Speaker 3: the rest of their life. We want to get the 320 00:16:39,320 --> 00:16:41,200 Speaker 3: money out and we want it to be in active 321 00:16:41,240 --> 00:16:43,680 Speaker 3: style investments because that's how we're going to generate the 322 00:16:43,680 --> 00:16:47,520 Speaker 3: best possible returns. So cash will manage the cash to 323 00:16:47,560 --> 00:16:50,160 Speaker 3: produce the best outcome at the time, but ultimately we 324 00:16:50,200 --> 00:16:52,040 Speaker 3: want it as liquid as we can so we can 325 00:16:52,080 --> 00:16:54,000 Speaker 3: get in and get it invested at the right time. 326 00:16:54,320 --> 00:16:57,600 Speaker 1: Okay, talking about liquidity, you said they're about of view. 327 00:16:57,640 --> 00:16:59,960 Speaker 1: You stick with the fundamentals. Some things have been changed. 328 00:17:00,040 --> 00:17:02,080 Speaker 1: But then in another way, you said to me that 329 00:17:02,480 --> 00:17:06,439 Speaker 1: people are in new areas relatively anywhere, it's propa creditor, 330 00:17:06,520 --> 00:17:11,680 Speaker 1: et cetera. Is that tolerance for ill liquidity changed with you, 331 00:17:11,680 --> 00:17:13,360 Speaker 1: your circle, your clients. 332 00:17:13,800 --> 00:17:17,720 Speaker 3: Yeah, we're really relaxed about liquidity or illiquidity, to be honest. So, 333 00:17:18,160 --> 00:17:21,320 Speaker 3: especially when you're dealing with clients with slightly bigger portfolios, 334 00:17:21,680 --> 00:17:24,159 Speaker 3: the reality is if we need that two hundred and 335 00:17:24,160 --> 00:17:26,840 Speaker 3: fifty thousand out of ten or fifteen or twenty million 336 00:17:26,880 --> 00:17:29,960 Speaker 3: dollars back within a short period of time, then we've 337 00:17:29,960 --> 00:17:32,400 Speaker 3: done something wrong, right, We buggered something up in terms 338 00:17:32,440 --> 00:17:34,960 Speaker 3: of the allocation or the knowledge of the client situation, 339 00:17:35,440 --> 00:17:39,800 Speaker 3: et cetera. So we are big ones for getting money out, 340 00:17:39,880 --> 00:17:42,320 Speaker 3: getting it invested, and trying to generate the best return. 341 00:17:42,880 --> 00:17:46,080 Speaker 3: If we get a premium for that illiquidity, then we're 342 00:17:46,119 --> 00:17:46,679 Speaker 3: all for that. 343 00:17:47,000 --> 00:17:48,880 Speaker 2: So can you apply that with everybody? 344 00:17:48,960 --> 00:17:51,400 Speaker 1: Charlie? Can you do you think that's applicable to everybody 345 00:17:51,440 --> 00:17:53,399 Speaker 1: at every level, whether they have one hundred grand or 346 00:17:53,400 --> 00:17:53,800 Speaker 1: a million. 347 00:17:54,640 --> 00:17:57,560 Speaker 3: Look, I think everybody's individual situation is different, and what 348 00:17:57,600 --> 00:17:59,840 Speaker 3: the advisor needs to do is work hard to understand 349 00:17:59,840 --> 00:18:01,080 Speaker 3: what the clients. 350 00:18:01,640 --> 00:18:03,440 Speaker 1: And I'll asking you to give advice. I'm just saying 351 00:18:03,520 --> 00:18:07,040 Speaker 1: in a universal way, do you think that's applicable to 352 00:18:07,080 --> 00:18:09,040 Speaker 1: all investors. 353 00:18:08,560 --> 00:18:12,600 Speaker 3: Where there is no requirement for the money in absolute terms, 354 00:18:12,640 --> 00:18:14,720 Speaker 3: to get it pulled out and get it spent where 355 00:18:14,760 --> 00:18:18,560 Speaker 3: it is there to generate good long term returns, then 356 00:18:18,680 --> 00:18:21,560 Speaker 3: having a portion of your money in liquid is absolutely 357 00:18:21,640 --> 00:18:24,920 Speaker 3: okay and will help generate better returns over a long 358 00:18:24,960 --> 00:18:28,240 Speaker 3: period of time. I would say, on average, we would 359 00:18:28,280 --> 00:18:32,280 Speaker 3: say that probably twenty five to thirty five percent of 360 00:18:32,280 --> 00:18:36,280 Speaker 3: our portfolios are going to be somewhat illiquid, and that's 361 00:18:36,320 --> 00:18:38,840 Speaker 3: the manner in which we generate good long term returns 362 00:18:39,240 --> 00:18:41,960 Speaker 3: for people. We still need to be able to produce 363 00:18:42,040 --> 00:18:43,800 Speaker 3: enough revenue for them, right We need to make sure 364 00:18:43,840 --> 00:18:46,040 Speaker 3: that they can buy bread and milk and rice and 365 00:18:46,160 --> 00:18:47,800 Speaker 3: race cars or whatever it is that they spend their 366 00:18:47,840 --> 00:18:50,920 Speaker 3: money on over a period of time. If we can 367 00:18:50,960 --> 00:18:53,480 Speaker 3: generate them a better return by having a portion of 368 00:18:53,520 --> 00:18:57,680 Speaker 3: the money in liquid or locked away or off invested 369 00:18:57,760 --> 00:19:00,359 Speaker 3: in a property or a group of assets or what 370 00:19:00,480 --> 00:19:02,800 Speaker 3: have you, then we'll do that and we will just 371 00:19:02,880 --> 00:19:05,399 Speaker 3: manage their liquidity needs around the rest of the stuff 372 00:19:05,400 --> 00:19:06,000 Speaker 3: that they've got. 373 00:19:06,440 --> 00:19:12,760 Speaker 1: I suppose most listeners would be familiar with I liquidity 374 00:19:13,359 --> 00:19:17,280 Speaker 1: through property, and maybe it's something of a mentally to 375 00:19:17,400 --> 00:19:21,600 Speaker 1: face that liquidity in another asset. It's a new challenge 376 00:19:21,640 --> 00:19:22,399 Speaker 1: for many people. 377 00:19:22,880 --> 00:19:28,440 Speaker 3: Yeah, possibly, But like I say, if somebody says to you, hey, 378 00:19:28,480 --> 00:19:31,919 Speaker 3: give me your money for three years, and I'll deliver 379 00:19:32,040 --> 00:19:35,440 Speaker 3: you back an eight an eight percent yield over that 380 00:19:35,520 --> 00:19:37,280 Speaker 3: three year period. But you can't have the money, you 381 00:19:37,320 --> 00:19:38,680 Speaker 3: can't have one hundred grand, or you can't have the 382 00:19:38,720 --> 00:19:40,160 Speaker 3: two hundred and fifty grand, but. 383 00:19:40,119 --> 00:19:40,480 Speaker 2: I'll give you. 384 00:19:40,680 --> 00:19:43,240 Speaker 3: I'll give you effectively a coupon or a return on 385 00:19:43,280 --> 00:19:45,560 Speaker 3: your investment of eight percent a year, and when I 386 00:19:45,600 --> 00:19:47,440 Speaker 3: return it back to you, we'll hope that the asset's 387 00:19:47,440 --> 00:19:49,119 Speaker 3: gone up in value and we might return back to 388 00:19:49,160 --> 00:19:50,879 Speaker 3: you instead of a dollar, we might return back to 389 00:19:50,920 --> 00:19:52,720 Speaker 3: you a dollar six or a dollar seven or a 390 00:19:52,760 --> 00:19:53,280 Speaker 3: dollar right. 391 00:19:53,240 --> 00:19:53,800 Speaker 2: Or something like that. 392 00:19:53,880 --> 00:19:55,960 Speaker 3: Right, which means that the client has achieved an eleven 393 00:19:56,000 --> 00:19:58,480 Speaker 3: percent return or whatever that works out to be over 394 00:19:58,520 --> 00:20:01,960 Speaker 3: the three year period. But what's happening over that three 395 00:20:02,040 --> 00:20:05,760 Speaker 3: year period is every month eight percent or the equivalent 396 00:20:05,800 --> 00:20:08,240 Speaker 3: of eight percent is being stuck into their bank account. 397 00:20:08,480 --> 00:20:10,719 Speaker 3: What we care about is the quality of the asset 398 00:20:10,760 --> 00:20:13,760 Speaker 3: that's backing this thing, the quality of the manager managing 399 00:20:13,880 --> 00:20:16,520 Speaker 3: the asset and their ability to make sure that the 400 00:20:16,560 --> 00:20:18,960 Speaker 3: cash keeps flying into the bank account, because we want 401 00:20:18,960 --> 00:20:21,760 Speaker 3: the client to live off the cash that's flowing into 402 00:20:21,760 --> 00:20:25,320 Speaker 3: the bank account. If they need that two hundred thousand 403 00:20:25,359 --> 00:20:28,040 Speaker 3: dollars back or that two hundred and fifty thousand dollars back, 404 00:20:28,320 --> 00:20:31,199 Speaker 3: then we've clearly not understood the client's needs and we 405 00:20:31,240 --> 00:20:31,760 Speaker 3: wouldn't have. 406 00:20:31,680 --> 00:20:32,200 Speaker 2: Put it in. 407 00:20:32,359 --> 00:20:35,199 Speaker 3: So it's really important that we understand client needs. But 408 00:20:35,240 --> 00:20:38,800 Speaker 3: people shouldn't be scared of liquidity. What are you Is 409 00:20:38,840 --> 00:20:41,159 Speaker 3: this money really invested for thirty years? Well, if it is, 410 00:20:41,200 --> 00:20:42,840 Speaker 3: then you don't need it in a month or two 411 00:20:42,840 --> 00:20:45,320 Speaker 3: months or three months. You need it to produce revenue 412 00:20:45,320 --> 00:20:47,200 Speaker 3: for you in the best possible return, So let's invest 413 00:20:47,240 --> 00:20:47,680 Speaker 3: it that way. 414 00:20:48,200 --> 00:20:50,520 Speaker 1: Okay, that's very good. I haven't had an answer like 415 00:20:50,560 --> 00:20:54,200 Speaker 1: that before. All right, very good, We'll take a break. 416 00:20:54,200 --> 00:21:14,960 Speaker 1: I'm going to be back with some of the questions. Hello, 417 00:21:15,040 --> 00:21:18,080 Speaker 1: welcome back to the Australians Money Puzzle podcast. James Kirby 418 00:21:18,119 --> 00:21:21,399 Speaker 1: here with Charlie Viola, regular on the show, regular on 419 00:21:21,440 --> 00:21:24,520 Speaker 1: the show many times and always good to have him. 420 00:21:24,600 --> 00:21:31,080 Speaker 1: Charlie from Picture Partners, Okay, question from Luke, whose concessional 421 00:21:31,119 --> 00:21:38,120 Speaker 1: contribution limit does it add to one contributing to espouses super? 422 00:21:38,320 --> 00:21:41,399 Speaker 1: I hope everyone understands that that's in when a couple 423 00:21:41,640 --> 00:21:45,800 Speaker 1: you've put in the max for your concessional contribution, and 424 00:21:46,119 --> 00:21:49,520 Speaker 1: maybe your partner hasn't, but there's money there that you 425 00:21:49,640 --> 00:21:53,719 Speaker 1: guys could put in that person's name. Whose concessional contribution 426 00:21:53,800 --> 00:21:56,440 Speaker 1: limit does it add to when contributing to a spouses super? 427 00:21:56,840 --> 00:21:58,040 Speaker 1: Is there a clear answer on that one? 428 00:21:59,240 --> 00:22:02,280 Speaker 3: Yeah, there is, assuming of what Luke means here is 429 00:22:02,560 --> 00:22:05,400 Speaker 3: the spouse contribution where you get the rebate for making 430 00:22:05,440 --> 00:22:10,080 Speaker 3: the contribution. Then it's not considered against either's concessional limit 431 00:22:10,119 --> 00:22:13,000 Speaker 3: because it's a non concessional contribution that's going in, So 432 00:22:13,040 --> 00:22:16,560 Speaker 3: it's measured against the non concessional limit for the spouse. 433 00:22:17,280 --> 00:22:20,919 Speaker 3: So if what Looke means though is super splitting, So 434 00:22:21,040 --> 00:22:23,960 Speaker 3: there is a concept of super splitting where where it 435 00:22:24,000 --> 00:22:26,960 Speaker 3: is effectively I get paid by employer, my employee makes 436 00:22:27,000 --> 00:22:29,480 Speaker 3: contributions for me, but I've got lots of money in 437 00:22:29,520 --> 00:22:32,520 Speaker 3: super My partner or my spouse doesn't have lots of 438 00:22:32,520 --> 00:22:37,160 Speaker 3: money in superannuation. You can split those contributions where eighty 439 00:22:37,200 --> 00:22:41,920 Speaker 3: five percent of the money goes into my spouse's superannuation fund. 440 00:22:41,960 --> 00:22:44,240 Speaker 3: And it's eighty five percent because the fifteen percent tax 441 00:22:44,400 --> 00:22:47,919 Speaker 3: comes out first. When you make a concessional contribution, that 442 00:22:48,040 --> 00:22:52,080 Speaker 3: amount is assessed against the spouse's concessional limit. So and 443 00:22:52,160 --> 00:22:53,960 Speaker 3: you tend to do that where you want to top 444 00:22:54,040 --> 00:22:57,920 Speaker 3: them up because they're not making the maximum concessional contributions 445 00:22:58,000 --> 00:22:59,639 Speaker 3: or they've got a lot of super member balance than 446 00:22:59,640 --> 00:23:00,040 Speaker 3: what you do. 447 00:23:00,400 --> 00:23:02,080 Speaker 1: It's the limit of the person who gets the money. 448 00:23:02,160 --> 00:23:04,119 Speaker 1: Is that really simplifying it. It's the limit of the 449 00:23:04,119 --> 00:23:07,320 Speaker 1: person gets the money. Okay, great, Yeah, okay, terrific. Thank 450 00:23:07,359 --> 00:23:10,320 Speaker 1: you for that, Bruce. There is a discussion in medical 451 00:23:10,359 --> 00:23:12,879 Speaker 1: circles as to whether it's better to use a family 452 00:23:12,880 --> 00:23:16,000 Speaker 1: trust or a self managed super fun for holding investments, 453 00:23:16,080 --> 00:23:20,159 Speaker 1: with opinion probably favoring family trusts. As a member of 454 00:23:20,200 --> 00:23:22,280 Speaker 1: the Great on Wash, I don't know anything about family 455 00:23:22,320 --> 00:23:24,480 Speaker 1: trust and I was wondering if you could discuss the issue. 456 00:23:24,680 --> 00:23:27,280 Speaker 1: Thank you, Bruce. This is there for advice information only. 457 00:23:28,600 --> 00:23:30,320 Speaker 1: I know I've a damn good idea, what you can 458 00:23:30,440 --> 00:23:33,720 Speaker 1: to say. But in any event, which is better a 459 00:23:33,760 --> 00:23:37,160 Speaker 1: family trust an SMSF. I'm guessing an SMSF is better 460 00:23:37,160 --> 00:23:39,880 Speaker 1: for a super but you tell me yeah. 461 00:23:40,000 --> 00:23:43,040 Speaker 3: So this of course depends on people's situation, right, And 462 00:23:43,160 --> 00:23:46,320 Speaker 3: both vehicles had their place, As me and everybody like 463 00:23:46,400 --> 00:23:49,880 Speaker 3: me always notes, super is the most tax effective structure 464 00:23:49,920 --> 00:23:53,000 Speaker 3: we have. It's also the most inflexible, right, what comes 465 00:23:53,000 --> 00:23:55,720 Speaker 3: with all the tax advantages of contribution limits and issues 466 00:23:55,760 --> 00:23:58,000 Speaker 3: around accessing the capital and that you're needing to wait 467 00:23:58,080 --> 00:24:01,560 Speaker 3: basically until retirement and to you get the money. But 468 00:24:01,680 --> 00:24:04,400 Speaker 3: SUPER is always going to be better than a trust 469 00:24:04,840 --> 00:24:09,480 Speaker 3: for apples for apples tax wise. So remembering that a 470 00:24:09,600 --> 00:24:12,280 Speaker 3: self managed super fund or super in general is just 471 00:24:12,359 --> 00:24:13,240 Speaker 3: a tax structure. 472 00:24:13,640 --> 00:24:16,159 Speaker 2: So on the basis that if you're investing in the exact. 473 00:24:15,920 --> 00:24:17,960 Speaker 3: Same way in a trust as you are in SUPER, 474 00:24:18,320 --> 00:24:20,760 Speaker 3: you're always going to get a better tax outcome. In Super, 475 00:24:20,880 --> 00:24:23,840 Speaker 3: it's the lowest tax rate in town, fifteen percent on 476 00:24:24,200 --> 00:24:26,159 Speaker 3: earnings and ten percent on capital gains when you're in 477 00:24:26,200 --> 00:24:30,840 Speaker 3: accumulation and being tax free when you're in pension phase 478 00:24:30,880 --> 00:24:33,760 Speaker 3: up to your transfer balance cap. Then clearly that's going 479 00:24:33,800 --> 00:24:36,040 Speaker 3: to be a better tax rate than putting it somewhere else. 480 00:24:36,880 --> 00:24:39,080 Speaker 3: A family trust is going to be more flexible in 481 00:24:39,119 --> 00:24:42,160 Speaker 3: terms of accessing your capital, but it's clearly not going 482 00:24:42,200 --> 00:24:45,200 Speaker 3: to be as tax effective. For those who don't understand, 483 00:24:45,560 --> 00:24:48,560 Speaker 3: a family trust is simply a flow through vehicle where 484 00:24:48,600 --> 00:24:51,840 Speaker 3: investments get made in the family trust. The income that 485 00:24:51,880 --> 00:24:54,760 Speaker 3: gets generated by the investments in there have to be 486 00:24:54,800 --> 00:24:58,520 Speaker 3: distributed to somebody, and a family trust is often known 487 00:24:58,560 --> 00:25:02,600 Speaker 3: as a discretionary trust. The trustee has the discretion as 488 00:25:02,640 --> 00:25:05,040 Speaker 3: to who they pay that income to, and that income 489 00:25:05,119 --> 00:25:08,399 Speaker 3: is often paid to a lower tax rate paying member 490 00:25:08,520 --> 00:25:11,600 Speaker 3: of your family, or if everybody's on the top marginal 491 00:25:11,600 --> 00:25:14,119 Speaker 3: tax rate or above thirty percent, you can pay it 492 00:25:14,160 --> 00:25:16,679 Speaker 3: to a company which is called a beneficiary company or 493 00:25:16,680 --> 00:25:20,240 Speaker 3: a venco or a bucket company in depending on what 494 00:25:20,280 --> 00:25:23,480 Speaker 3: parlance people use. So in effect, you end up with 495 00:25:23,600 --> 00:25:25,199 Speaker 3: kind of if you've got lots and lots of money, 496 00:25:25,600 --> 00:25:27,560 Speaker 3: you end up with this sort of scenario with the 497 00:25:27,600 --> 00:25:30,879 Speaker 3: best tax rate that you'll pay is thirty percent, whereas 498 00:25:30,880 --> 00:25:33,080 Speaker 3: in super it's always going to be lower than that. 499 00:25:33,440 --> 00:25:36,840 Speaker 3: So and again, remember but money in super it's stuck 500 00:25:36,840 --> 00:25:40,399 Speaker 3: there until you're retired effectively money and the trust you 501 00:25:40,400 --> 00:25:43,280 Speaker 3: can get to, but you're going to pay more tax. 502 00:25:43,680 --> 00:25:46,200 Speaker 3: So it'll depend on your It'll depend on your situation. 503 00:25:46,560 --> 00:25:49,200 Speaker 1: I would it be fair to say you'll also pay 504 00:25:49,240 --> 00:25:51,240 Speaker 1: more year by year in terms of fees, in terms 505 00:25:51,280 --> 00:25:52,159 Speaker 1: of keeping that ruling. 506 00:25:52,680 --> 00:25:53,919 Speaker 2: In terms of the family trust. 507 00:25:54,520 --> 00:25:57,560 Speaker 1: Yes, it's a family trust diter tor on each year 508 00:25:57,600 --> 00:25:58,560 Speaker 1: than an SMSFC. 509 00:25:59,240 --> 00:26:03,719 Speaker 3: No, they're about the scanning cost of running a family 510 00:26:03,760 --> 00:26:06,160 Speaker 3: trust and running yourself when it's super fun are going 511 00:26:06,160 --> 00:26:08,640 Speaker 3: to be very similar. To Remember, they are two different 512 00:26:08,680 --> 00:26:12,679 Speaker 3: tax structures and they use two different purposes. If you 513 00:26:12,800 --> 00:26:16,280 Speaker 3: have lots of capacity to do lots of savings, get 514 00:26:16,320 --> 00:26:18,600 Speaker 3: as much money into super as you can because it's 515 00:26:18,640 --> 00:26:21,680 Speaker 3: going to be the best tax structure available to us. 516 00:26:22,200 --> 00:26:24,359 Speaker 3: Just be mindful that you can't get to that money 517 00:26:24,720 --> 00:26:25,520 Speaker 3: until you retire. 518 00:26:26,520 --> 00:26:28,479 Speaker 1: Yeah, so there you are. I hope that's you. I 519 00:26:28,480 --> 00:26:30,400 Speaker 1: imagine that is very useful to you, Bruce, and thank 520 00:26:30,440 --> 00:26:34,720 Speaker 1: you for the question. Okay, Catherine says, I'm returning to 521 00:26:34,720 --> 00:26:37,399 Speaker 1: the EU to retire. I have a said agread on 522 00:26:37,520 --> 00:26:42,679 Speaker 1: my house and have just exchanged contracts. The that is 523 00:26:42,720 --> 00:26:45,720 Speaker 1: that Katherine is selling the Australian house and moving to 524 00:26:46,840 --> 00:26:51,480 Speaker 1: the EU. My super has been dissolved sitting in a 525 00:26:51,520 --> 00:26:55,000 Speaker 1: bank account. She wants to recommenct it. She wants us 526 00:26:55,119 --> 00:27:00,240 Speaker 1: to recommend a currency size for switching the money and 527 00:27:00,280 --> 00:27:06,080 Speaker 1: for forecast rates. Big issue, Catherine, I know, and I 528 00:27:06,200 --> 00:27:09,920 Speaker 1: know in our family when on those rare occasions that 529 00:27:09,960 --> 00:27:14,720 Speaker 1: there were substantial amounts of money crossing the world, in 530 00:27:15,480 --> 00:27:18,320 Speaker 1: an act of deep conservatism, we went back to the 531 00:27:18,359 --> 00:27:21,000 Speaker 1: banks knowing that they were going to charge an awful 532 00:27:21,000 --> 00:27:24,920 Speaker 1: lot more than other services. Any observations on that one, Charlie. 533 00:27:25,840 --> 00:27:28,120 Speaker 3: Look, I understand what Catherine would want to be assured 534 00:27:28,200 --> 00:27:31,600 Speaker 3: of exchange rate, and it's probably a big lump of money, 535 00:27:31,640 --> 00:27:33,439 Speaker 3: and it's maybe the last big lump of money that 536 00:27:33,520 --> 00:27:37,520 Speaker 3: you'll ever earn. Very hard for us to recommend a provider. 537 00:27:37,600 --> 00:27:40,520 Speaker 3: We're agnostic, and we like to tell the market that 538 00:27:40,560 --> 00:27:43,480 Speaker 3: we are completely agnostic in terms of product and what 539 00:27:43,600 --> 00:27:46,200 Speaker 3: have you. There are a number of good providers out there. 540 00:27:46,320 --> 00:27:48,800 Speaker 3: Just find the one that's going to not charge a 541 00:27:48,840 --> 00:27:51,080 Speaker 3: big spread and not charge a big fee. 542 00:27:51,280 --> 00:27:53,800 Speaker 1: Would you be prepared to name, say, two popular ones 543 00:27:53,840 --> 00:27:55,000 Speaker 1: without recommending them. 544 00:27:55,560 --> 00:27:59,080 Speaker 3: Look, I often think going and talking to your bank 545 00:27:59,359 --> 00:28:01,919 Speaker 3: is not the word idea in the world secure. It 546 00:28:01,920 --> 00:28:04,160 Speaker 3: gets done quite quickly. It comes through, it goes through 547 00:28:04,160 --> 00:28:06,400 Speaker 3: your accounts. There's no need to set up others. They're 548 00:28:06,520 --> 00:28:08,960 Speaker 3: very good in terms of the regulatory In terms of 549 00:28:08,960 --> 00:28:11,520 Speaker 3: the regulatory stuff, I don't think the spread is as 550 00:28:11,520 --> 00:28:14,439 Speaker 3: big as what you would think it would be. And 551 00:28:14,480 --> 00:28:17,040 Speaker 3: then the other sort of really popular one, and certainly 552 00:28:17,040 --> 00:28:20,439 Speaker 3: the one that we use for clients is OFX. They 553 00:28:20,560 --> 00:28:22,680 Speaker 3: do a good job. They make it really quite simple. 554 00:28:23,520 --> 00:28:26,679 Speaker 3: But just go and review the rates and see you 555 00:28:27,000 --> 00:28:27,880 Speaker 3: see which one. 556 00:28:27,960 --> 00:28:31,240 Speaker 1: She was asking about forecast reads. I presume one fore 557 00:28:31,280 --> 00:28:34,000 Speaker 1: castrat is as good as another, regardless if it was 558 00:28:34,000 --> 00:28:34,639 Speaker 1: putting it together. 559 00:28:35,280 --> 00:28:38,000 Speaker 3: Yeah, it's that Like like I said, it's the spread 560 00:28:38,000 --> 00:28:40,240 Speaker 3: that you really want to be mindful of and the 561 00:28:40,320 --> 00:28:43,320 Speaker 3: cost of associated with doing it in terms of which 562 00:28:43,320 --> 00:28:44,480 Speaker 3: way the currency is going to go. 563 00:28:45,440 --> 00:28:48,000 Speaker 2: Like, there's no crystal ball here. It's very no one. 564 00:28:48,080 --> 00:28:51,680 Speaker 1: No one knows. No one knows, Catherine, nobody knows, regardless 565 00:28:51,680 --> 00:28:54,440 Speaker 1: how much they're paid to forecast. All right, there was 566 00:28:54,440 --> 00:28:57,000 Speaker 1: a question from Jenny about this sort of thing. This 567 00:28:57,200 --> 00:29:00,840 Speaker 1: was more complicated. It was about and date in England 568 00:29:00,880 --> 00:29:04,400 Speaker 1: and farms and very interesting question I'm afraid, Jenny. It's 569 00:29:04,480 --> 00:29:07,520 Speaker 1: just that I'm afraid on this occasion we would refer 570 00:29:07,600 --> 00:29:10,240 Speaker 1: you off to a financial advisor and we would not 571 00:29:10,320 --> 00:29:14,880 Speaker 1: go into that one. It's just too particular, Okay, for 572 00:29:15,000 --> 00:29:17,520 Speaker 1: the show and its purposes. Okay, final question from Ben, 573 00:29:17,600 --> 00:29:20,040 Speaker 1: This is a juicy one. The background here, Charlie, was 574 00:29:20,080 --> 00:29:23,880 Speaker 1: that we were working onto the assumption, perhaps on the show, 575 00:29:23,920 --> 00:29:26,560 Speaker 1: that if Trump gets in, and a few weeks ago 576 00:29:26,640 --> 00:29:29,160 Speaker 1: it seems more likely that he would get in. But 577 00:29:30,160 --> 00:29:34,160 Speaker 1: if he does get in, he's got this clear bias 578 00:29:34,240 --> 00:29:38,480 Speaker 1: towards fossil fuels and oil and coal, et cetera, and 579 00:29:38,760 --> 00:29:41,960 Speaker 1: is not remotely would seem not to be remotely enthusiastic 580 00:29:42,280 --> 00:29:46,640 Speaker 1: about alternative energy, certainly subsidizing it or the Holy ESG movement, 581 00:29:46,920 --> 00:29:49,040 Speaker 1: and that's pretty clear from he's the record so far. 582 00:29:49,440 --> 00:29:51,880 Speaker 1: So we were making the assumption that it would be 583 00:29:51,920 --> 00:29:53,840 Speaker 1: good that oil would get a good run, and so 584 00:29:53,920 --> 00:29:56,840 Speaker 1: with fossil fuse if he gets in. This correspondent Ben 585 00:29:56,880 --> 00:29:59,560 Speaker 1: says that you got it the wrong way around, and 586 00:29:59,640 --> 00:30:02,320 Speaker 1: that so if he gets in, there'll be basically more 587 00:30:02,360 --> 00:30:06,480 Speaker 1: oil drilled. Because they said, what's the phrase one of 588 00:30:06,520 --> 00:30:10,640 Speaker 1: the many chants Trump around is dig, baby dig. He says, well, 589 00:30:10,640 --> 00:30:13,760 Speaker 1: if they dig more, the price will go down. What 590 00:30:13,800 --> 00:30:17,400 Speaker 1: do you think about the whole political risk that is 591 00:30:17,560 --> 00:30:21,160 Speaker 1: clearly on the table here on the US and investing. 592 00:30:21,760 --> 00:30:23,880 Speaker 2: Yeah, again, I think I made the point for it. 593 00:30:23,920 --> 00:30:25,920 Speaker 2: Didn't realize we're in a political show here, James. 594 00:30:25,960 --> 00:30:28,800 Speaker 1: But we're not, Charlie, but we're we live in the 595 00:30:28,800 --> 00:30:29,360 Speaker 1: real world. 596 00:30:29,840 --> 00:30:33,440 Speaker 3: Yeah. Look, I must confess that I don't wonderfully know. 597 00:30:33,760 --> 00:30:37,200 Speaker 3: What I do know is Trump is all about free market, right. 598 00:30:37,280 --> 00:30:40,520 Speaker 3: He is a capitalist at heart. He's about free market, 599 00:30:40,560 --> 00:30:44,240 Speaker 3: He's about open trading, and he is about creation of 600 00:30:44,360 --> 00:30:47,760 Speaker 3: kind of really good quality supply chain so so much. 601 00:30:47,760 --> 00:30:50,000 Speaker 3: I like about all of the other antiqs and whatever else. 602 00:30:50,000 --> 00:30:52,240 Speaker 3: And I'm certainly not sitting here suggesting in any way 603 00:30:52,240 --> 00:30:55,960 Speaker 3: a Trump supporter. But we saw in his first presidency 604 00:30:56,360 --> 00:30:58,360 Speaker 3: that it was a big one for saying to everyone 605 00:30:58,400 --> 00:31:00,800 Speaker 3: and everything, let's open the doors, let's put port fuel 606 00:31:00,840 --> 00:31:03,040 Speaker 3: on the fire, and let's get everybody out there and 607 00:31:03,120 --> 00:31:06,320 Speaker 3: let's get it growing. His view around fossil fulls fuels 608 00:31:06,360 --> 00:31:09,280 Speaker 3: is exactly the same. It's somewhat obviously fueled by the 609 00:31:09,320 --> 00:31:11,360 Speaker 3: fact that's where lots of his supporters come from, and 610 00:31:11,400 --> 00:31:14,960 Speaker 3: lots of his donations come from, etc. I think he's 611 00:31:15,000 --> 00:31:17,360 Speaker 3: the comment around, look if he goes and souls the 612 00:31:17,440 --> 00:31:20,200 Speaker 3: Russia Ukraine conflict and Russian oil kind of ends back 613 00:31:20,240 --> 00:31:22,520 Speaker 3: on the market and we end up with this kind 614 00:31:22,560 --> 00:31:27,120 Speaker 3: of additional kind of supply. I think is rhetoric more 615 00:31:27,160 --> 00:31:31,200 Speaker 3: than anything. I think that the discussion around let's drill 616 00:31:31,240 --> 00:31:34,280 Speaker 3: more holes and make more oil is very much a 617 00:31:34,320 --> 00:31:38,360 Speaker 3: discussion around his supporter base in terms of that kind 618 00:31:38,400 --> 00:31:41,200 Speaker 3: of belt around the kind of wealthy sort of textan 619 00:31:41,680 --> 00:31:44,840 Speaker 3: oil kind of barrens and what have you, around creating 620 00:31:44,880 --> 00:31:50,080 Speaker 3: additional sort of activity. I don't think that US fracking oil, 621 00:31:50,160 --> 00:31:53,920 Speaker 3: which is the lowest quality stuff, will have the OCD 622 00:31:54,320 --> 00:31:55,960 Speaker 3: change oil prices particularly. 623 00:31:56,000 --> 00:31:57,840 Speaker 2: I don't think that stuff scratches the surface. 624 00:31:58,080 --> 00:32:01,120 Speaker 3: I think not worried on the board of a CO No, 625 00:32:01,280 --> 00:32:03,400 Speaker 3: I don't think. Look, I think I think in reality 626 00:32:03,400 --> 00:32:07,280 Speaker 3: it's going to come from the interrelation between the Middle 627 00:32:07,360 --> 00:32:09,920 Speaker 3: East and some of the Russian stuff, and I think 628 00:32:09,960 --> 00:32:12,640 Speaker 3: that's what's going to draw the oil prices. Trump can 629 00:32:12,680 --> 00:32:14,440 Speaker 3: say what he likes to get as many votes as 630 00:32:14,600 --> 00:32:17,520 Speaker 3: he can. I don't think it's changing the IOL prices 631 00:32:17,840 --> 00:32:18,800 Speaker 3: are going to be determined. 632 00:32:20,080 --> 00:32:23,800 Speaker 1: Okay, very interesting. Well, thank you for even tackling that, Charlie. 633 00:32:23,840 --> 00:32:28,560 Speaker 1: Appreciate you. I appreciate your gumption and even going in there. Okay, Hey, terrific. 634 00:32:28,600 --> 00:32:30,560 Speaker 1: Great to have you on the show. As always, lovely to. 635 00:32:30,480 --> 00:32:32,720 Speaker 2: Talk to you again, Thank you, appreciate it. 636 00:32:32,800 --> 00:32:36,480 Speaker 1: That's Charlie Viola, top advisor on the upper ranks of 637 00:32:36,520 --> 00:32:39,880 Speaker 1: our top soon to be one hundred and fifty advisor's 638 00:32:39,920 --> 00:32:43,360 Speaker 1: list from Picture Partners. Lovely to talk to him as always. 639 00:32:43,680 --> 00:32:47,480 Speaker 1: Keep those emails rolling, and we would love if you 640 00:32:47,520 --> 00:32:50,400 Speaker 1: would mention the show to one other person. A little 641 00:32:50,400 --> 00:32:52,480 Speaker 1: campaign we're running at the moment and it seems to 642 00:32:52,520 --> 00:32:56,080 Speaker 1: be working, so thank you very much. The emails the 643 00:32:56,120 --> 00:32:59,000 Speaker 1: money puzzle at the Australian dot com dot you. Today's 644 00:32:59,000 --> 00:33:02,200 Speaker 1: show was produced by yes Am I You Talk you soon.