1 00:00:05,600 --> 00:00:08,320 Speaker 1: Welcome to the Fear and Greed Business Interview. I'm Sean Aylmer. 2 00:00:08,560 --> 00:00:11,200 Speaker 1: Listeners to this podcast would know I'm a very big 3 00:00:11,280 --> 00:00:14,920 Speaker 1: fan of financial advisors. Every day we're insisting that listeners 4 00:00:15,080 --> 00:00:18,200 Speaker 1: get professional advice to help them make good investment decisions. 5 00:00:18,760 --> 00:00:22,279 Speaker 1: That's why I love research like this that calculates the 6 00:00:22,320 --> 00:00:25,480 Speaker 1: actual value of an advisor in Australia. It's an annual 7 00:00:25,560 --> 00:00:29,480 Speaker 1: report released by Russell Investments, a leading global investment management 8 00:00:29,520 --> 00:00:32,559 Speaker 1: and solutions partner, which is a great supporter of this podcast. 9 00:00:32,680 --> 00:00:36,040 Speaker 1: Neil Rogan is the Managing Director ahead of Distribution at 10 00:00:36,120 --> 00:00:38,520 Speaker 1: Russell Investments. Neil, Welcome to Fear and Greed. 11 00:00:38,920 --> 00:00:39,640 Speaker 2: Thank you, Sean. 12 00:00:39,960 --> 00:00:43,560 Speaker 1: The Value of an Advisor report's been around for seven years. 13 00:00:44,000 --> 00:00:47,519 Speaker 1: Why does Russell Investments produce it now? 14 00:00:47,680 --> 00:00:50,760 Speaker 2: Men? Seawan, We've been doing this, as you said, for 15 00:00:50,920 --> 00:00:56,160 Speaker 2: seven years and really emanated from us. We've been doing 16 00:00:56,600 --> 00:01:01,040 Speaker 2: globally for around a decade, and then during around twenty 17 00:01:01,080 --> 00:01:04,679 Speaker 2: eighteen in Australia where a lot of advisors had been 18 00:01:05,800 --> 00:01:10,120 Speaker 2: almost beaten up, we wanted something that showed our support 19 00:01:10,240 --> 00:01:15,640 Speaker 2: not only to advisers but also to consumers around both 20 00:01:15,720 --> 00:01:20,480 Speaker 2: qualifying and quantifying the value advisors provided, and also to 21 00:01:20,600 --> 00:01:24,880 Speaker 2: provide a toolkit for advisers to help them build their 22 00:01:24,920 --> 00:01:29,000 Speaker 2: confidence in what they were providing, particularly at the time 23 00:01:29,240 --> 00:01:32,000 Speaker 2: when the industry was I want to say suffering, but 24 00:01:32,200 --> 00:01:35,080 Speaker 2: was going through enormous change. And now we're out the 25 00:01:35,120 --> 00:01:37,920 Speaker 2: other side of that. A lot of advisors and their 26 00:01:37,959 --> 00:01:43,440 Speaker 2: clients really are resonating with this report and clearly understand 27 00:01:43,959 --> 00:01:47,400 Speaker 2: a lot of value then advisors providing to them. 28 00:01:47,880 --> 00:01:49,840 Speaker 1: Yeah, I think that's really important. What I like about 29 00:01:49,880 --> 00:01:52,280 Speaker 1: the report. I understand why it's good for a person 30 00:01:52,360 --> 00:01:54,800 Speaker 1: like me, but I also see the benefits for a 31 00:01:54,880 --> 00:01:59,000 Speaker 1: financial advisor. The report found the total value of an 32 00:01:59,000 --> 00:02:03,400 Speaker 1: advisor in Australia is approximately five point seven percent. Now 33 00:02:03,400 --> 00:02:07,360 Speaker 1: that's just a number. What does it mean. I mean, 34 00:02:07,360 --> 00:02:09,520 Speaker 1: we're not actually talking about investment routiness here, We're talking 35 00:02:09,560 --> 00:02:10,680 Speaker 1: about something totally different. 36 00:02:11,120 --> 00:02:13,160 Speaker 2: Yeah, I mean, an advice is going to help you 37 00:02:13,320 --> 00:02:17,120 Speaker 2: with a whole range of things, ranging from your asset 38 00:02:17,160 --> 00:02:23,400 Speaker 2: allocation all the way through to identifying opportunities around tax 39 00:02:23,480 --> 00:02:28,120 Speaker 2: and tax effective investing. And what this report demonstrates is 40 00:02:28,160 --> 00:02:32,760 Speaker 2: that if you add acid allocation, managing some of the 41 00:02:32,840 --> 00:02:36,880 Speaker 2: behaviors helping you manage choices and trade offs and really 42 00:02:36,960 --> 00:02:41,560 Speaker 2: positioning their expertise and tax planning advice that that's the 43 00:02:41,680 --> 00:02:45,560 Speaker 2: five point seven percent in addition probably to the investment 44 00:02:45,639 --> 00:02:49,760 Speaker 2: return that the asset your acid allocation that matches your 45 00:02:49,840 --> 00:02:53,840 Speaker 2: risk profile is going to give you. But also in 46 00:02:53,840 --> 00:02:56,680 Speaker 2: addition to that, there may be some individuals where some 47 00:02:56,760 --> 00:03:00,440 Speaker 2: of these elements may be of a higher value to 48 00:03:01,080 --> 00:03:03,720 Speaker 2: some individuals depending on their circumstance. 49 00:03:04,400 --> 00:03:06,880 Speaker 1: So let's just break down some of those elements. It's 50 00:03:06,919 --> 00:03:10,200 Speaker 1: A plus B plus C plus E plus t A. 51 00:03:10,400 --> 00:03:13,480 Speaker 1: Starting with asset allocation, run I mean, just quickly run 52 00:03:13,560 --> 00:03:14,399 Speaker 1: us through those. 53 00:03:14,440 --> 00:03:19,480 Speaker 2: Yep, so asset allocation. Really we find that close to 54 00:03:19,520 --> 00:03:23,120 Speaker 2: sixty two percent of Australians are in their default superannuation 55 00:03:23,360 --> 00:03:28,840 Speaker 2: plan and often that default doesn't match their true risk profile. 56 00:03:29,000 --> 00:03:32,440 Speaker 2: So sitting down with an advisor or a professional who 57 00:03:32,440 --> 00:03:36,480 Speaker 2: can step them through what their true risk profile is. 58 00:03:36,560 --> 00:03:40,160 Speaker 2: But in addition to that, it's also maybe now we're 59 00:03:40,200 --> 00:03:43,040 Speaker 2: in a state of having a range of sustainable funds 60 00:03:43,040 --> 00:03:46,680 Speaker 2: also aligning maybe to their values as well, so either 61 00:03:47,080 --> 00:03:49,960 Speaker 2: also you know, so it's risk return as well as 62 00:03:50,000 --> 00:03:53,640 Speaker 2: potential values now and so really sitting down with a 63 00:03:53,640 --> 00:03:57,520 Speaker 2: professional going through that, and not only does it give 64 00:03:58,200 --> 00:04:01,640 Speaker 2: the investor the investment that they're looking for, but probably 65 00:04:01,640 --> 00:04:06,120 Speaker 2: also provides them with a lot more confidence around understanding 66 00:04:06,160 --> 00:04:09,000 Speaker 2: what they're investing in and ensuring that's a line to 67 00:04:09,080 --> 00:04:10,760 Speaker 2: where they want to go with their future. 68 00:04:11,360 --> 00:04:13,960 Speaker 1: Okay, so B which is behavioral coaching, which is something 69 00:04:13,960 --> 00:04:15,680 Speaker 1: that you probably don't think a lot about, but it's 70 00:04:15,800 --> 00:04:16,680 Speaker 1: really important. 71 00:04:16,960 --> 00:04:19,320 Speaker 2: Oh, behavioral coaching, I would say is one of the 72 00:04:19,360 --> 00:04:23,480 Speaker 2: most important. So, behavioral coaching where value added around three 73 00:04:23,520 --> 00:04:27,000 Speaker 2: point three percent. And really the role of an advisor 74 00:04:27,080 --> 00:04:31,360 Speaker 2: here is to ensure investors are invested during the market, 75 00:04:32,480 --> 00:04:37,240 Speaker 2: stay invested in during the market downturns, and also during 76 00:04:37,240 --> 00:04:40,520 Speaker 2: the upside as well, and that they're staying the course 77 00:04:41,000 --> 00:04:44,640 Speaker 2: and in the report and also just more broadly, we 78 00:04:44,720 --> 00:04:48,760 Speaker 2: give the example of an individual who went to cash 79 00:04:48,800 --> 00:04:52,120 Speaker 2: in March of twenty twenty. The value of that cash 80 00:04:52,160 --> 00:04:54,400 Speaker 2: if that stayed in cash today, If you had one 81 00:04:54,480 --> 00:04:58,160 Speaker 2: hundred dollars stayed in cash from March twenty twenty to 82 00:04:58,920 --> 00:05:01,600 Speaker 2: pretty much today, value of that cash would be worth 83 00:05:01,640 --> 00:05:06,040 Speaker 2: around seventy five dollars. Versus staying invested, it'd be upwuts 84 00:05:06,040 --> 00:05:09,160 Speaker 2: of around one hundred and twenty four dollars. So you 85 00:05:09,520 --> 00:05:13,839 Speaker 2: see those kinds of examples, and I know that you 86 00:05:13,839 --> 00:05:17,159 Speaker 2: know it's about time in the market rather than trying 87 00:05:17,240 --> 00:05:20,599 Speaker 2: to time the market. And I'm sure you've hadn't You've 88 00:05:20,640 --> 00:05:23,440 Speaker 2: heard from many clients to say, well, I'm going to 89 00:05:23,920 --> 00:05:26,760 Speaker 2: I'm going to go to cash and I'm going to 90 00:05:26,839 --> 00:05:30,560 Speaker 2: invest my money back in the market when and it's 91 00:05:30,560 --> 00:05:35,040 Speaker 2: always when you know, Donald Trump or whatever gets elected. 92 00:05:35,120 --> 00:05:38,839 Speaker 2: It'll be, and then it'll be I'll invest that after Christmas, 93 00:05:38,880 --> 00:05:42,240 Speaker 2: and then it'll be I'll wait till the financial year. 94 00:05:43,120 --> 00:05:44,280 Speaker 1: Suddenly you're out of the market. 95 00:05:44,480 --> 00:05:47,800 Speaker 2: Yeah, exactly. And we've done some research about missing the 96 00:05:47,800 --> 00:05:50,600 Speaker 2: best forty days of the market. So over a ten 97 00:05:50,680 --> 00:05:53,640 Speaker 2: year period, you miss the best forty days of the market, 98 00:05:54,120 --> 00:05:57,000 Speaker 2: you're losing thirty two percent of the value of your 99 00:05:57,040 --> 00:06:00,680 Speaker 2: money versus staying invested where you're upwards of one hundred 100 00:06:00,680 --> 00:06:01,800 Speaker 2: and thirteen percent. 101 00:06:02,600 --> 00:06:06,200 Speaker 1: So okay, so that's a plus B plus C. C's 102 00:06:06,200 --> 00:06:07,600 Speaker 1: about choices and trade offs. 103 00:06:08,200 --> 00:06:11,680 Speaker 2: Oh yeah, choices and trade off is really interesting. And 104 00:06:11,760 --> 00:06:15,119 Speaker 2: so if you look at various life stages of people, 105 00:06:15,160 --> 00:06:17,960 Speaker 2: I'll use myself as an example. You know, I've got 106 00:06:18,000 --> 00:06:21,880 Speaker 2: two young boys, a lovely wife, those kinds of things. 107 00:06:22,120 --> 00:06:24,520 Speaker 2: And you know, I'm at the stage where I've got 108 00:06:24,600 --> 00:06:28,919 Speaker 2: to understand, you know, the costs around education, and so 109 00:06:29,640 --> 00:06:32,919 Speaker 2: as much as you know, for the cost of educating 110 00:06:33,520 --> 00:06:38,840 Speaker 2: two boys in Sydney at a reasonably decent school, private. 111 00:06:38,520 --> 00:06:42,240 Speaker 1: School, expensive, Neil expensive, I think is the answer that 112 00:06:42,279 --> 00:06:43,000 Speaker 1: there goes. 113 00:06:42,800 --> 00:06:49,080 Speaker 2: The annual European holidays short follow week the sun. So 114 00:06:49,279 --> 00:06:51,520 Speaker 2: that's a choice in a trade off. You know, my 115 00:06:51,640 --> 00:06:56,760 Speaker 2: wife and I've made to educate our children. So choices 116 00:06:56,800 --> 00:07:00,920 Speaker 2: and trade offs become really important because there now there's 117 00:07:00,960 --> 00:07:05,480 Speaker 2: now a decade where we're foregoing these things, maybe a holiday, 118 00:07:05,800 --> 00:07:11,520 Speaker 2: new car, renovations to the HUD for the price of education. 119 00:07:12,520 --> 00:07:17,360 Speaker 2: And so sitting down with an advisor who you trust 120 00:07:17,440 --> 00:07:21,280 Speaker 2: to can step you through not only the choices, these 121 00:07:21,400 --> 00:07:24,720 Speaker 2: types of choices, but also the trade offs and maybe 122 00:07:24,840 --> 00:07:28,840 Speaker 2: deferring things for a later period of time. The value 123 00:07:28,840 --> 00:07:32,200 Speaker 2: of that can be variable, and so in the report 124 00:07:32,240 --> 00:07:35,200 Speaker 2: we've rated that is variable, and if I look at myself, 125 00:07:35,240 --> 00:07:38,240 Speaker 2: you know we're deferring these things for around a decade. 126 00:07:38,880 --> 00:07:43,760 Speaker 1: Stay with me, Neil, we'll be back in a minute. 127 00:07:48,920 --> 00:07:52,040 Speaker 1: I'm speaking to Neil Rogan managing director ahead of distribution 128 00:07:52,160 --> 00:07:56,000 Speaker 1: at Russell Investments. Okay, so A plus B plus C 129 00:07:56,120 --> 00:08:00,800 Speaker 1: plus E E being expertise and that I think is 130 00:08:00,840 --> 00:08:03,880 Speaker 1: where financial planners and financial advisors really come into their own. 131 00:08:04,120 --> 00:08:07,520 Speaker 2: Oh yes, this, you know, we rate is priceless. And 132 00:08:07,560 --> 00:08:11,400 Speaker 2: that's because you know, the financial advisor acts as you know, 133 00:08:11,520 --> 00:08:14,960 Speaker 2: a guide, a guru, and a gladiator. And you know, 134 00:08:15,000 --> 00:08:17,760 Speaker 2: if I start with gladiator, be fair to say that 135 00:08:18,160 --> 00:08:21,920 Speaker 2: most grandparents love their grandchildren more than their children. And 136 00:08:22,040 --> 00:08:28,240 Speaker 2: so as the gladiator, how does the financial advisor structure 137 00:08:28,600 --> 00:08:31,640 Speaker 2: assets and their state planning so that you know, the 138 00:08:31,720 --> 00:08:34,480 Speaker 2: right funds go into the right hands at the right time, 139 00:08:34,600 --> 00:08:38,480 Speaker 2: particularly you know, in that situation. And also how do 140 00:08:38,559 --> 00:08:42,520 Speaker 2: they have asset protection at that age where we see 141 00:08:42,800 --> 00:08:47,880 Speaker 2: increasing incidents of elder abuse. You look at the guru 142 00:08:48,000 --> 00:08:52,000 Speaker 2: side of things. Financial advisors hold a lot of information 143 00:08:52,760 --> 00:08:55,760 Speaker 2: in their day to day head that they've accumulated through 144 00:08:55,840 --> 00:08:59,240 Speaker 2: talking to many, many clients over many years, and even 145 00:08:59,280 --> 00:09:02,640 Speaker 2: younger advisor is with the training that they have and 146 00:09:02,679 --> 00:09:08,880 Speaker 2: a lot of the information they have around superannuation, contributions, insurances, 147 00:09:10,280 --> 00:09:14,680 Speaker 2: asset allocation, all these things are almost seen as guru moments. 148 00:09:14,720 --> 00:09:18,120 Speaker 2: For clients in terms of information that they wouldn't readily 149 00:09:18,600 --> 00:09:23,040 Speaker 2: have access to. And so the advisor in many cases 150 00:09:23,160 --> 00:09:26,120 Speaker 2: is a guru with the kind of information they can provide. 151 00:09:26,440 --> 00:09:29,080 Speaker 2: And then finally the guide. You know, if you've got 152 00:09:29,080 --> 00:09:32,200 Speaker 2: a goal, how you get guided to achieving that goal. 153 00:09:32,440 --> 00:09:35,040 Speaker 2: As I said in our case, it's about educating our 154 00:09:35,120 --> 00:09:38,960 Speaker 2: children and how we achieve that goal. And then I 155 00:09:39,000 --> 00:09:40,520 Speaker 2: can follow the sun short. 156 00:09:40,840 --> 00:09:43,520 Speaker 1: Then you can maybe a little while. Yet final one 157 00:09:43,840 --> 00:09:46,960 Speaker 1: is T A plus B plus C plus E plus 158 00:09:47,240 --> 00:09:51,160 Speaker 1: T not surprising. Tax heavy planning, yep. 159 00:09:51,679 --> 00:09:55,160 Speaker 2: As we know most Australians don't like paying more tax 160 00:09:55,200 --> 00:09:58,959 Speaker 2: than what they should. I think there's very wealthy Australian 161 00:09:59,000 --> 00:10:03,559 Speaker 2: who wants one's a champion that on behalf of many Australians. 162 00:10:04,040 --> 00:10:07,600 Speaker 2: They did not long with us. But tax savvy planning 163 00:10:07,679 --> 00:10:10,840 Speaker 2: is really important. It starts at the kind of underlying 164 00:10:10,880 --> 00:10:14,400 Speaker 2: investments you have that your advisor puts you in all 165 00:10:14,440 --> 00:10:19,880 Speaker 2: the way through to being able to access certain tax benefits. 166 00:10:19,960 --> 00:10:24,960 Speaker 2: You know, the elderly clients or elderly investors is maybe 167 00:10:25,000 --> 00:10:29,200 Speaker 2: accessing the pharmaceutical Benefit Scheme and those kinds of things 168 00:10:29,240 --> 00:10:32,840 Speaker 2: for those in as young families it's around getting the 169 00:10:32,960 --> 00:10:37,320 Speaker 2: childcare rebates, but also understanding the opportunities that sit around 170 00:10:37,360 --> 00:10:40,240 Speaker 2: sealary sacrifice and those kinds of things. The type of 171 00:10:40,360 --> 00:10:44,520 Speaker 2: tax savings by salary sacrificing, even just a little bit 172 00:10:44,600 --> 00:10:47,559 Speaker 2: if you're on a median income into superannuation can make 173 00:10:47,559 --> 00:10:50,439 Speaker 2: a big difference over a decade. 174 00:10:50,920 --> 00:10:53,200 Speaker 1: So A plus B plus C plus E plus T. 175 00:10:53,280 --> 00:10:56,079 Speaker 1: You've been through them all? Do all advisors offer all 176 00:10:56,120 --> 00:10:57,000 Speaker 1: of them? 177 00:10:57,640 --> 00:11:01,480 Speaker 2: Advisors may offer all of these things through the lifetime 178 00:11:01,520 --> 00:11:04,520 Speaker 2: of the client, and they may focus on different elements 179 00:11:04,520 --> 00:11:07,440 Speaker 2: of these at different points of a client's life cycle. 180 00:11:08,000 --> 00:11:11,520 Speaker 2: So you know, depending on where you are as an 181 00:11:11,559 --> 00:11:16,599 Speaker 2: investor or as a potential client of the financial advisor, 182 00:11:17,280 --> 00:11:19,560 Speaker 2: your advisor may cover all of these maybe in the 183 00:11:19,600 --> 00:11:22,959 Speaker 2: initial meeting, and that focus on particular ones at different 184 00:11:22,960 --> 00:11:27,520 Speaker 2: points in times. But in the main, what matters most 185 00:11:27,640 --> 00:11:30,200 Speaker 2: is that an advisor is likely to put you in 186 00:11:30,240 --> 00:11:33,000 Speaker 2: a better position than where you are today over a 187 00:11:33,040 --> 00:11:33,920 Speaker 2: period of time. 188 00:11:34,400 --> 00:11:36,920 Speaker 1: Now, thank you for talking to Fear and Greed Pleasure. 189 00:11:37,480 --> 00:11:41,400 Speaker 1: That was Neil Reagan, Managing directorhead of Distribution at Russell Investments, 190 00:11:41,440 --> 00:11:44,240 Speaker 1: which is a great supporter of this podcast. This is 191 00:11:44,280 --> 00:11:46,720 Speaker 1: the Fear and Greed, a business interview. Join us every 192 00:11:46,720 --> 00:11:48,880 Speaker 1: morning for the full episode of Fear and Greed, business 193 00:11:48,920 --> 00:11:51,640 Speaker 1: news for people who make their own decisions. I'm chanelma 194 00:11:51,960 --> 00:11:52,480 Speaker 1: Enjoy your day.