Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirby, the Wealth Edit shor at the Australian. Welcome
Speaker 1: aboard everybody. I wanted to talk to you today. I
Speaker 1: want to step outside the news cycle that you like
Speaker 1: and I want to look at something that I think
Speaker 1: is pertinent to every single listener to this show, because
Speaker 1: you're listening to this show for information and observations. And
Speaker 1: I have a lot of financial advisors on the show,
Speaker 1: and I imagine there's no one on this show, or
Speaker 1: no one in the audience who would not benefit from
Speaker 1: good financial advice. Now, the reality of it is that
Speaker 1: it's actually, first of all, just sheer mathematics. There used
Speaker 1: to be thirty thousand advisors in Australia and the other's
Speaker 1: fifteen thousand, right, so it's twice as hour as it
Speaker 1: used to be to find the one. Secondly, despite great
Speaker 1: efforts on the professional side, they have a mixed reputation
Speaker 1: still and that will always be the case, okay, because
Speaker 1: it's it's very hard to get it right and every
Speaker 1: advisor is different. And then on top of that, on
Speaker 1: top of that, there is as an ugly word by furcasion,
Speaker 1: all right, but there's a split going on in advice.
Speaker 1: There was always the split in advice. Very top advisor
Speaker 1: dealt with the wealthiest people, but that is becoming severe
Speaker 1: now and we're finding that it is harder to get
Speaker 1: an advisor, and it's particularly hard to get an advisor
Speaker 1: if you're not a multimillionaire. And I mean multimillionaire. That
Speaker 1: means you have a million or so to spend. I
Speaker 1: don't mean your house is worth a million. I mean
Speaker 1: you have a million in the bank, ready to go
Speaker 1: in any direction. So I wanted to talk to someone
Speaker 1: who really has an overview on this, who who does
Speaker 1: work at the top of the market, but also has
Speaker 1: a helicopter view, if you like, on the whole scene.
Speaker 1: It's someone I've had on the show before. She's terrific
Speaker 1: to talk to. It's Jackie Clark. How are you, Jackie?
Speaker 2: Great giants, wonderful to be back today.
Speaker 1: Great to have you on board. We haven't talked for
Speaker 1: a while, but one of the things that's happened, I
Speaker 1: think since we talked last, is this issue about the
Speaker 1: role of an advisor, and there's been some big changes
Speaker 1: and one of the things that prompted this particular show,
Speaker 1: And the topic of this show is that I had
Speaker 1: come upon something a few months ago which seemed innocuous
Speaker 1: in and of itself, and this was two advisors. It
Speaker 1: was an industry note, and it was the industry note said, hey, guys,
Speaker 1: the average advisor in Australia, they've dropped the number of
Speaker 1: clients they have from one hundred and twenty per person
Speaker 1: to about ninety nine. And it struck me, Hey, hang
Speaker 1: on a second. That means about one in six clients
Speaker 1: have been dropped, have been dropped by their advisor. And
Speaker 1: I did some work on it, and it did get
Speaker 1: quite a lot of attension because people were already aware
Speaker 1: that the advisor population has been halved, if you like.
Speaker 1: And then on top of that, those who are left
Speaker 1: are slicing their books back, which means it's becoming very difficult.
Speaker 1: I want to ask you, is that a reflection of
Speaker 1: what's happening? Of course, is it fair? But it's an
Speaker 1: unfair question. But is it happening? Tell me is it happening?
Speaker 1: Am I exaggerating? And why? Now?
Speaker 2: Look, James, it's a great point that you raise. There's
Speaker 2: a genuine scarcity of advisors, particularly for what we consider
Speaker 2: the mum and dad population of Australia, those people who
Speaker 2: actually might be paying that five or ten thousand dollars
Speaker 2: a year. It's actually quite frightening because there's two sides
Speaker 2: of this coin. Obviously, the cost of advice has become
Speaker 2: increasingly difficult. So if you think of all the layers
Speaker 2: of regulation, particularly over the last decade, are seeing advisors
Speaker 2: drop right far. So the reality is that providing advice
Speaker 2: to mom and dads is no longer commercially viable. So
Speaker 2: it makes absolute sense to me that people are dropping
Speaker 2: out of the market. And unless you're shifting from retail
Speaker 2: to wholesale, which is a whole other world. Again, there
Speaker 2: is a distinct drop in the availability of advisors who
Speaker 2: actually have the time to deliver what's required just under
Speaker 2: the regulations.
Speaker 1: When you say people are dropping, but really they're being
Speaker 1: dropped rather than voluntarily leaving.
Speaker 2: I think there's a combination of factors there, but it
Speaker 2: is becoming increasingly different. I'm also saying mergers happen again,
Speaker 2: where firms such as financial planners and insurance brokers are
Speaker 2: all coming back together to try and get some benefit
Speaker 2: of the economies of scale, if you like, of a
Speaker 2: total business, and access to perhaps a greater variety of
Speaker 2: clients who might exceed that minimum threshold somehow in the
Speaker 2: retail space.
Speaker 1: I know it's a brutal question, but I said, at
Speaker 1: the start, you want to have a million dollars whatever.
Speaker 1: I'll tell you a story I was in. I was
Speaker 1: somewher the other day, and you know, I often get pinned,
Speaker 1: as you probably get pinned, and someone said to me,
Speaker 1: I've got and I think it was like twenty five
Speaker 1: thousand dollars And they said, I've got twenty five thousand
Speaker 1: dollars I've been I can't remember whether they inherited or something.
Speaker 1: And they said, could you recommend a financial advisor? And
Speaker 1: I hate doing this, but I said, look, I don't
Speaker 1: think you should go to a financial advisor. Not that
Speaker 1: you shouldn't go, but I don't think. I don't think
Speaker 1: when you walk into a financial advisor, they're going to
Speaker 1: look at you and they're going to say, twenty five
Speaker 1: thousand dollars. Jesus Christ, I'm wasting my time. I need
Speaker 1: to make five thousand dollars from this person.
Speaker 2: Yeah, and I'm going to spend five thousand dollars in
Speaker 2: my time doing the compliance just to opt you in
Speaker 2: as a client, which is the reality unfortunately that's been
Speaker 2: created as a function of all this what complexity, you
Speaker 2: could say. But the other thing is what do you
Speaker 2: get for five thousand bucks a year? Jameson And I
Speaker 2: think the reality is today what advisors can offer you
Speaker 2: is not much for that, especially I think since the
Speaker 2: reforms suggested that as advisors you have to get your
Speaker 2: clients to opt in every year. So whilst we can
Speaker 2: no longer roll as a retail customer of a year,
Speaker 2: we have to opt in. That's more compliance and more
Speaker 2: paperwork and administration. So if you're getting an annual review
Speaker 2: and a chat, that's probably all your money's buying you,
Speaker 2: which is incredibly disappointing. Yes, but I'm not saying that
Speaker 2: about the advisors. They're trying to do a job, but
Speaker 2: in an environment that's very constrained and being for your buck. Right,
Speaker 2: if you've got twenty five thousand or quite frankly a million,
Speaker 2: does it make sense for you to pay that every year?
Speaker 2: I don't think.
Speaker 1: So what do you want to be making a fair
Speaker 1: bit for it to be worth five thousand a year? Right?
Speaker 1: Because you're going to have to subtract to five thousand
Speaker 1: from whatever you make.
Speaker 2: If you make ten percent and you pay the tax,
Speaker 2: you get where this is going?
Speaker 1: Yeah, soltwhare so before we go into whostal retail? I
Speaker 1: know it's hard, but what's the number then? What's the
Speaker 1: number that you think that the average financial advisor in
Speaker 1: Australia wants to hear when you go in to talk
Speaker 1: to them, excluding the value of your home.
Speaker 2: Well, they want to know that they're playing with at
Speaker 2: least what they're investing at least one to two million dollars.
Speaker 1: That's a lot. That's a lot to have outside the
Speaker 1: value of your home. Does that include your super? If
Speaker 1: it was a self managed super fund?
Speaker 2: Is that I would say it well, as a financial advisor,
Speaker 2: it would include your super and obviously a self managed
Speaker 2: super fund then.
Speaker 1: But you would have to go in with the view
Speaker 1: that self managed super fund is open to change. It's
Speaker 1: no point to go into the advisor and saying, hey, listen,
Speaker 1: I like what I'm doing. I've got it all lovely diversified.
Speaker 1: I just want to know what do you think about it?
Speaker 1: That's kind of.
Speaker 2: Which goes a little bit full circle. To possibly you
Speaker 2: and I in a very similar boat. I would get
Speaker 2: asked every week at least once for a referral to
Speaker 2: a financial planner, and I go, let's go ten steps back.
Speaker 2: Let's actually have a look at back to the basics.
Speaker 2: What are you actually saving? Do you understand what your
Speaker 2: costs are and work out whether there is a true
Speaker 2: sort of savings investment strategy that you've put in place
Speaker 2: before we then start engaging and paying somebody to actually
Speaker 2: take us on that next journey around taking our hard
Speaker 2: owing pash and putting it into an investment that they
Speaker 2: then will charge your commission for their time.
Speaker 1: We've kicked off on a fairly sober note. Is there
Speaker 1: circumstances where you can have less than that? And it
Speaker 1: makes sense. I'm thinking in terms of the traditional argument
Speaker 1: that you don't want to make mistakes at the start,
Speaker 1: you don't want to go on the wrong track, you
Speaker 1: don't want to make huge structural mistakes. Where he then
Speaker 1: worked for twenty years and realize, damn, I should have
Speaker 1: had some advice twenty years ago. I'll give you an example.
Speaker 1: Once upon a time I was involved in a startup
Speaker 1: company and in the end we were ten years in
Speaker 1: this company and it was great and it was terrific,
Speaker 1: and we sold and we all did fairly well, depending
Speaker 1: on how much stock you had, of course, and I
Speaker 1: was a minor shareholder, but I didn't have it in
Speaker 1: a family trust or anything like that. And then of
Speaker 1: course I went to a planner because I finally had
Speaker 1: something to plan with, and they said, you might have
Speaker 1: had this in the family trust, and I thought like, yeah,
Speaker 1: but when we started, I hadn't anything, and a family
Speaker 1: trust would have been It was outside my realm, if
Speaker 1: you like, at the time, because I was up to
Speaker 1: my eyes one loans and mortgages and everything else. But
Speaker 1: the irony is that's when you need the advice, not
Speaker 1: when you've made the money.
Speaker 2: Absolutely. Yeah, So there's it's a really good point. And
Speaker 2: you and I have talked about that experience before. What
Speaker 2: you really want is very early on in life. And
Speaker 2: you know, I've talked about the person finance village, and
Speaker 2: it doesn't need to be a lawyer and a charged
Speaker 2: accountant and a financial planner. It needs to be a
Speaker 2: group of trusted individuals who have possibly or more likely
Speaker 2: more knowledge than you, perhaps in that particular area that
Speaker 2: you're contemplating whether it might be how to I structure
Speaker 2: a new investment in this startup I'm doing. You want
Speaker 2: to be surrounded by people and talking to people about
Speaker 2: these issues because some people hold back. Right, you're supposed
Speaker 2: to know this stuff when you're in business, But the
Speaker 2: reality is we got other things to focus on, so
Speaker 2: sooner rather than later. And I suggest, sure a financial
Speaker 2: planner can help you, but there may be other earlier
Speaker 2: entry points in your network of people that can advise you.
Speaker 2: I have no doubt that there are. There's many more
Speaker 2: trusted experience mates or family who can at least get
Speaker 2: your part of the way, and perhaps in your case,
Speaker 2: might have got you to a point of saying before
Speaker 2: you went into that startup, well, actually, in an early
Speaker 2: period in your investment, you could have transitioned your entry
Speaker 2: price or whatever sweat equity in there to a different
Speaker 2: structure that could have been even more benefit. Now I've
Speaker 2: got my tax hat on, of course, but could have
Speaker 2: even been more beneficial to you down the track. It
Speaker 2: didn't have to be day one, but fairly quickly, playing
Speaker 2: in the right circles, you could have certainly had some
Speaker 2: further advice that would have cost you less than today's
Speaker 2: financial plan.
Speaker 1: Yes, as you say, there's no point going in, there's
Speaker 1: no point going in too late, caustic, you can't. I
Speaker 1: remember saying, well, maybe I'll open one now. I was like,
Speaker 1: that's too late. Now, all right, okay, look, we've got
Speaker 1: to take a short break. I really want to get
Speaker 1: into some of the issues that we've talked before the
Speaker 1: show started. We'll be back in a moment. Hello and
Speaker 1: welcome back to the Australians Money Puzzle podcast. I'm James
Speaker 1: Kirby and I'm talking to Jackie Clark and Jackie I
Speaker 1: should have said your operation. I know you're explained to
Speaker 1: our listeners. I know you're very good, but they need
Speaker 1: to know you're an author. But also it's hard to
Speaker 1: repin it right because you are a consultant, you're a
Speaker 1: board member, you're an advisor to a family office. How
Speaker 1: do you describe yourself? What's your elevator pitch?
Speaker 2: Well, it's actually I don't have one specifically, I have
Speaker 2: a portfolio career. No. I obviously spent twenty almost thirty
Speaker 2: years at Deloitte and then transitioned out James support and
Speaker 2: accounting practice that I'm run with a couple of my
Speaker 2: former colleagues, and yes, consult to a number of families,
Speaker 2: and yes, became an author and spending quite a bit
Speaker 2: of time in the money space actually helping people because
Speaker 2: I love it.
Speaker 1: Might as well allow you have a plug for your
Speaker 1: book which is still out there.
Speaker 2: What's it called, Stop Worrying About Money? Only available on
Speaker 2: Amazon these days and in Great Bookstore a book type desile.
Speaker 1: Stop Worrying About Money, And you can get jack Jackie
Speaker 1: Clark's book out there if you'd like to develop further
Speaker 1: what we're talking about here today. Oh yes, Now, just
Speaker 1: before we go into that whole issue about sophisticated or
Speaker 1: retailer hostsale and etc. Which is a breakthrough perhaps for
Speaker 1: some listeners or could be, I want to ask you
Speaker 1: one other thing, because you're very experienced in the space.
Speaker 1: The hope, the only hope of everyday financial advice available
Speaker 1: perhaps easily enough that doesn't cost an arm and leg
Speaker 1: will come and there are plans afoot to get it
Speaker 1: from the big superannuation funds, and the big funds, by
Speaker 1: the way, some of them are ware. I think it
Speaker 1: is Australian super and art. They have teams, they are
Speaker 1: getting ready and the minister they're basically getting. The minister
Speaker 1: will sign it off sooner or later, and the big
Speaker 1: super funds will be able to give much more financial
Speaker 1: advice than they do currently on would you welcome them in?
Speaker 1: Do you think that would be good or flawed?
Speaker 2: It's a great question. Again My answer is yes with
Speaker 2: a very big butt. But is that it's conflicted advice.
Speaker 2: So I've already seen this at play. In fact, a
Speaker 2: family member recently was doing there during contribution. I said,
Speaker 2: why don't you just give them a call us with
Speaker 2: the advice to get that right? Husband was getting close
Speaker 2: to what was fifty nine or sixty. It was a
Speaker 2: really good time to have a chat with them. So
Speaker 2: I think there's absolutely a role for big super but
Speaker 2: the conflict is a real problem. And the other thing
Speaker 2: is this going to boil down in time to some
Speaker 2: call centered type of vibe. It's hard to say, but
Speaker 2: the reality is it's a very complex area. There is
Speaker 2: a strong shortage of good technical superinnuation advisors in particular,
Speaker 2: but there's definitely a role for it, and I can
Speaker 2: see at an entry point, you know, phone call troubleshooting level,
Speaker 2: it could be quite valuable.
Speaker 1: They're talking about the very obscure term for non relevant
Speaker 1: advisors with the original thing. Then they talked about qualified advisors.
Speaker 1: They'll come up with something else, but sooner or later
Speaker 1: they will have this sort of army of advisors. What
Speaker 1: I want to ask you is articulat if you would
Speaker 1: to everyone listening, what do you mean by conflict of interest?
Speaker 2: Yeah, it's really straightforward. If you've got half a million
Speaker 2: dollars of your superannuation invested with that big industry fund
Speaker 2: and their recommendation is, well, you should stay with us,
Speaker 2: and here's an additional product that or you could change
Speaker 2: the mix of your superannuation investment, possibly putting a member
Speaker 2: into a more growth fund versus balanced or a yield
Speaker 2: depending on what path they're taking, all of which could
Speaker 2: generate substantial revenue back to the superfund. So it's a
Speaker 2: mega conflict. Is something that other advisors, it's very difficult
Speaker 2: for them to do.
Speaker 1: To put it another way, that fund will never see
Speaker 1: take your money out of the fund.
Speaker 2: Precisely, precisely, and actually you sound like something, Yeah, you
Speaker 2: sound like somebody who would be better off X or
Speaker 2: maybe a self managed super fun is ideal for you.
Speaker 2: Now that you've reached this particular level in your investment experience.
Speaker 2: They're not going to say that. So there's things that
Speaker 2: will be left off the table or that remain unsaid
Speaker 2: that you need to hear. And that's again where that
Speaker 2: it's not independent.
Speaker 1: Yeah, but it's there almost always an element of that.
Speaker 1: And an advisor will never say, Hey, tell you what,
Speaker 1: I've just charged your five thousand dollars and you know what,
Speaker 1: I think you should do nothing, But an advisor ever
Speaker 1: say that.
Speaker 2: I'd like to think. I'd like to think that before
Speaker 2: they sat down or maybe for the first coffee that
Speaker 2: they said, maybe we're not right for you because of
Speaker 2: x yles.
Speaker 1: Yes, yes, and I suppose, being honest, that's probably more
Speaker 1: likely to happen these days because they are actively cutting
Speaker 1: their lists. Maybe there's a positive dimension to this, yes, okay.
Speaker 2: Or the one other thing James just on that comment too,
Speaker 2: I want I did want to mention. One other thing
Speaker 2: to you is to realize in this history of advisor
Speaker 2: relationships and the transition, remember the big banks have got
Speaker 2: out of more transitioned out of retail a long time ago.
Speaker 2: They saw this waves, they felt the cost of this
Speaker 2: coming pretty much since twenty twenty was since the Raw Commission,
Speaker 2: so they're head of the pack realizing that this was happening.
Speaker 1: One other thing I wanted to ask you, also, just
Speaker 1: on the same thing, is you deal with very wealthy investors.
Speaker 1: One of the things I've been reading of reading in
Speaker 1: recent times, but reading consistently, and I wonder if it's
Speaker 1: really true, is that I'm let to believe that wealthy
Speaker 1: Australians are shifting their portfolio and their money, not just shares,
Speaker 1: but all activity more and more outside Australia offshore.
Speaker 2: Is that your experience, I've got a number of different
Speaker 2: experiences in that space. What I would say is that
Speaker 2: with the wealthy families I work with, they're always looking
Speaker 2: for business opportunities offshore. So if we can park that,
Speaker 2: what I am saying perhaps with that are more the
Speaker 2: investor style type posted sale event where there may be
Speaker 2: less in their business and more as a wealthy investor.
Speaker 2: I'm definitely seeing that diversification into things like international equities.
Speaker 2: Now people aren't necessarily moving their money offshore, they're investing
Speaker 2: in funds or other have a direct access to some
Speaker 2: type of international equity diversification. One of the things though
Speaker 2: that I must caution any of your listeners about, of course,
Speaker 2: is the risk of inheritance tax offshore. So one of
Speaker 2: the things I do see a lot is when my
Speaker 2: clients go to help family members and send money offshore,
Speaker 2: the risk of particularly let's just say the UK and
Speaker 2: the US, where they have a really lively inheritance tax
Speaker 2: or death tax, whatever you want to call it, in place,
Speaker 2: there are multiple taxes that prevent or certainly are ugly
Speaker 2: if you like up to forty percent tax on your death,
Speaker 2: if you've gifted money in a particular way, or if
Speaker 2: you've bought assets offshore, you want to be very careful
Speaker 2: about your planning if you are in money away and
Speaker 2: you just don't want to fall, you don't want it
Speaker 2: to fall into that other tax knit that brings that
Speaker 2: exposure to you or your family, which unfortunately a lot
Speaker 2: of the case when people become ultra wealthy, they tend
Speaker 2: to be older in Australia, in their seventies and eighties,
Speaker 2: at a time where their demise maybe forthcoming, and therefore
Speaker 2: the risks of inheritance tax rise substantially.
Speaker 1: Ah, that's I suppose that's all around the world. But
Speaker 1: I'm just trying to identify the depth of this risk.
Speaker 1: If I, as an ordinary everyday investor, went and said,
Speaker 1: the US is really good. The US market always beats
Speaker 1: the Australian market again again year after year. I'm going
Speaker 1: to just actually buy directly into the US instead of
Speaker 1: buying Australian listed dtfs. I'm going to buy US listed
Speaker 1: ETFs and the parkt in there for twenty years. That
Speaker 1: doesn't expose me to inheritance tax in the US, does it.
Speaker 2: I wouldn't be sure that it doesn't because of the
Speaker 2: asset being done the soil over there, you can actually
Speaker 2: take it where so it's worthwhile again considering the domicile
Speaker 2: of that investment itself first, so I'd be talking to
Speaker 2: somebody before I went anywhere near that.
Speaker 1: What if I use a local booker like I use Consack,
Speaker 1: but I put everything.
Speaker 2: Through same same I think where the difference is getting
Speaker 2: access from here through an advisor here, you might be
Speaker 2: actually accessing those markets in any case without necessarily putting
Speaker 2: your foot in there. So if you start to go
Speaker 2: offshore yourself, specifically into directly into a share market, you're
Speaker 2: actually connecting the profile in a foreign country where they'll
Speaker 2: ask for all sorts of numbers and things that you
Speaker 2: might not have at that particular time, creating a profile.
Speaker 2: It's a bit different to buying into a particular asset
Speaker 2: here that has that exposure. And I think what I
Speaker 2: have seen quite a shift in is and to be fair,
Speaker 2: the Aussie stocks have underperformed, so people are definitely looking
Speaker 2: beyond our ASEX two hundred for investments.
Speaker 1: Is it percolating down is Middle Australia the mass affluence
Speaker 1: starting to actively look and seek to invest offshore, not
Speaker 1: just shares, but literally to shunt their wealth two other jurisdictions.
Speaker 1: Because that's what I'm reading.
Speaker 2: I think it would be limited because of the risks
Speaker 2: that are inherent in doing that. And I'm not talking
Speaker 2: about from a retterm perspective. I'm talking more from a
Speaker 2: global tax exposure perspective. And perhaps it's what you don't
Speaker 2: know if you've got an advisor who's not actually qualified
Speaker 2: to contemplate that. And I do see people set out
Speaker 2: structures overseas all the time and come to me and
Speaker 2: they're all very well organized from an Australian point of view,
Speaker 2: but they haven't actually contemplated what this means. In the
Speaker 2: UK and I'm often looking at the end of life
Speaker 2: where it comes back to bite you when you're no
Speaker 2: longer here is what do we do with that asset
Speaker 2: now that you're gone?
Speaker 1: What do we tell that asset? What do others do
Speaker 1: with that asset now that you're gone? All right, we'll
Speaker 1: take sure back back in a moment. Hello and welcome
Speaker 1: back to the Australians Money Puzzle podcast. I'm James Kirkby
Speaker 1: talking to Jackie Clark. Now, Jackie is an advisor and author,
Speaker 1: and we've been talking in a way. We're talking big
Speaker 1: picture here, something we should do more often and the
Speaker 1: issue that we're always talking about on the show but
Speaker 1: we never really stand back and examine it, which is
Speaker 1: about a financial advice. How does it work? What do
Speaker 1: they want from you? What are the realities when you
Speaker 1: go looking for an advisor? First of all, when you
Speaker 1: find one, how much do you have to pay? And
Speaker 1: is it worth paying that five thousand dollars a year
Speaker 1: and what would you expect? Now I want to explain
Speaker 1: something that Jackie brought up at the start of the show,
Speaker 1: which is really interesting. There's two layers to financial advice
Speaker 1: in Australia, and I when we're talking about it, and when
Speaker 1: you read about it, mostly about mom and dad, right,
Speaker 1: it's mostly about the general person and all the issues
Speaker 1: they have with financial advice. The problem that the advisor
Speaker 1: has with the average investor is that that person is
Speaker 1: classified as retail. Because they're classified as retail, there is
Speaker 1: a zillion parts of regulation that they must satisfy to
Speaker 1: satisfy the regulators that they're doing the right thing. Now,
Speaker 1: you don't have to go through all that and not
Speaker 1: everyone does, because you can qualify as a wholesale investor
Speaker 1: or what they call a sophisticated investor. Advisors love sophisticated
Speaker 1: investors because they don't have to do the paperwork and
Speaker 1: it means right, and it means they have more money,
Speaker 1: but almost as much. It means they don't have to
Speaker 1: do as much paperwork. So Jackie, first of all, let's
Speaker 1: tell people what is the legal definition of a sophisticated investor.
Speaker 1: So money wise, you need to have either two and
Speaker 1: a half million dollars in assets acts of net assets.
Speaker 1: That excludes But now does it actually exclude your family
Speaker 1: home legally?
Speaker 2: Not?
Speaker 1: No, it doesn't. I mean it should, right, but it doesn't. Okay,
Speaker 1: So there you are. Everybody in Sydney's halfway there already
Speaker 1: they have on the average price.
Speaker 2: You forgot about the mortgage that most the average the.
Speaker 1: Mortgage is subtracted. The mortgage is subtracted. Yeah, ah, fair enough.
Speaker 1: So there's two criteria, two ways of getting into this category.
Speaker 1: Two and a half million in assets. That would could
Speaker 1: include your house, but it must be minus your debts. Okay,
Speaker 1: that's keep that in mind, Jackie. If you have a
Speaker 1: self managed superfund, that's entirely included, right, so I can
Speaker 1: take it. Yeah, So that might be the way that
Speaker 1: most people would get in. Alternatively, and I imagine for
Speaker 1: many people listening to this show, this is much much
Speaker 1: more important. If you earn two fifty grand a year
Speaker 1: or more, you're also able to satisfy this. That doesn't
Speaker 1: mean your salary doesn't you have to be two fifty grand,
Speaker 1: by the way, if you earn it, right, So if
Speaker 1: you have two hundred but you make fifty farms something
Speaker 1: else doesn't matter what it is. If you had an investment,
Speaker 1: property or whatever, that gets you over the line as well.
Speaker 1: So it doesn't matter where the income comes from as
Speaker 1: long as you get over this. As long as you
Speaker 1: can get an accountant to tick the box that says
Speaker 1: you met two fifty grand in the last two years.
Speaker 1: So they are the two ways in. Now it's not
Speaker 1: quite nirvana when you get past that point, but tell
Speaker 1: us how it is very different.
Speaker 2: It's a really good conversation to have because some people
Speaker 2: might not realize that they satisfy the wholesale test. You
Speaker 2: have just an access to a much more vast network
Speaker 2: of advisors who perhaps more qualified and understand certainly a
Speaker 2: greater diversity of assets and opportunities for you. Plus a
Speaker 2: lot of them aren't cookie cutter either. So rather than
Speaker 2: having what every mom and dad has in the rest
Speaker 2: to pernuation fund, you might find that you get access
Speaker 2: to quite different investments and you can participate in more
Speaker 2: things as a wholesale investor. So it's a bit like
Speaker 2: being led into a new community, not a secret community,
Speaker 2: it's one that's quite accessible to Australians. Now you are
Speaker 2: right too, I do find that there is still a
Speaker 2: lot of admin so the fees go up, the prices
Speaker 2: go up. People charge your percentage for managing your money.
Speaker 2: It's perhaps a little bit different in some respect.
Speaker 1: You the more you have, so it doesn't cut down
Speaker 1: the paperwork.
Speaker 2: No, it doesn't really. I think it just cuts down
Speaker 2: the barriers to entry, which is there are certain assumptions
Speaker 2: made about you in the way our financial services regulations
Speaker 2: are created that mean that the advice sort of comes
Speaker 2: in at a higher point that you're assumed to have
Speaker 2: slightly higher knowledge as well. In fact, you're signing a
Speaker 2: way that you do have greater knowledge, as the term
Speaker 2: implies sophisticated investor.
Speaker 1: And the hush reality of it is as I understand,
Speaker 1: and we have the list obviously, the top hundred Financial
Speaker 1: Advisors list which we publish every year, which by the way,
Speaker 1: is going to one hundred and fifty this year when
Speaker 1: it comes out in November, and you'll see that they
Speaker 1: all have their minimum minimum that they will see there's
Speaker 1: a minium. But as I understand, many of them, especially
Speaker 1: at the opper end, they just want sophisticated investors. They
Speaker 1: just don't want their complication. And a lot of advisors say, hey,
Speaker 1: it's make life easy for ourselves. Let's just have horse
Speaker 1: sal investors. Sophisticated investors. Is that what's going on?
Speaker 2: Yeah, that's actually a good point because what you'll find
Speaker 2: is even though you get in the door, then they say, oh,
Speaker 2: the minimum investment for this particular asset is five hundred
Speaker 2: thousand dollars. And some of them think a little bit
Speaker 2: more about networks. So say, for example, if you're a
Speaker 2: lawyer in a law firm and a couple of you
Speaker 2: get together, they might take you on board as a
Speaker 2: client where you all put one hundred thousand dollars in,
Speaker 2: but it's big links. Then I'm in situations where you
Speaker 2: can do ten fifteen thousand dollars investments with in a
Speaker 2: sophisticated investor relationship, but the total invest in some is
Speaker 2: then half a million or a million and so on.
Speaker 1: Yeah, explain if you could to listeners what it is
Speaker 1: they could invest in that really is worth it to
Speaker 1: get over the line as a sophisticator's investor. You mean,
Speaker 1: I don't think it's I don't, by the way, I
Speaker 1: don't think it's IPOs, which they seem to throw at
Speaker 1: you once you're qualified.
Speaker 2: Yeah, no, I think, James, to be honest, it's just
Speaker 2: again it's dependent on their network. So who are they
Speaker 2: spending time with. What's their investment committee look like? Because
Speaker 2: this is the other thing, the size of these organizations.
Speaker 2: Some of them we're not talking about JP Morgan, but
Speaker 2: we could. But if you're talking about more private operators,
Speaker 2: they might have an investment committee that puts particular investments
Speaker 2: through quite a significant process to determine whether that's suitable
Speaker 2: for their colights, of which you then had access. So
Speaker 2: it's there's nothing consistent I would suggest about what stepping
Speaker 2: into the realms of sophisticated or wholesale investing maye you
Speaker 2: get access to particular things you can't Otherwise you.
Speaker 1: Would think logically that the big megabrands, the global names
Speaker 1: requiry to that because they are a global bank do
Speaker 1: they will sell themselves as having access to what your
Speaker 1: top notch independent advisor who has ten or fifteen people
Speaker 1: on the staff. They see the big brands were saying,
Speaker 1: those guys can't compete with us, because we've got this machine,
Speaker 1: this global machine. Is that true?
Speaker 2: It is because they also create their own They custom
Speaker 2: their own investments, with their own relationships and networks to
Speaker 2: sort their own profit loss and balance sheet out, and
Speaker 2: they give you the opportunity to join them, yeah, in
Speaker 2: an investment, and it can be very good.
Speaker 1: Well, people often get minced in these big global firms too,
Speaker 1: just as fast as they get minced by the inadequacies
Speaker 1: of an independent advisor who might have been good when
Speaker 1: they were thirty five but has got a bit dopey
Speaker 1: or soft, or just doesn't care anymore because their career
Speaker 1: they've met loads and they don't know whatever the issue is,
Speaker 1: how do you steer it between those two?
Speaker 2: You can do. What I do is I say I
Speaker 2: don't want any products that you're in. What else have
Speaker 2: you got.
Speaker 1: To expand that a little bit. I don't quite understand
Speaker 1: what that means.
Speaker 2: So if an advisor is presenting to you a number,
Speaker 2: let's say they give you five to ten investment opportunities,
Speaker 2: and you say, which one are you in? Which one
Speaker 2: is the firm in which one is the firm participating in? Yeah,
Speaker 2: So you start to understand up the tree where because
Speaker 2: you also find that in the tiers of these things,
Speaker 2: people get different price seeing benefits, some of which you
Speaker 2: may participate in coming in as an entry level wholesale investor.
Speaker 2: So there's unfortunately, there's far too much complexity in all
Speaker 2: this for the average Joe to understand. Anyway, you're relying yeah,
Speaker 2: but you could still anyone who thinks through.
Speaker 1: It's very similar to the broker who says, we've got
Speaker 1: a really good IPO coming down the line, which we
Speaker 1: happen to be putting to the market, which we happen
Speaker 1: to be getting fees from, and you see what any
Speaker 1: other IPOs that you're not involved in. It's the same
Speaker 1: sort of thinking, right.
Speaker 2: Yeah, it is. And sometimes you can decide that you
Speaker 2: back their decisions, you back their research. We have to
Speaker 2: anyway as a client, but there's other parts of their
Speaker 2: research you might decide I'd rather remain again, independent of that.
Speaker 2: What else have you got? Now? A lot of firms
Speaker 2: will promote independent investment opportunities for you, so it's just
Speaker 2: good to understand what their approach to it is themselves.
Speaker 1: I hope I've asked the right questions. I'm just wondering
Speaker 1: before we finish, you mentioned how you get pinned, So
Speaker 1: do I all the time? I have an easy answer.
Speaker 1: So someone says, if someone has if I feel that
Speaker 1: they're just going to know it's not going to make sense,
Speaker 1: I do say to them, listen, I don't think you
Speaker 1: should spend the money. I don't think you'll get value
Speaker 1: out of it. If I think they can and they say,
Speaker 1: can you name an advisor? I see anyone on the
Speaker 1: advisers lists be published, or any advisor who's been on
Speaker 1: my show. I think they're good enough to talk to you.
Speaker 1: There are my two answers in terms of what you
Speaker 1: want to tell the listeners about interacting with advisors, trying
Speaker 1: to find one, having one, trying to manage the relationship.
Speaker 1: Is there anything you think we haven't covered or haven't
Speaker 1: pointed out?
Speaker 2: Actually, well, the thing that we have historically covered is
Speaker 2: again making sure that you don't fall into the trap.
Speaker 2: Onlyschatics customers did, so go back making sure that if
Speaker 2: you are talking to somebody, they've got the right qualifications.
Speaker 2: Really serious point. You'll find their names listed somewhere. You
Speaker 2: want to make sure that they have the qualifications. I
Speaker 2: think the most important thing, too, is your own preparation, Like,
Speaker 2: don't waste a financial advisor's time if you don't have
Speaker 2: your own house in order, knowing what you spend every month,
Speaker 2: what you've got saved, what you've got prepared to reinvest,
Speaker 2: don't waste their time because you're only wasting your own
Speaker 2: time and money. This is a great opportunity to develop
Speaker 2: your own financial literacy, not just in the office of
Speaker 2: a financial advisor, like do your own homework and be prepared.
Speaker 2: And I think the last point is it's never too
Speaker 2: late to start, and you can start as early as
Speaker 2: you like, but build your network up. They don't have
Speaker 2: to be you don't. We don't invest with people that
Speaker 2: aren't qualified, obviously, but you can certainly be talking to
Speaker 2: your network of understanding and building again your literacy up
Speaker 2: about all these things so that when you do eventually
Speaker 2: make the decision to go into a financial advisor's office
Speaker 2: and you feel like you're comfortable to develop rapport with them, mate,
Speaker 2: just whatever you do, make sure they've got the right
Speaker 2: qualifications and at the same time, make sure you've got
Speaker 2: that rapport with them where you feel comfortable to be
Speaker 2: open and honest about the things that you're worried about
Speaker 2: with money, so that they can then help guide you
Speaker 2: on the investment part, because you're already going in with
Speaker 2: a good level of knowledge and you're very clear on
Speaker 2: where you're at. Because a lot of people walk in
Speaker 2: and this is how I prepare. People come to me,
Speaker 2: I need a financial plan to Jack, I say, hang
Speaker 2: on a minute, let's work out what you've got first.
Speaker 2: And that's the bit that people think, they close their
Speaker 2: minds and want to just hand it over to somebody.
Speaker 2: And I don't think you want to be paying somebody
Speaker 2: an hourly rate to do that. You want to get
Speaker 2: things in order to get your house in order. As
Speaker 2: I say my book right at the start, terrific.
Speaker 1: All right, very good, Hey, thank you very much, Jackie.
Speaker 1: I give you the floor to name the title of
Speaker 1: the book again.
Speaker 2: Stop worrying about money.
Speaker 1: Stop worrying about money, by Jackie Clark. Stop worrying about
Speaker 1: money and worry about whether the financial advisor you're dealing
Speaker 1: with is good enough for you and whether that amount
Speaker 1: and at least we you know what the amount is, right,
Speaker 1: the averages five thousand a year. Does that make sense
Speaker 1: to you? Does that make sense with the amount of
Speaker 1: money you're going in the door with. Keep that in mind. Okay, terrific. Hey,
Speaker 1: thank you very much, Jackie. Wonderful to have you on
Speaker 1: the show.
Speaker 2: Thanks, Jan's great to be back and.
Speaker 1: We'll talk again. Okay, folks, keep those correspondents rolling in.
Speaker 1: Do remember if you can't mention the show to someone,
Speaker 1: you know, we really appreciate that. Today's show was produced
Speaker 1: by Lia Samango and our Email is the money puzzle
Speaker 1: at the Australian dot Com dot Au