1 00:00:09,400 --> 00:00:12,380 Speaker 1: Hello and welcome to The Australian's Money Puzzle Podcast. I'm 2 00:00:12,400 --> 00:00:16,850 Speaker 1: James Kirby, the Wealth Editor at The Australian. Welcome aboard, everybody. 3 00:00:17,030 --> 00:00:19,130 Speaker 1: A little later this year, The Australian is going to 4 00:00:19,170 --> 00:00:22,650 Speaker 1: publish its annual list of top financial advisors, which is 5 00:00:22,730 --> 00:00:27,390 Speaker 1: expanding this time to 150 advisors. It used to be 6 00:00:27,390 --> 00:00:30,420 Speaker 1: 100 advisors. And once upon a time when it started, 7 00:00:31,220 --> 00:00:33,980 Speaker 1: back in 2017 or so, it was only 50 advisors. 8 00:00:34,080 --> 00:00:36,000 Speaker 1: And one of the advisors that has managed to stay 9 00:00:36,060 --> 00:00:39,420 Speaker 1: on that list every single year is and I might 10 00:00:39,520 --> 00:00:42,959 Speaker 1: add in the upper reaches of that list every single year, 11 00:00:43,420 --> 00:00:46,979 Speaker 1: is Charlie Viola from Picture Partners. He's been on the 12 00:00:47,000 --> 00:00:49,380 Speaker 1: show before. Love to have him on. He's my guest today. 13 00:00:49,440 --> 00:00:52,600 Speaker 1: How are you, Charlie? Good, James. How are you, mate? 14 00:00:53,280 --> 00:00:56,140 Speaker 1: We're going to talk about a couple of things, but news-wise, 15 00:00:56,340 --> 00:00:58,520 Speaker 1: and I can't help it, I'm sorry, but I'm a 16 00:00:58,600 --> 00:01:03,540 Speaker 1: news-driven journalist to this day, never ends. And we have 17 00:01:03,560 --> 00:01:08,980 Speaker 1: been covering super, of course, regularly. And everybody, I suppose, 18 00:01:09,030 --> 00:01:13,310 Speaker 1: in many ways, aspires to have lots in super. We'd 19 00:01:13,410 --> 00:01:16,950 Speaker 1: all like to have three million in super. Not many do, 20 00:01:17,510 --> 00:01:19,929 Speaker 1: but many may have in the future. And some big 21 00:01:19,990 --> 00:01:24,010 Speaker 1: news this week in that the independents, the Teals, all 22 00:01:24,069 --> 00:01:27,610 Speaker 1: of them, plus a couple of their friends, Helen Haynes, 23 00:01:27,670 --> 00:01:32,630 Speaker 1: Kylie Tink, have issued a quite unusual, unprecedented statement that 24 00:01:32,709 --> 00:01:36,440 Speaker 1: they are calling for amendments as a group. on it, 25 00:01:36,760 --> 00:01:39,100 Speaker 1: two important, they're calling for all sorts of things, but 26 00:01:39,140 --> 00:01:41,910 Speaker 1: in terms, when I called them and asked what are 27 00:01:41,950 --> 00:01:44,630 Speaker 1: the actual amendments you're going to put through in Parliament, 28 00:01:44,650 --> 00:01:47,830 Speaker 1: there's two important ones. One's from Kylie, I think, which 29 00:01:47,950 --> 00:01:51,310 Speaker 1: is that this notion of that the new tax, which 30 00:01:51,370 --> 00:01:56,960 Speaker 1: is 15% on earnings on amounts above 3 million and super, 31 00:01:57,480 --> 00:02:01,720 Speaker 1: would be based on unrealised paper gains, which is really controversial. 32 00:02:02,500 --> 00:02:06,320 Speaker 1: And the second one, which would be put forward by 33 00:02:06,340 --> 00:02:10,100 Speaker 1: Allegra Spender is that if you were hit with this bill, 34 00:02:10,139 --> 00:02:12,320 Speaker 1: it would be deferred, that you would have the ability 35 00:02:12,400 --> 00:02:15,440 Speaker 1: to defer it for the simple reason that people could 36 00:02:15,480 --> 00:02:18,930 Speaker 1: get really caught. If you had one investment and it 37 00:02:18,970 --> 00:02:21,510 Speaker 1: was a property that was worth 3 million and you 38 00:02:21,730 --> 00:02:24,089 Speaker 1: had to sell it for some reason, that might be 39 00:02:24,130 --> 00:02:26,930 Speaker 1: a bit unfair on some people. I think the real 40 00:02:26,970 --> 00:02:30,910 Speaker 1: problem with the tax is not so much that there's 41 00:02:30,930 --> 00:02:34,220 Speaker 1: going to be another tax on super. although that obviously 42 00:02:34,240 --> 00:02:38,020 Speaker 1: isn't breaking an election promise. But the nature of this 43 00:02:38,080 --> 00:02:42,300 Speaker 1: tax is seen to be unfair in relation to tax 44 00:02:42,820 --> 00:02:46,290 Speaker 1: as it exists for everything else. What's your view on it, Charlie, 45 00:02:46,430 --> 00:02:48,330 Speaker 1: on the $ 3 million? And what are you saying to 46 00:02:48,370 --> 00:02:51,090 Speaker 1: your wealthy clients, of which I'm sure you have many? 47 00:02:52,389 --> 00:02:55,590 Speaker 2: Yeah, well, I think, firstly, it just doesn't affect that 48 00:02:55,630 --> 00:02:58,310 Speaker 2: many people. So the political capital that's being used on 49 00:02:58,350 --> 00:03:00,730 Speaker 2: this seems to me to be a massive overreach. But 50 00:03:01,419 --> 00:03:02,619 Speaker 2: We're not a political show here. 51 00:03:02,639 --> 00:03:04,820 Speaker 3: So we'll move on from that. 52 00:03:04,980 --> 00:03:10,110 Speaker 2: Look, it does tend to impact a fair number of 53 00:03:10,230 --> 00:03:14,370 Speaker 2: our clients. Our advice up until now, until we've understood 54 00:03:14,450 --> 00:03:16,190 Speaker 2: really what the impact of this is going to be, 55 00:03:16,230 --> 00:03:18,690 Speaker 2: has to be to sit tight and just to see 56 00:03:18,730 --> 00:03:22,850 Speaker 2: how it's applied in reality. It is likely, though, that 57 00:03:22,910 --> 00:03:26,180 Speaker 2: we will start reverting some of those excess amounts over 58 00:03:26,220 --> 00:03:28,959 Speaker 2: and above the three mil back into their sort of 59 00:03:29,020 --> 00:03:31,929 Speaker 2: trust and company structures and so that we are only 60 00:03:32,010 --> 00:03:34,970 Speaker 2: ever paying tax on the income and realised gains and 61 00:03:35,050 --> 00:03:40,490 Speaker 2: not that arbitrary uplifting value. I understand what the government 62 00:03:40,560 --> 00:03:42,720 Speaker 2: is doing here, right? They're saying, well, you only ever 63 00:03:42,760 --> 00:03:46,000 Speaker 2: need so much to be able to fund a really healthy, 64 00:03:46,080 --> 00:03:49,580 Speaker 2: happy retirement. The whole purpose of super was to make 65 00:03:49,620 --> 00:03:52,420 Speaker 2: it concessionally taxed so you weren't leaning on the welfare system, 66 00:03:52,840 --> 00:03:56,620 Speaker 2: so the age pension. So those tax concessions fundamentally should 67 00:03:56,680 --> 00:03:58,520 Speaker 2: go away or at least some of them should go 68 00:03:58,540 --> 00:04:01,270 Speaker 2: away if you've got more than what you need, because 69 00:04:01,290 --> 00:04:02,610 Speaker 2: you've now got more than what you need, so you 70 00:04:02,630 --> 00:04:04,690 Speaker 2: should be adding back to the public purse. We sort 71 00:04:04,710 --> 00:04:08,160 Speaker 2: of understand what they're doing. The application of it, though, 72 00:04:08,180 --> 00:04:12,500 Speaker 2: has just been terrible. And again, we understand why they're 73 00:04:12,520 --> 00:04:14,440 Speaker 2: trying to make sure that self-managed super funds are treated 74 00:04:14,460 --> 00:04:16,620 Speaker 2: the same way as industry funds and public offer funds, 75 00:04:17,060 --> 00:04:20,760 Speaker 2: and they're taxing the increase in a member's balance. But really, 76 00:04:20,820 --> 00:04:23,460 Speaker 2: they should have just kept it simple and provided a 77 00:04:23,500 --> 00:04:27,690 Speaker 2: surcharge tax on the realized gains and income over that 78 00:04:27,690 --> 00:04:30,120 Speaker 2: $ 3 million and an additional kind of 15%. 79 00:04:30,120 --> 00:04:32,490 Speaker 3: And it would have simplified it for everybody. And we 80 00:04:32,529 --> 00:04:33,670 Speaker 3: would have all gone, right, okay. 81 00:04:33,710 --> 00:04:36,969 Speaker 2: Well, we know we're paying 30% surcharge on that portion. 82 00:04:37,770 --> 00:04:39,510 Speaker 2: The way they've done it, they've made a real hash 83 00:04:39,529 --> 00:04:42,150 Speaker 2: of it. And it's going to be really hard to administer. 84 00:04:42,529 --> 00:04:46,470 Speaker 2: The issue of deferral that came out today, deferred, is 85 00:04:46,510 --> 00:04:49,990 Speaker 2: there interest payable on the deferral? Can we defer it forever? 86 00:04:50,010 --> 00:04:54,360 Speaker 2: So uncertainty is not loved by anyone and you'll just 87 00:04:54,420 --> 00:04:57,320 Speaker 2: have people ripping that extra portion out, sticking it back, 88 00:04:57,400 --> 00:04:59,279 Speaker 2: especially if people have got lots and lots of money, 89 00:04:59,740 --> 00:05:01,400 Speaker 2: pulling it out, putting it back in their trust and 90 00:05:01,440 --> 00:05:04,239 Speaker 2: company structures and ending up with a 30% tax rate anyway. 91 00:05:05,300 --> 00:05:07,659 Speaker 1: It sounds to me when we jump over all the 92 00:05:08,360 --> 00:05:12,940 Speaker 1: technicals and details that really what's going on here is 93 00:05:13,640 --> 00:05:17,560 Speaker 1: people like you and your investors, your clients are saying, look, 94 00:05:18,140 --> 00:05:21,229 Speaker 1: they call this a threshold issue. this $ 3 million in super. 95 00:05:21,270 --> 00:05:25,190 Speaker 1: But in effect, it's a cap. In effect, it's the end. 96 00:05:25,480 --> 00:05:28,560 Speaker 1: After $ 3 million, you would be silly to have more 97 00:05:28,600 --> 00:05:29,380 Speaker 1: than that in super. 98 00:05:30,400 --> 00:05:31,980 Speaker 3: Well, not really. It just makes it more complex. 99 00:05:32,040 --> 00:05:35,660 Speaker 2: It just means calculating your after-tax returns slightly more complex. 100 00:05:36,420 --> 00:05:39,420 Speaker 2: And if there is an alternative, if the assets within 101 00:05:39,440 --> 00:05:41,900 Speaker 2: your fund are liquid enough and there is an alternative, 102 00:05:42,410 --> 00:05:44,589 Speaker 2: and there's an alternative to only paying tax on the 103 00:05:44,630 --> 00:05:48,930 Speaker 2: realized gains and income as it's received, like you otherwise 104 00:05:49,010 --> 00:05:52,710 Speaker 2: normally would, If we have an option, then we're probably 105 00:05:52,770 --> 00:05:54,890 Speaker 2: going to take that option, right? There are going to 106 00:05:54,910 --> 00:05:57,110 Speaker 2: be some people, as you say, who are caught with 107 00:05:57,170 --> 00:06:00,890 Speaker 2: no option because they have one significant property in there 108 00:06:01,110 --> 00:06:03,670 Speaker 2: or a set of illiquid assets that are in there. 109 00:06:03,870 --> 00:06:08,990 Speaker 2: So it's not so much as a cap, but it's 110 00:06:09,070 --> 00:06:11,250 Speaker 2: just made the whole thing far more complex and more 111 00:06:11,290 --> 00:06:12,409 Speaker 2: complex than it needs to be. 112 00:06:12,690 --> 00:06:16,390 Speaker 1: If I had a startup and I put my shares 113 00:06:16,470 --> 00:06:21,560 Speaker 1: in the startup in super... And the years went by 114 00:06:21,600 --> 00:06:26,400 Speaker 1: and the startup really started, it really worked. I'd be caught, right? 115 00:06:26,440 --> 00:06:29,020 Speaker 1: I couldn't get it out because it's in super. And 116 00:06:29,060 --> 00:06:34,159 Speaker 1: I'd have to pay tax on the assumed increase in value, 117 00:06:34,220 --> 00:06:35,690 Speaker 1: even though I hadn't got any money out of it. 118 00:06:36,000 --> 00:06:36,310 Speaker 2: Is that it? 119 00:06:36,460 --> 00:06:39,099 Speaker 1: Is that it at its worst? Is that an issue 120 00:06:39,380 --> 00:06:42,520 Speaker 1: for people? Or do many people put startups in super? 121 00:06:43,200 --> 00:06:48,050 Speaker 2: You probably rarely see people put startups in just because 122 00:06:48,070 --> 00:06:51,260 Speaker 2: of the high risk nature. We like to enshrine client 123 00:06:51,320 --> 00:06:53,810 Speaker 2: super money because you're obviously limited as to what you 124 00:06:53,850 --> 00:06:56,570 Speaker 2: can put in into super and it becomes the most 125 00:06:56,630 --> 00:07:00,590 Speaker 2: tax effective money in our tax system. So really high 126 00:07:00,610 --> 00:07:03,750 Speaker 2: risk assets like that, unless someone is super sure that 127 00:07:03,770 --> 00:07:06,790 Speaker 2: they're going to get a really significant outcome out of 128 00:07:06,850 --> 00:07:09,190 Speaker 2: something like that, then we don't tend to put it 129 00:07:09,810 --> 00:07:12,730 Speaker 2: in super. The arbitrage doesn't tend to be that great 130 00:07:12,830 --> 00:07:14,630 Speaker 2: in terms of doing it in a family trust and 131 00:07:14,650 --> 00:07:17,750 Speaker 2: getting the CGT discount somewhere down the line. But yeah, look, 132 00:07:17,850 --> 00:07:19,290 Speaker 2: at its worst, you end up with this kind of 133 00:07:19,410 --> 00:07:23,370 Speaker 2: really illiquid asset, which has been revalued by virtue of 134 00:07:23,430 --> 00:07:27,890 Speaker 2: other capital raises or they're sitting in escrow. They've done 135 00:07:27,940 --> 00:07:29,940 Speaker 2: really well. They've gone to a startup. They've gone to listing. 136 00:07:30,300 --> 00:07:33,260 Speaker 2: Now they're in escrow for 12 or 18 months. You're 137 00:07:33,400 --> 00:07:37,180 Speaker 2: now paying this latent tax bill on a really illiquid asset. 138 00:07:37,240 --> 00:07:41,130 Speaker 2: And that's… I'm not sure that's been thought through particularly. 139 00:07:41,500 --> 00:07:43,460 Speaker 2: I think it was done in an effort to ensure 140 00:07:43,520 --> 00:07:46,940 Speaker 2: that self-managed super funds, which have got obviously all of 141 00:07:47,000 --> 00:07:51,340 Speaker 2: the individual assets to be aligned with public offer funds 142 00:07:51,380 --> 00:07:54,180 Speaker 2: and industry funds, where it is simply the change in 143 00:07:54,200 --> 00:07:55,960 Speaker 2: the member balance that's being taxed. 144 00:07:56,670 --> 00:08:00,990 Speaker 1: All right. More generally, again, with wealthier investors, I read 145 00:08:01,310 --> 00:08:06,770 Speaker 1: everywhere that they are more and more engrossed and occupied 146 00:08:06,870 --> 00:08:10,970 Speaker 1: with alternatives, which is such a wide, fuzzy term. But 147 00:08:11,030 --> 00:08:12,990 Speaker 1: I also read that they're more and more putting their 148 00:08:13,010 --> 00:08:19,340 Speaker 1: money offshore. Broadly, is that the case among Australian investors 149 00:08:19,400 --> 00:08:21,880 Speaker 1: today that they are more likely to put money offshore? 150 00:08:21,900 --> 00:08:26,140 Speaker 2: I think it's certainly more prevalent now than it was 151 00:08:26,140 --> 00:08:28,580 Speaker 2: 10 or 15 years ago. So 10 or 15 years 152 00:08:28,620 --> 00:08:30,550 Speaker 2: ago or 20 years ago when I probably started my 153 00:08:30,580 --> 00:08:33,950 Speaker 2: career and we started building portfolios, We were probably having 154 00:08:34,330 --> 00:08:37,800 Speaker 2: almost kind of two thirds domestic, one third international exposure 155 00:08:38,240 --> 00:08:40,439 Speaker 2: to equities. We were all in love with the kind 156 00:08:40,460 --> 00:08:43,719 Speaker 2: of dividend paying shares that Australia has. And we were 157 00:08:43,740 --> 00:08:46,400 Speaker 2: all in love with kind of the imputation credits and 158 00:08:46,420 --> 00:08:49,730 Speaker 2: the level of revenue that was being generated by Australian equities. 159 00:08:50,410 --> 00:08:51,689 Speaker 3: I think as time has gone on. 160 00:08:51,630 --> 00:08:53,550 Speaker 2: And we've realised that the world is a big place 161 00:08:53,710 --> 00:08:55,770 Speaker 2: and that Australia is quite a small place and that 162 00:08:55,809 --> 00:08:58,410 Speaker 2: there is lots of growth and activity and especially in 163 00:08:58,450 --> 00:09:01,980 Speaker 2: the tech and AI space globally. that what you're finding 164 00:09:02,040 --> 00:09:06,199 Speaker 2: now is that certainly portfolios are much more closely aligned 165 00:09:06,240 --> 00:09:10,490 Speaker 2: in terms of their kind of domestic exposure versus international exposure. 166 00:09:10,890 --> 00:09:14,430 Speaker 2: I know certainly we here have probably, if we're putting 167 00:09:14,450 --> 00:09:17,770 Speaker 2: portfolios together, we're 40%. In terms of our equity exposure, 168 00:09:17,790 --> 00:09:20,790 Speaker 2: we're probably 40% domestic because we still like them. We 169 00:09:20,830 --> 00:09:23,930 Speaker 2: still think that they're good companies that are well-run and 170 00:09:23,970 --> 00:09:26,800 Speaker 2: good balance sheets and we like the income, but. 171 00:09:26,720 --> 00:09:30,040 Speaker 3: We probably have a slightly bigger weighting, so 60%. 172 00:09:30,040 --> 00:09:33,080 Speaker 2: To global equities because we tend to believe that those 173 00:09:33,140 --> 00:09:36,240 Speaker 2: businesses that continue to do things and continue to buy 174 00:09:36,300 --> 00:09:39,500 Speaker 2: up market share and gobble up their competitors will generate 175 00:09:39,640 --> 00:09:41,980 Speaker 2: the best kind of medium to long-term returns. 176 00:09:42,440 --> 00:09:43,920 Speaker 1: That's a big point, isn't it, really? 177 00:09:43,980 --> 00:09:47,180 Speaker 2: The other piece, James, is that accessibility now is far 178 00:09:47,250 --> 00:09:49,150 Speaker 2: greater than it ever was. Fifteen years ago, you had 179 00:09:49,190 --> 00:09:51,270 Speaker 2: Platinum and Magellan and not much else in terms of 180 00:09:51,350 --> 00:09:56,250 Speaker 2: accessing global equities. Now, we can all trade Apple and. 181 00:09:56,809 --> 00:09:58,880 Speaker 1: I can buy Nvidia after this show. I can buy 182 00:09:58,890 --> 00:10:01,980 Speaker 1: Google after this show in five minutes, two minutes. Okay, 183 00:10:02,240 --> 00:10:06,300 Speaker 1: about that, that asset allocation and the majority. So you're 184 00:10:06,320 --> 00:10:09,439 Speaker 1: telling me the majority of their shares in your clients, 185 00:10:09,460 --> 00:10:12,660 Speaker 1: the majority of their shares are overseas. That means the 186 00:10:12,700 --> 00:10:15,880 Speaker 1: majority are in the US, right? Because the US is 72% 187 00:10:15,880 --> 00:10:19,110 Speaker 1: of the Organ Stanley Capital International Index now. 188 00:10:19,740 --> 00:10:22,400 Speaker 2: Probably say that we've still probably got some domestic bias 189 00:10:22,480 --> 00:10:25,219 Speaker 2: because we're probably living with 15 or 20 years of 190 00:10:25,280 --> 00:10:28,140 Speaker 2: gains on the Australian market. So it's more about where 191 00:10:28,160 --> 00:10:29,880 Speaker 2: we're allocating new money as. 192 00:10:29,660 --> 00:10:32,040 Speaker 3: Opposed to what portfolios look like. 193 00:10:32,580 --> 00:10:35,520 Speaker 2: But to your point, there is still a fairly significant 194 00:10:35,620 --> 00:10:39,440 Speaker 2: US bias to any global allocation that we make. We 195 00:10:39,540 --> 00:10:44,339 Speaker 2: still very much like those big sort of mega cap 196 00:10:45,110 --> 00:10:48,880 Speaker 2: AI companies and tech companies and because, as I said before, 197 00:10:49,100 --> 00:10:52,520 Speaker 2: they're gobbling up competitors, they protect their margins, and they're 198 00:10:52,540 --> 00:10:55,780 Speaker 2: probably able to trade for very long periods of time 199 00:10:56,020 --> 00:10:59,479 Speaker 2: at very big multiples, which means that we tend to 200 00:10:59,540 --> 00:11:03,020 Speaker 2: get that kind of valuation and thematic run that we've had, 201 00:11:03,080 --> 00:11:06,600 Speaker 2: and it'll likely continue for a period of time. 202 00:11:06,800 --> 00:11:09,300 Speaker 1: Okay. On the flip side, does it mean that frank 203 00:11:09,500 --> 00:11:11,490 Speaker 1: dividends are less important than they used to be? 204 00:11:12,800 --> 00:11:15,819 Speaker 2: So I guess the way that we construct portfolios, we 205 00:11:15,840 --> 00:11:19,140 Speaker 2: want to generate client returns in all different ways. The 206 00:11:19,350 --> 00:11:23,670 Speaker 2: revenue production from portfolios, which should absolutely come from shares, 207 00:11:23,710 --> 00:11:27,670 Speaker 2: but also comes from private debt, private credit, syndicated property, 208 00:11:28,010 --> 00:11:29,790 Speaker 2: will get income in all different ways. 209 00:11:30,250 --> 00:11:31,670 Speaker 3: We still like Australian shares. 210 00:11:31,710 --> 00:11:34,210 Speaker 2: We are still an investor in Australian shares, and we 211 00:11:34,270 --> 00:11:38,770 Speaker 2: still like the nature of those companies, especially the large cap, defensive, 212 00:11:38,890 --> 00:11:43,420 Speaker 2: blue chip, revenue producing companies. So it's not less important. 213 00:11:43,520 --> 00:11:45,209 Speaker 2: We just don't want to leave the return on the 214 00:11:45,290 --> 00:11:49,410 Speaker 2: table available to us in terms of global equities. We 215 00:11:49,450 --> 00:11:53,050 Speaker 2: also want to be genuinely diversified, right? So we want 216 00:11:53,070 --> 00:11:55,579 Speaker 2: to make sure that we're giving the clients a spread 217 00:11:55,600 --> 00:11:58,300 Speaker 2: of their risk. If we do nothing but go on 218 00:11:58,340 --> 00:12:01,980 Speaker 2: by CBA and BHP shares, then we are always only 219 00:12:02,040 --> 00:12:03,640 Speaker 2: exposed to what's happening domestically. 220 00:12:04,120 --> 00:12:05,970 Speaker 1: Okay, very good. Hey, we'll take a short break and 221 00:12:05,990 --> 00:12:17,590 Speaker 1: we'll be back in a moment. Hello and welcome back 222 00:12:17,630 --> 00:12:20,820 Speaker 1: to the Australian's Money Puzzle. I'm James Kirby talking to 223 00:12:20,860 --> 00:12:24,860 Speaker 1: Charlie Viola of Pitcher Partners. Hey, Charlie, you just mentioned 224 00:12:24,880 --> 00:12:28,560 Speaker 1: just in passing reference there about diversification. And it doesn't 225 00:12:28,580 --> 00:12:30,920 Speaker 1: really matter. The next question I'm going to throw is 226 00:12:30,960 --> 00:12:33,960 Speaker 1: it doesn't really matter whether the person has 100,000 in 227 00:12:34,000 --> 00:12:38,710 Speaker 1: super or 10 million in super. But regardless of what 228 00:12:38,750 --> 00:12:42,990 Speaker 1: you're offering them or is being offered through you, It 229 00:12:43,020 --> 00:12:45,969 Speaker 1: could be a private credit, private equity, pick anything you like, 230 00:12:46,390 --> 00:12:52,730 Speaker 1: oil futures, whatever. Nothing is guaranteed, right? Nothing. Except Australian 231 00:12:52,770 --> 00:12:56,970 Speaker 1: cash in the bank. It's guaranteed by the government. It's 232 00:12:56,990 --> 00:13:01,190 Speaker 1: guaranteed to the tune of 250 grand per person, per account. 233 00:13:01,270 --> 00:13:05,630 Speaker 1: And I'm sure your clients can have 10 different bank 234 00:13:05,700 --> 00:13:07,980 Speaker 1: accounts with 250 grand in each one if they want. 235 00:13:08,280 --> 00:13:12,880 Speaker 1: Point I'm making is, Do we in our excitement about 236 00:13:13,160 --> 00:13:19,320 Speaker 1: what has been a good share market since COVID, do 237 00:13:19,360 --> 00:13:23,870 Speaker 1: we underestimate cash now that it's paying good money on 238 00:13:23,929 --> 00:13:26,850 Speaker 1: any measure, even against inflation? 239 00:13:26,870 --> 00:13:30,550 Speaker 2: So I think the best way to answer this is 240 00:13:30,590 --> 00:13:33,010 Speaker 2: number one, we never underestimate cash. It's where we park 241 00:13:33,100 --> 00:13:35,840 Speaker 2: money before we invest it somewhere else. I'm probably on 242 00:13:35,900 --> 00:13:38,170 Speaker 2: record a lot. as saying that we're big ones for 243 00:13:38,210 --> 00:13:40,630 Speaker 2: having powder dry because we want to be able to 244 00:13:40,690 --> 00:13:43,089 Speaker 2: invest into weakness and opportunity as things come along and 245 00:13:43,150 --> 00:13:47,330 Speaker 2: as cycles change. But your point is a well-made one 246 00:13:47,390 --> 00:13:51,540 Speaker 2: where the risk-free rate at 5% is quite high. So 247 00:13:51,700 --> 00:13:54,320 Speaker 2: it is easier for us to leave powder dry and 248 00:13:54,400 --> 00:13:57,020 Speaker 2: not have clients feel like they're having their returns dragged. 249 00:13:57,559 --> 00:14:01,459 Speaker 2: But also with the risk-free rate being 5%, we now 250 00:14:01,500 --> 00:14:03,360 Speaker 2: need to work out whether or not we're actually being 251 00:14:03,440 --> 00:14:06,400 Speaker 2: rewarded for the additional risk that we're taking and by 252 00:14:06,440 --> 00:14:07,520 Speaker 2: investing anywhere else. 253 00:14:08,679 --> 00:14:11,320 Speaker 3: So previously, when we were buying. 254 00:14:11,260 --> 00:14:13,959 Speaker 2: Possibly, I don't know, just one of the flavours of 255 00:14:13,980 --> 00:14:15,559 Speaker 2: the month or what's been the flavour of the last 256 00:14:15,580 --> 00:14:18,540 Speaker 2: couple of years has clearly been private debt. Private debt 257 00:14:18,580 --> 00:14:21,460 Speaker 2: where it has always felt like the risk versus return 258 00:14:21,480 --> 00:14:24,080 Speaker 2: was a bit asymmetric. You're getting good returns for the 259 00:14:24,160 --> 00:14:27,230 Speaker 2: risk that you were taking with LVRs, sort of 60%, 260 00:14:27,230 --> 00:14:30,750 Speaker 2: good sponsors, loans are turned over all of the time, 261 00:14:31,180 --> 00:14:32,710 Speaker 2: where you're getting 6% or 7% or 8% above the 262 00:14:32,730 --> 00:14:36,630 Speaker 2: cash rate. now where you're getting 3% or 4% above 263 00:14:36,650 --> 00:14:38,980 Speaker 2: the cash rate for the additional risk that you're taking, 264 00:14:39,020 --> 00:14:42,640 Speaker 2: given the environment where rates are up, construction is struggling, 265 00:14:42,740 --> 00:14:45,980 Speaker 2: people are struggling to borrow money, et cetera, it feels 266 00:14:46,060 --> 00:14:49,460 Speaker 2: like the 5%, given the risk, which is no risk, 267 00:14:49,880 --> 00:14:53,420 Speaker 2: versus getting 7% or 8% for a good deal of 268 00:14:53,500 --> 00:14:56,850 Speaker 2: risk is actually a good outcome. So I think cash 269 00:14:56,880 --> 00:14:59,130 Speaker 2: is really two things. One, it's waiting there to be 270 00:14:59,170 --> 00:15:02,090 Speaker 2: invested in other things. And right now, it's not particularly 271 00:15:02,130 --> 00:15:04,859 Speaker 2: dragging on portfolios. So It's not the worst thing in 272 00:15:04,880 --> 00:15:07,080 Speaker 2: the world to have some cash sitting in portfolios. 273 00:15:07,940 --> 00:15:10,980 Speaker 1: Do you think that will be the case? In a way, 274 00:15:11,020 --> 00:15:13,850 Speaker 1: I'm asking you the outlook for rates or at least 275 00:15:13,880 --> 00:15:17,130 Speaker 1: the outlook for rates, which you must... If I'm sitting 276 00:15:17,170 --> 00:15:19,290 Speaker 1: across from your desk and I'm a client of yours, 277 00:15:19,330 --> 00:15:21,710 Speaker 1: I'm going to say, where do you think rates are going? 278 00:15:21,730 --> 00:15:24,110 Speaker 1: I don't know what you're going to say. Maybe you say, well, 279 00:15:24,370 --> 00:15:28,070 Speaker 1: we follow whatever, Morgan Stanley, or we follow Goldman Sachs 280 00:15:28,390 --> 00:15:30,310 Speaker 1: in terms of their team or whatever. What do you 281 00:15:30,370 --> 00:15:33,100 Speaker 1: say when someone says, hey, I like the 5%. Should 282 00:15:33,140 --> 00:15:35,000 Speaker 1: I lock it in for a few years because maybe 283 00:15:35,020 --> 00:15:36,900 Speaker 1: this is as high as it gets? 284 00:15:37,780 --> 00:15:41,790 Speaker 2: We're still big ones for normal, fundamental kind of portfolio construction. 285 00:15:41,970 --> 00:15:45,350 Speaker 2: We are still, generally speaking, investors. So we want the 286 00:15:45,390 --> 00:15:47,690 Speaker 2: money out and invested. We just want to make sure 287 00:15:47,710 --> 00:15:49,710 Speaker 2: that we're picking our timing and we're picking our mark 288 00:15:49,750 --> 00:15:53,380 Speaker 2: in terms of when to deploy that capital into markets, again, 289 00:15:53,580 --> 00:15:57,040 Speaker 2: into sort of weakness and when opportunity kind of presents 290 00:15:57,400 --> 00:15:59,520 Speaker 2: itself in terms of what we think from a rate 291 00:15:59,560 --> 00:16:01,970 Speaker 2: outlook point of view, we're probably the same as everybody else. 292 00:16:02,000 --> 00:16:03,630 Speaker 2: We think domestically, we're not going to get a rate 293 00:16:03,670 --> 00:16:05,950 Speaker 2: cut for a period of time and it'll probably be. 294 00:16:05,910 --> 00:16:06,750 Speaker 3: Into next year. 295 00:16:07,170 --> 00:16:10,170 Speaker 2: So where we know that we're probably deploying money over 296 00:16:10,210 --> 00:16:12,290 Speaker 2: a period of time, we're happy to lock rates in 297 00:16:12,370 --> 00:16:15,130 Speaker 2: for three and six and kind of nine months to 298 00:16:15,190 --> 00:16:18,300 Speaker 2: try and achieve a reasonable return on that money that 299 00:16:18,320 --> 00:16:21,440 Speaker 2: we're still yet to deploy. But I make the point 300 00:16:21,580 --> 00:16:25,230 Speaker 2: that every client that we see whether they are 30 301 00:16:25,230 --> 00:16:28,090 Speaker 2: or whether they are 50 or whether they are 60, 302 00:16:28,090 --> 00:16:33,030 Speaker 2: have got 30-plus year timeframes. Over a 30-year-plus timeframe, because remember, 303 00:16:33,050 --> 00:16:35,700 Speaker 2: even a 60-year-old is alive for a period of time. 304 00:16:35,740 --> 00:16:37,720 Speaker 2: We still want to invest this money for the rest 305 00:16:37,760 --> 00:16:39,820 Speaker 2: of their life. We want to get the money out 306 00:16:39,880 --> 00:16:42,000 Speaker 2: and we want it to be in active style investments 307 00:16:42,020 --> 00:16:44,900 Speaker 2: because that's how we're going to generate the best possible returns. 308 00:16:45,420 --> 00:16:48,180 Speaker 2: So cash, we'll manage the cash to produce the best 309 00:16:48,240 --> 00:16:50,610 Speaker 2: outcome at the time, but ultimately, We want it as 310 00:16:50,770 --> 00:16:52,490 Speaker 2: liquid as we can so we can get in and 311 00:16:52,510 --> 00:16:53,910 Speaker 2: get it invested at the right time. 312 00:16:54,370 --> 00:16:57,900 Speaker 1: Okay. Talking about liquidity, you said there about you stick 313 00:16:57,920 --> 00:17:00,420 Speaker 1: with the fundamentals. Some things haven't changed. But then in 314 00:17:00,520 --> 00:17:03,300 Speaker 1: another way, you said to me that people are in 315 00:17:03,540 --> 00:17:07,020 Speaker 1: new areas, relatively new areas, private debt, private credit, et cetera. 316 00:17:07,340 --> 00:17:12,350 Speaker 1: Has that tolerance for illiquidity changed with you, your circle, 317 00:17:12,490 --> 00:17:13,090 Speaker 1: your clients? 318 00:17:13,850 --> 00:17:17,429 Speaker 3: Yeah, we're really relaxed about liquidity or illiquidity, to be honest. 319 00:17:17,510 --> 00:17:21,320 Speaker 2: So especially when you're dealing with clients with slightly bigger portfolios. 320 00:17:21,720 --> 00:17:25,240 Speaker 3: The reality is if we need that. 321 00:17:24,400 --> 00:17:27,700 Speaker 2: $ 250, 000 out of $ 10 or $ 15 or $ 20 million back 322 00:17:28,119 --> 00:17:30,980 Speaker 2: within a short period of time, then we've done something wrong. 323 00:17:31,020 --> 00:17:33,520 Speaker 2: We've buggered something up in terms of the allocation or 324 00:17:33,560 --> 00:17:37,440 Speaker 2: the knowledge of the client situation, etc. So we are 325 00:17:37,480 --> 00:17:40,810 Speaker 2: big ones for getting money out, getting it invested and 326 00:17:40,850 --> 00:17:43,430 Speaker 2: trying to generate the best return. If we get a 327 00:17:43,490 --> 00:17:46,710 Speaker 2: premium for that illiquidity, then we're all for that. 328 00:17:47,010 --> 00:17:49,850 Speaker 1: So Can you apply that for everybody, Charlie? Do you 329 00:17:49,869 --> 00:17:52,560 Speaker 1: think that's applicable to everybody at every level, whether they 330 00:17:52,580 --> 00:17:53,760 Speaker 1: have 100 grand or a million? 331 00:17:54,700 --> 00:17:57,580 Speaker 2: Look, I think everybody's individual situation is different and what 332 00:17:57,600 --> 00:17:59,860 Speaker 2: the advisor needs to do is work hard to understand 333 00:17:59,900 --> 00:18:01,649 Speaker 2: what the client's needs are. 334 00:18:01,720 --> 00:18:03,400 Speaker 1: I'm not asking you to give advice. I'm just saying 335 00:18:03,580 --> 00:18:07,060 Speaker 1: in a universal way, do you think that's applicable to 336 00:18:07,100 --> 00:18:07,760 Speaker 1: all investors? 337 00:18:08,560 --> 00:18:12,160 Speaker 2: Where there is no requirement for the money in absolute 338 00:18:12,220 --> 00:18:14,430 Speaker 2: terms to get it pulled out and get it spent, 339 00:18:14,550 --> 00:18:17,780 Speaker 2: where it is there to generate good long-term results returns, 340 00:18:18,359 --> 00:18:21,540 Speaker 2: then having a portion of your money illiquid is absolutely 341 00:18:21,660 --> 00:18:24,920 Speaker 2: okay and will help generate better returns over a long 342 00:18:24,980 --> 00:18:28,180 Speaker 2: period of time. I would say on average, we would 343 00:18:28,240 --> 00:18:33,850 Speaker 2: say that probably 25 to 35% of our portfolios are 344 00:18:33,890 --> 00:18:36,810 Speaker 2: going to be somewhat illiquid. And that's the manner in 345 00:18:36,850 --> 00:18:40,950 Speaker 2: which we generate good long-term returns for people. We still 346 00:18:40,990 --> 00:18:43,060 Speaker 2: need to be able to produce enough revenue for them, right? 347 00:18:43,080 --> 00:18:44,660 Speaker 2: We need to make sure that they can buy bread 348 00:18:44,680 --> 00:18:47,080 Speaker 2: and milk and rice and race cars or whatever it 349 00:18:47,119 --> 00:18:49,419 Speaker 2: is that they spend their money on over a period 350 00:18:49,440 --> 00:18:52,350 Speaker 2: of time, if we can generate them a better return 351 00:18:52,490 --> 00:18:55,830 Speaker 2: by having a portion of the money illiquid or locked 352 00:18:55,869 --> 00:18:59,510 Speaker 2: away or off invested in a property or a group 353 00:18:59,550 --> 00:19:02,130 Speaker 2: of assets or what have you, then we'll do that. 354 00:19:02,290 --> 00:19:04,750 Speaker 2: And we will just manage their liquidity needs around the 355 00:19:04,790 --> 00:19:05,910 Speaker 2: rest of the stuff that they've got. 356 00:19:06,550 --> 00:19:14,060 Speaker 1: I suppose most listeners would be familiar with illiquidity through property. 357 00:19:14,750 --> 00:19:17,710 Speaker 1: And maybe it's something of a mental leap to face 358 00:19:17,730 --> 00:19:21,780 Speaker 1: that liquidity in another asset. It's a new challenge for 359 00:19:21,820 --> 00:19:22,340 Speaker 1: many people. 360 00:19:22,920 --> 00:19:23,740 Speaker 3: Yeah, possibly. 361 00:19:24,000 --> 00:19:28,500 Speaker 2: But like I say, if somebody says to you, hey, 362 00:19:28,520 --> 00:19:31,960 Speaker 2: give me your money for three years and I'll deliver 363 00:19:32,000 --> 00:19:36,510 Speaker 2: you back an 8% yield over that three-year period, but 364 00:19:36,530 --> 00:19:37,980 Speaker 2: you can't have the money, you can't have the 100 365 00:19:37,980 --> 00:19:40,870 Speaker 2: grand or you can't have the 250 grand, but I'll 366 00:19:40,890 --> 00:19:43,250 Speaker 2: give you effectively a coupon or a a return on 367 00:19:43,270 --> 00:19:45,919 Speaker 2: your investment of 8% a year. And when I return 368 00:19:45,940 --> 00:19:47,580 Speaker 2: it back to you, we'll hope that the asset's gone 369 00:19:47,640 --> 00:19:49,270 Speaker 2: up in value and we might return back to you 370 00:19:49,310 --> 00:19:52,670 Speaker 2: instead of $ 1. we might return back to you $ 1. 06 371 00:19:51,550 --> 00:19:54,630 Speaker 2: or $ 1. 07 or $ 1. 08 or something like that, which means 372 00:19:54,650 --> 00:19:57,090 Speaker 2: that the client has achieved an 11% return or whatever 373 00:19:57,109 --> 00:20:00,360 Speaker 2: that works out to be over the three-year period. But 374 00:20:00,390 --> 00:20:04,980 Speaker 2: what's happening over that three-year period is every month, 8% 375 00:20:04,980 --> 00:20:07,500 Speaker 2: or the equivalent of 8% is being stuck into their 376 00:20:07,560 --> 00:20:10,250 Speaker 2: bank account. What we care about is the quality of 377 00:20:10,290 --> 00:20:12,810 Speaker 2: the asset that's backing this thing, the quality of the 378 00:20:12,850 --> 00:20:16,290 Speaker 2: manager managing the asset and their ability to make sure 379 00:20:16,310 --> 00:20:18,630 Speaker 2: that the cash keeps flowing into the bank account. Because 380 00:20:18,650 --> 00:20:20,970 Speaker 2: we want the client to live off the cash that's 381 00:20:21,020 --> 00:20:27,520 Speaker 2: flowing into the bank account. If they need that $ 200, 000 382 00:20:25,640 --> 00:20:29,919 Speaker 2: back or that $ 250, 000 back, then we've clearly not understood 383 00:20:29,940 --> 00:20:31,760 Speaker 2: the client's needs and we wouldn't have. 384 00:20:31,680 --> 00:20:32,100 Speaker 3: Put it in. 385 00:20:32,359 --> 00:20:35,250 Speaker 2: So it's really important that we understand client needs, but 386 00:20:35,350 --> 00:20:38,830 Speaker 2: people shouldn't be scared of illiquidity. What do you, is 387 00:20:38,850 --> 00:20:41,149 Speaker 2: this money really invested for 30 years? Well, if it is, 388 00:20:41,190 --> 00:20:42,820 Speaker 2: then you don't need it in a month or two 389 00:20:42,840 --> 00:20:45,300 Speaker 2: months or three months. You need it to produce revenue 390 00:20:45,340 --> 00:20:47,180 Speaker 2: for you and the best possible return. So let's invest 391 00:20:47,220 --> 00:20:47,600 Speaker 2: it that way. 392 00:20:48,260 --> 00:20:50,510 Speaker 1: Okay. That's very good. I haven't had an answer like 393 00:20:50,530 --> 00:20:54,130 Speaker 1: that before. All right. Very good. We'll take a break 394 00:20:54,330 --> 00:21:15,000 Speaker 1: and we'll be back with some of the questions. Hello, 395 00:21:15,060 --> 00:21:18,040 Speaker 1: welcome back to the Australian's Money Puzzle podcast. James Kirby 396 00:21:18,080 --> 00:21:21,369 Speaker 1: here with Charlie Viola, regular on the show, regular on 397 00:21:21,390 --> 00:21:24,510 Speaker 1: the show many times and always good to have him. 398 00:21:24,570 --> 00:21:31,070 Speaker 1: Charlie from Pitcher Partners. OK, question from Luke. Whose concessional 399 00:21:31,109 --> 00:21:36,050 Speaker 1: contribution limit does it add to on contributing money? To 400 00:21:36,109 --> 00:21:40,670 Speaker 1: a spouse's super. I hope everyone understands that. That's when 401 00:21:41,010 --> 00:21:45,280 Speaker 1: a couple, you've put in the max for your concession contribution, 402 00:21:45,720 --> 00:21:49,340 Speaker 1: and maybe your partner hasn't, but there's money there that 403 00:21:49,380 --> 00:21:53,050 Speaker 1: you guys could put in that person's name. Whose concessional 404 00:21:53,109 --> 00:21:55,570 Speaker 1: contribution limit does it add to when contributing to a 405 00:21:55,570 --> 00:21:57,939 Speaker 1: spouse's super? Is there a clear answer on that one? 406 00:21:59,240 --> 00:21:59,880 Speaker 3: Yeah, there is. 407 00:22:00,180 --> 00:22:03,830 Speaker 2: Assuming that what Luke means here is the spouse contribution 408 00:22:03,869 --> 00:22:06,770 Speaker 2: where you get the rebate for making the contribution, then 409 00:22:06,950 --> 00:22:10,600 Speaker 2: it's not considered against either's concessional limit because it's a 410 00:22:10,700 --> 00:22:13,960 Speaker 2: non-concessional contribution that's going in. So it's measured against the 411 00:22:14,060 --> 00:22:16,520 Speaker 2: non-concessional limit for the spouse. 412 00:22:17,290 --> 00:22:17,470 Speaker 1: So. 413 00:22:18,270 --> 00:22:21,209 Speaker 2: If what Luke means though is super splitting, so there 414 00:22:21,250 --> 00:22:24,990 Speaker 2: is a concept of super splitting where it is effectively, 415 00:22:25,010 --> 00:22:28,470 Speaker 2: I get paid by employer, my employer makes contributions for me, 416 00:22:28,550 --> 00:22:30,859 Speaker 2: but I've got lots of money in super, my partner 417 00:22:30,960 --> 00:22:34,800 Speaker 2: or my spouse doesn't have lots of money in superannuation. 418 00:22:35,080 --> 00:22:38,160 Speaker 2: You can split those contributions where 85% of the money 419 00:22:38,200 --> 00:22:43,140 Speaker 2: goes into my spouse's superannuation fund and it's 85% because 420 00:22:43,160 --> 00:22:46,270 Speaker 2: the 15% tax comes out first when you make a 421 00:22:46,310 --> 00:22:50,090 Speaker 2: concessional contribution and That amount is assessed against the spouse's 422 00:22:50,130 --> 00:22:53,449 Speaker 2: concessional limit. And you tend to do that where you 423 00:22:53,490 --> 00:22:55,990 Speaker 2: want to top them up because they're not making the 424 00:22:56,010 --> 00:22:58,910 Speaker 2: maximum concessional contributions or they've got a lot of super 425 00:22:58,950 --> 00:23:00,080 Speaker 2: member balance than what you do. 426 00:23:00,500 --> 00:23:02,060 Speaker 1: It's the limit of the person who gets the money. 427 00:23:02,160 --> 00:23:04,160 Speaker 1: Is that really simplifying it? It's the limit of the 428 00:23:04,180 --> 00:23:04,920 Speaker 1: person who gets the money. 429 00:23:05,440 --> 00:23:05,740 Speaker 3: Correct. 430 00:23:06,000 --> 00:23:09,240 Speaker 1: Okay, terrific. Thank you for that. Bruce, there is a 431 00:23:09,300 --> 00:23:12,250 Speaker 1: discussion in medical circles as to whether it's better to 432 00:23:12,350 --> 00:23:15,070 Speaker 1: use a family trust or a self-managed super fund for 433 00:23:15,130 --> 00:23:19,369 Speaker 1: holding investments, with opinion probably favoring family trusts. As a 434 00:23:19,490 --> 00:23:21,930 Speaker 1: member of the Great Unwashed, I don't know anything about 435 00:23:21,950 --> 00:23:24,290 Speaker 1: family trusts. I was wondering if you could discuss the issue. 436 00:23:24,710 --> 00:23:27,270 Speaker 1: Thank you, Bruce. This is never advice information only. I 437 00:23:28,750 --> 00:23:30,290 Speaker 1: know I have a damn good idea what you're going 438 00:23:30,310 --> 00:23:33,629 Speaker 1: to say here. But in any event, which is better, 439 00:23:33,670 --> 00:23:36,710 Speaker 1: a family trust or an SMSF? I'm guessing an SMSF 440 00:23:36,780 --> 00:23:39,040 Speaker 1: is better for super. But you tell me. 441 00:23:39,600 --> 00:23:42,860 Speaker 2: Yeah. So this of course depends on people's situation, right? 442 00:23:43,020 --> 00:23:46,080 Speaker 2: And both vehicles have their place. As me and everybody 443 00:23:46,140 --> 00:23:49,410 Speaker 2: like me always notes, super is the most tax effective 444 00:23:49,450 --> 00:23:50,270 Speaker 2: structure we have. 445 00:23:50,990 --> 00:23:52,530 Speaker 3: It's also the most inflexible, right? 446 00:23:52,570 --> 00:23:54,990 Speaker 2: What comes with all the tax advantages of contribution limits 447 00:23:55,030 --> 00:23:57,650 Speaker 2: and issues around accessing the capital and that you're needing 448 00:23:57,670 --> 00:24:01,070 Speaker 2: to wait basically until retirement until you get the money. 449 00:24:01,530 --> 00:24:03,869 Speaker 2: But super is always going to be a better than 450 00:24:03,890 --> 00:24:08,260 Speaker 2: a trust for apples for apples kind of tax wise, right? 451 00:24:08,280 --> 00:24:11,250 Speaker 2: So Remembering that a self-managed super fund or super in 452 00:24:11,310 --> 00:24:14,389 Speaker 2: general is just a tax structure. So on the basis 453 00:24:14,410 --> 00:24:16,490 Speaker 2: that if you're investing the exact same way in a 454 00:24:16,530 --> 00:24:19,010 Speaker 2: trust as you are in super, you're always going to 455 00:24:19,050 --> 00:24:21,470 Speaker 2: get a better tax outcome in super. It's the lowest 456 00:24:21,520 --> 00:24:25,200 Speaker 2: tax rate in town, 15% on earnings and 10% on 457 00:24:25,240 --> 00:24:29,500 Speaker 2: capital gains when you're in accumulation and it being tax-free 458 00:24:29,820 --> 00:24:32,200 Speaker 2: when you're in pension phase up to your transfer balance cap, 459 00:24:32,680 --> 00:24:34,780 Speaker 2: then clearly that's going to be a better tax rate 460 00:24:34,840 --> 00:24:38,060 Speaker 2: than putting it somewhere else. A family trust is going 461 00:24:38,080 --> 00:24:40,560 Speaker 2: to be more flexible in terms of accessing your capital, 462 00:24:41,300 --> 00:24:43,200 Speaker 2: but it's clearly not going to be as tax effective. 463 00:24:43,680 --> 00:24:46,800 Speaker 2: For those who don't understand, a family trust is simply 464 00:24:47,000 --> 00:24:50,790 Speaker 2: a flow-through vehicle where investments get made in the family trust. 465 00:24:51,190 --> 00:24:53,990 Speaker 2: The income that gets generated by the investments in there 466 00:24:54,330 --> 00:24:58,010 Speaker 2: have to be distributed to somebody. And a family trust 467 00:24:58,070 --> 00:25:01,210 Speaker 2: is often known as a discretionary trust. The trustee has 468 00:25:01,250 --> 00:25:04,150 Speaker 2: the discretion as to who they pay that income to. 469 00:25:04,550 --> 00:25:07,030 Speaker 2: And that income is often paid to a lower... tax 470 00:25:07,090 --> 00:25:10,840 Speaker 2: rate paying member of your family, or if everybody's on 471 00:25:10,859 --> 00:25:13,760 Speaker 2: the top marginal tax rate or above 30%, you can 472 00:25:13,820 --> 00:25:16,060 Speaker 2: pay it to a company, which is called a beneficiary 473 00:25:16,119 --> 00:25:20,139 Speaker 2: company or a Benco or a bucket company, depending on 474 00:25:20,160 --> 00:25:23,399 Speaker 2: what parlance people use. So in effect, you end up 475 00:25:23,440 --> 00:25:25,100 Speaker 2: with kind of, if you've got lots and lots of money, 476 00:25:25,640 --> 00:25:27,399 Speaker 2: you end up with this sort of scenario where the 477 00:25:27,600 --> 00:25:31,399 Speaker 2: best tax rate that you'll pay is 30%. Whereas in super, 478 00:25:31,570 --> 00:25:35,359 Speaker 2: it's always going to be lower than that. So, and again, Remember, 479 00:25:35,580 --> 00:25:39,300 Speaker 2: put money in super, it's stuck there until you retire, effectively. 480 00:25:39,540 --> 00:25:42,379 Speaker 2: Money in the trust you can get to, but you're 481 00:25:42,400 --> 00:25:46,240 Speaker 2: going to pay more tax. So it'll depend on your situation. 482 00:25:46,609 --> 00:25:49,170 Speaker 1: And would it be fair to say you'd also pay 483 00:25:49,210 --> 00:25:51,230 Speaker 1: more year by year in terms of fees, in terms 484 00:25:51,270 --> 00:25:52,109 Speaker 1: of keeping that rolling? 485 00:25:52,750 --> 00:25:53,850 Speaker 3: In terms of the family trust? 486 00:25:54,510 --> 00:25:57,550 Speaker 1: Yes. Is the family trust dearer to run each year 487 00:25:57,570 --> 00:25:58,710 Speaker 1: than an SMSF, say? 488 00:25:59,290 --> 00:26:00,170 Speaker 3: No, they're about the same. 489 00:26:00,760 --> 00:26:01,480 Speaker 1: Are they? Okay. 490 00:26:01,520 --> 00:26:04,770 Speaker 2: The accounting costs of running a family trust... and running 491 00:26:04,830 --> 00:26:07,050 Speaker 2: a self-managed super fund are going to be very similar. 492 00:26:07,330 --> 00:26:09,830 Speaker 2: But remember, they're two different tax structures and they're used 493 00:26:10,350 --> 00:26:14,350 Speaker 2: for two different purposes. If you have lots of capacity 494 00:26:14,430 --> 00:26:17,020 Speaker 2: to do lots of savings, get as much money into 495 00:26:17,040 --> 00:26:19,240 Speaker 2: super as you can because it's going to be the 496 00:26:19,300 --> 00:26:23,139 Speaker 2: best tax structure available to us. Just be mindful that 497 00:26:23,160 --> 00:26:25,520 Speaker 2: you can't get to that money until you retire. 498 00:26:25,540 --> 00:26:29,200 Speaker 1: Yeah. So there you are. I imagine that is very 499 00:26:29,260 --> 00:26:31,780 Speaker 1: useful to you, Bruce, and thank you for the question. Okay. 500 00:26:32,119 --> 00:26:36,159 Speaker 1: Catherine says... I'm returning to the EU to retire. I 501 00:26:36,440 --> 00:26:39,660 Speaker 1: have a sale agreed on my house and have just 502 00:26:39,720 --> 00:26:44,600 Speaker 1: exchanged contracts. That is, Catherine is selling the Australian house 503 00:26:44,640 --> 00:26:49,510 Speaker 1: and moving to the EU. My super has been dissolved, 504 00:26:50,369 --> 00:26:55,230 Speaker 1: sitting in a bank account. Basically, she wants us to 505 00:26:55,270 --> 00:27:00,389 Speaker 1: recommend a currency site for switching the money and for 506 00:27:00,510 --> 00:27:06,450 Speaker 1: forecast rates. Big issue, Catherine, I know. And I know 507 00:27:06,609 --> 00:27:10,109 Speaker 1: in our family, when on those rare occasions that there 508 00:27:10,130 --> 00:27:15,659 Speaker 1: were substantial amounts of money crossing the world in an 509 00:27:15,760 --> 00:27:18,639 Speaker 1: act of deep conservatism, we went back to the banks 510 00:27:18,900 --> 00:27:21,119 Speaker 1: knowing that they were going to charge an awful lot 511 00:27:21,160 --> 00:27:24,800 Speaker 1: more than other services. Any observations on that one, Charlie? 512 00:27:25,940 --> 00:27:28,080 Speaker 2: Look, I understand why Catherine would want to be assured 513 00:27:28,100 --> 00:27:31,160 Speaker 2: of her exchange rate and it's probably a big lump 514 00:27:31,200 --> 00:27:33,060 Speaker 2: of money and it's maybe the last big lump of 515 00:27:33,100 --> 00:27:36,100 Speaker 2: money that she'll ever earn. Very hard for us to 516 00:27:36,160 --> 00:27:39,580 Speaker 2: recommend a provider. We're agnostic and we like to tell 517 00:27:39,600 --> 00:27:42,659 Speaker 2: the market that we are completely agnostic in terms of 518 00:27:42,859 --> 00:27:44,980 Speaker 2: product and what have you. There are a number of 519 00:27:45,020 --> 00:27:47,400 Speaker 2: good providers out there. Just find the one that's going 520 00:27:47,460 --> 00:27:50,100 Speaker 2: to not charge a big spread and not charge a 521 00:27:50,160 --> 00:27:51,159 Speaker 2: big fee. 522 00:27:51,359 --> 00:27:53,760 Speaker 1: Would you be prepared to name, say, two popular ones 523 00:27:53,780 --> 00:27:54,859 Speaker 1: without recommending them? 524 00:27:55,609 --> 00:27:59,070 Speaker 2: Look, I often think going and talking to your bank 525 00:27:59,330 --> 00:28:01,210 Speaker 2: is not the worst idea in the world. 526 00:28:01,250 --> 00:28:01,859 Speaker 1: It's secure. 527 00:28:01,890 --> 00:28:04,699 Speaker 2: It gets done quite quickly. It goes through your accounts. 528 00:28:04,720 --> 00:28:06,920 Speaker 2: There's no need to set up others. They're very good 529 00:28:06,960 --> 00:28:10,740 Speaker 2: in terms of the regulatory stuff. I don't think the 530 00:28:10,780 --> 00:28:13,500 Speaker 2: spread is as big as what you would think it 531 00:28:13,540 --> 00:28:16,640 Speaker 2: would be. And then the other sort of really popular one, 532 00:28:16,660 --> 00:28:19,680 Speaker 2: and certainly the one that we use for clients, is OFX. 533 00:28:20,119 --> 00:28:22,680 Speaker 2: They do a good job. They make it really quite simple. 534 00:28:23,520 --> 00:28:27,639 Speaker 2: But just go and review the rates and see which one. 535 00:28:27,980 --> 00:28:31,540 Speaker 1: She was asking about forecast rates. I presume one forecast 536 00:28:31,619 --> 00:28:34,200 Speaker 1: rate is as good as another, regardless of who's putting 537 00:28:34,240 --> 00:28:36,040 Speaker 1: it together. Yeah. 538 00:28:36,140 --> 00:28:38,620 Speaker 2: Like I said, it's the spread that you really want 539 00:28:38,640 --> 00:28:42,170 Speaker 2: to be mindful of and the cost associated with doing 540 00:28:42,230 --> 00:28:44,210 Speaker 2: it in terms of which way the currency is going 541 00:28:44,230 --> 00:28:44,350 Speaker 2: to go. 542 00:28:45,440 --> 00:28:48,020 Speaker 3: There's no crystal ball here. It's very hard. 543 00:28:48,120 --> 00:28:51,620 Speaker 1: No one knows. No one knows, Catherine. Nobody knows, regardless 544 00:28:51,640 --> 00:28:52,960 Speaker 1: of how much they're paid to forecast. 545 00:28:53,380 --> 00:28:53,740 Speaker 3: All right. 546 00:28:54,210 --> 00:28:56,810 Speaker 1: There was a question from Jenny about this sort of thing. 547 00:28:56,930 --> 00:29:00,470 Speaker 1: This was more complicated. It was about an estate in 548 00:29:00,530 --> 00:29:04,170 Speaker 1: England and farms and a very interesting question. I'm afraid, Jenny, 549 00:29:04,210 --> 00:29:06,550 Speaker 1: it's just that you've got to– I'm afraid on this 550 00:29:06,610 --> 00:29:09,190 Speaker 1: occasion we would refer you off to a financial advisor 551 00:29:09,340 --> 00:29:11,540 Speaker 1: and we would not go into that one. It's just 552 00:29:12,000 --> 00:29:16,600 Speaker 1: too particular. OK, for the show and its purposes. OK, 553 00:29:16,630 --> 00:29:18,620 Speaker 1: final question from Ben. This is a juicy one. The 554 00:29:18,660 --> 00:29:22,880 Speaker 1: background here, Charlie, was that we were working on the assumption, perhaps, 555 00:29:23,340 --> 00:29:26,060 Speaker 1: on the show that if Trump gets in, and a 556 00:29:26,100 --> 00:29:27,880 Speaker 1: few weeks ago it seemed more likely that he would 557 00:29:27,920 --> 00:29:32,550 Speaker 1: get in, but if he does get in, he's got 558 00:29:32,590 --> 00:29:38,250 Speaker 1: this clear bias towards fossil fuels and oil and coal, etc., 559 00:29:38,430 --> 00:29:41,220 Speaker 1: and is not remotely responsible. seem not to be remotely 560 00:29:41,300 --> 00:29:45,760 Speaker 1: enthusiastic about alternative energy, certainly subsidizing it or the whole 561 00:29:45,860 --> 00:29:49,020 Speaker 1: ESG movement. And that's pretty clear from his records so far. 562 00:29:49,460 --> 00:29:51,880 Speaker 1: So we were making the assumption that it would be 563 00:29:51,900 --> 00:29:53,940 Speaker 1: good that oil would get a good run. And so 564 00:29:53,960 --> 00:29:56,860 Speaker 1: would fossil fuels if he gets in. This correspondent, Ben, 565 00:29:56,880 --> 00:29:59,900 Speaker 1: says he got it the wrong way around. and that 566 00:30:00,120 --> 00:30:04,020 Speaker 1: if he gets in, there'll be basically more oil drilled, 567 00:30:04,280 --> 00:30:06,830 Speaker 1: because they say, what's the phrase? One of the many 568 00:30:06,920 --> 00:30:10,630 Speaker 1: chants at Trump rallies is, dig, baby, dig. He says, well, 569 00:30:10,670 --> 00:30:13,790 Speaker 1: if they dig more, the price will go down. What 570 00:30:13,810 --> 00:30:17,370 Speaker 1: do you think about the whole political risk that is 571 00:30:17,590 --> 00:30:21,130 Speaker 1: clearly on the table here on the US and investing? 572 00:30:21,730 --> 00:30:23,840 Speaker 2: Yeah, again, I I think I made the point before, 573 00:30:23,860 --> 00:30:25,820 Speaker 2: I didn't realize we're on a political show here, James. 574 00:30:26,320 --> 00:30:30,120 Speaker 1: We're not, Charlie, but we live in the real world. Yeah. 575 00:30:30,400 --> 00:30:33,900 Speaker 2: Look, I must confess that I don't wonderfully know. What 576 00:30:33,940 --> 00:30:37,230 Speaker 2: I do know is Trump is all about free market, right? 577 00:30:37,270 --> 00:30:39,010 Speaker 2: He is a capitalist at heart. 578 00:30:39,370 --> 00:30:42,290 Speaker 3: He's about free market. He's about open trading. 579 00:30:42,790 --> 00:30:45,350 Speaker 2: And he is about creation of kind of really good 580 00:30:45,410 --> 00:30:48,410 Speaker 2: quality supply chain. So say what you like about all 581 00:30:48,430 --> 00:30:50,510 Speaker 2: of the other antics and whatever else, and I'm certainly 582 00:30:50,550 --> 00:30:53,020 Speaker 2: not sitting here suggesting I'm in any way a Trump supporter, 583 00:30:53,340 --> 00:30:56,720 Speaker 2: but we saw in his first presidency that he was 584 00:30:56,760 --> 00:30:59,140 Speaker 2: a big one for saying to everyone and everything, let's 585 00:30:59,200 --> 00:31:01,780 Speaker 2: open the doors, let's pour fuel on the fire and 586 00:31:01,800 --> 00:31:04,060 Speaker 2: let's get everybody out there and let's get it growing. 587 00:31:04,380 --> 00:31:07,860 Speaker 2: His view around fossil fuels is exactly the same. It's 588 00:31:07,920 --> 00:31:10,240 Speaker 2: somewhat obviously fuelled by the fact that's where lots of 589 00:31:10,280 --> 00:31:13,920 Speaker 2: his supporters come from and lots of his donations come from, etc., 590 00:31:14,480 --> 00:31:16,830 Speaker 2: I think the comment around, oh, look, if he goes 591 00:31:16,870 --> 00:31:19,710 Speaker 2: and solves the Russia-Ukraine conflict and Russian oil kind of 592 00:31:19,750 --> 00:31:22,130 Speaker 2: ends back on the market and we end up with 593 00:31:22,150 --> 00:31:25,890 Speaker 2: this kind of additional kind of supply, I think is 594 00:31:25,970 --> 00:31:30,900 Speaker 2: rhetoric more than anything. I think the discussion around let's 595 00:31:30,940 --> 00:31:34,200 Speaker 2: drill more holes and make more oil is very much 596 00:31:34,240 --> 00:31:37,910 Speaker 2: a discussion around around his supporter base in terms of 597 00:31:37,970 --> 00:31:40,710 Speaker 2: that kind of belt around the kind of wealthy sort 598 00:31:40,730 --> 00:31:43,890 Speaker 2: of Texan oil kind of barons and what have you 599 00:31:43,950 --> 00:31:48,590 Speaker 2: around creating additional sort of activity. I don't think that 600 00:31:48,870 --> 00:31:52,590 Speaker 2: US fracking oil, which is the lowest quality stuff, will 601 00:31:52,630 --> 00:31:55,950 Speaker 2: have the OCD change oil prices particularly. 602 00:31:56,010 --> 00:31:57,790 Speaker 3: I don't think that stuff scratches the surface. 603 00:31:58,210 --> 00:32:00,350 Speaker 1: They're not worried on the board of Aramco? 604 00:32:01,050 --> 00:32:01,890 Speaker 3: No, I don't think so. 605 00:32:01,910 --> 00:32:04,490 Speaker 2: Look, I think in reality it's going to come from 606 00:32:05,020 --> 00:32:09,020 Speaker 2: the interrelation between the middle east and some of the 607 00:32:09,060 --> 00:32:10,820 Speaker 2: russian stuff and i think that's what's going to drive 608 00:32:10,940 --> 00:32:13,520 Speaker 2: oil prices trump can say what he likes to get 609 00:32:13,560 --> 00:32:15,700 Speaker 2: as many votes as he can i don't think it's 610 00:32:15,760 --> 00:32:19,230 Speaker 2: changing the way oil prices are going to be determined. 611 00:32:20,090 --> 00:32:23,430 Speaker 1: Okay very interesting well thank you for even tackling that 612 00:32:23,490 --> 00:32:26,690 Speaker 1: charlie appreciate you i appreciate your gumption and even going 613 00:32:26,750 --> 00:32:29,310 Speaker 1: in there okay hey terrific great to have you on 614 00:32:29,330 --> 00:32:31,060 Speaker 1: the show as always lovely to talk to you again 615 00:32:31,770 --> 00:32:32,070 Speaker 1: Thank you. 616 00:32:32,090 --> 00:32:32,650 Speaker 3: Appreciate it. 617 00:32:32,790 --> 00:32:36,410 Speaker 1: That's Charlie Viola, top advisor on the upper ranks of 618 00:32:36,550 --> 00:32:41,730 Speaker 1: our top, soon to be 150 advisors list from Pitcher Partners. 619 00:32:41,840 --> 00:32:45,150 Speaker 1: Lovely to talk to him. As always, keep those emails rolling. 620 00:32:45,730 --> 00:32:48,560 Speaker 1: And we would love if you would mention the show 621 00:32:48,620 --> 00:32:51,360 Speaker 1: to one other person. A little campaign we're running at 622 00:32:51,400 --> 00:32:53,760 Speaker 1: the moment and seems to be working. So thank you 623 00:32:53,800 --> 00:32:59,460 Speaker 1: very much. The emails, themoneypuzzle at theaustralian.com.au. Today's show was 624 00:32:59,500 --> 00:33:02,120 Speaker 1: produced by DSM Englund. Talk to you soon.