1 00:00:09,920 --> 00:00:13,040 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,160 --> 00:00:16,720 Speaker 1: James Kirby. Welcome aboard everybody. Now, a lot of listeners 3 00:00:16,760 --> 00:00:19,320 Speaker 1: are property investors, and a lot of them would have 4 00:00:19,440 --> 00:00:22,560 Speaker 1: an idea of having their own superfund and putting property 5 00:00:22,560 --> 00:00:26,920 Speaker 1: into that fund. It's a backbone basically of active independent investing. 6 00:00:26,960 --> 00:00:29,320 Speaker 1: There has been for some time. But my guest today, 7 00:00:29,360 --> 00:00:33,520 Speaker 1: financial advisor James already says buying property inside a super 8 00:00:33,520 --> 00:00:35,879 Speaker 1: fund is a million dollar mistake. 9 00:00:35,960 --> 00:00:38,559 Speaker 2: Hi, James, HELLI James, lovely to chat night. 10 00:00:38,880 --> 00:00:40,920 Speaker 1: Good to have you on the show. I don't know 11 00:00:40,960 --> 00:00:44,720 Speaker 1: what you're going to say, but I imagine that there's 12 00:00:44,760 --> 00:00:46,760 Speaker 1: no lack of demand. I think people want to put 13 00:00:46,760 --> 00:00:49,360 Speaker 1: property in super funds. They have for a long time. 14 00:00:49,400 --> 00:00:53,760 Speaker 1: They've had a success for a long time. But you've 15 00:00:53,800 --> 00:00:57,560 Speaker 1: done an exercise, a numerical exercise. Basically, you dug deep, 16 00:00:57,600 --> 00:01:00,040 Speaker 1: You've a made certain assumptions, you tested and tested it, 17 00:01:00,440 --> 00:01:03,880 Speaker 1: and you have come to the conclusion that it is 18 00:01:03,960 --> 00:01:06,959 Speaker 1: not worth doing. Just explain briefly why. 19 00:01:08,280 --> 00:01:10,880 Speaker 2: Yeah, of course, well please alam it is step back 20 00:01:11,000 --> 00:01:13,080 Speaker 2: just a moment, because it might be valuable to offer 21 00:01:13,120 --> 00:01:16,240 Speaker 2: some context, which is that I embarked on this exercise. 22 00:01:16,280 --> 00:01:18,800 Speaker 2: I'm a financial advisor. I embarked on this exercise open 23 00:01:18,840 --> 00:01:21,440 Speaker 2: minded to the idea of doing this myself. Our super 24 00:01:22,080 --> 00:01:24,160 Speaker 2: my superbalancers continue to grow, and I'm now at a 25 00:01:24,160 --> 00:01:27,039 Speaker 2: point where it's a viable option, and so I thought, 26 00:01:27,040 --> 00:01:29,440 Speaker 2: you know, I'm going to really run the details, run 27 00:01:29,440 --> 00:01:31,960 Speaker 2: the numbers in as much detail as I can. And 28 00:01:32,040 --> 00:01:34,600 Speaker 2: so that was what motivated me to do that. And 29 00:01:34,880 --> 00:01:37,320 Speaker 2: when I put those numbers in and I accounted for 30 00:01:37,840 --> 00:01:40,160 Speaker 2: all the costs that you incur inside of self managed 31 00:01:40,200 --> 00:01:42,800 Speaker 2: superannuation fund, the thing that stood out to me is 32 00:01:42,840 --> 00:01:44,240 Speaker 2: that you really need to hit it out of the 33 00:01:44,280 --> 00:01:46,760 Speaker 2: park in terms of the asset that you buy to 34 00:01:46,840 --> 00:01:51,480 Speaker 2: have any chance of outperforming your standard high growth superannuation 35 00:01:51,560 --> 00:01:54,400 Speaker 2: fund that might be available through your industry super fund, 36 00:01:54,400 --> 00:01:56,520 Speaker 2: for instance, let alone, if you're willing to take more 37 00:01:56,600 --> 00:01:59,320 Speaker 2: risk and invest in gear type assets like I am. 38 00:02:00,200 --> 00:02:03,600 Speaker 1: When you say i'll perform, you mean do you mean 39 00:02:03,760 --> 00:02:06,440 Speaker 1: the rental return or the total return? Because obviously you'd 40 00:02:06,440 --> 00:02:08,720 Speaker 1: have the capital gain, wouldn't you running So I presume 41 00:02:08,760 --> 00:02:09,840 Speaker 1: you allowed for all that, did you. 42 00:02:10,520 --> 00:02:14,120 Speaker 2: Yeah, that's right. Yeah, so the total return. I'm almost 43 00:02:14,160 --> 00:02:17,440 Speaker 2: forty eight, and I ran the numbers to I see 44 00:02:17,440 --> 00:02:18,760 Speaker 2: a raygrin on your face there. 45 00:02:18,639 --> 00:02:22,240 Speaker 1: But because assurans hell, don't look a remotely like forty. 46 00:02:22,320 --> 00:02:26,120 Speaker 2: Look at you, Yes, I assure you, I feel every 47 00:02:26,120 --> 00:02:29,880 Speaker 2: bit of it. An then some. But when I was 48 00:02:29,919 --> 00:02:32,840 Speaker 2: looking at this, the question was firstly, from now until 49 00:02:32,880 --> 00:02:35,280 Speaker 2: fifty five? You know what would be better if I 50 00:02:35,360 --> 00:02:37,280 Speaker 2: was to sell the asset at fifty five versus just 51 00:02:37,320 --> 00:02:40,440 Speaker 2: continuing on the trajectory I am right now. And then 52 00:02:40,520 --> 00:02:42,880 Speaker 2: similarly I also looked at this, we'll hold up. What 53 00:02:42,960 --> 00:02:46,040 Speaker 2: about if I hold on till sixty current legislation media 54 00:02:46,080 --> 00:02:48,280 Speaker 2: condition of release, which means you can access your super 55 00:02:48,320 --> 00:02:50,079 Speaker 2: and then there are some real tax benefits of selling 56 00:02:50,160 --> 00:02:53,440 Speaker 2: after that date, even after both of those things, including 57 00:02:53,720 --> 00:02:56,560 Speaker 2: all the likely returns that we get using long term averages, 58 00:02:56,680 --> 00:03:01,280 Speaker 2: the likely income we receive again using long term averages. James, 59 00:03:01,280 --> 00:03:02,080 Speaker 2: it just didn't stuck up. 60 00:03:02,120 --> 00:03:03,880 Speaker 1: It just didn't stuck up. It's funny. I thought you 61 00:03:03,880 --> 00:03:12,120 Speaker 1: would tell me that the issue was reached. That was 62 00:03:12,160 --> 00:03:16,520 Speaker 1: a part of time SMSF lending was mainstream. I don't 63 00:03:16,560 --> 00:03:18,560 Speaker 1: know why it's moved so much to the margins, but 64 00:03:18,639 --> 00:03:21,680 Speaker 1: it has, And so no one pays more. Right, no 65 00:03:21,760 --> 00:03:24,280 Speaker 1: one pays more. No one pays a higher mortgage ate 66 00:03:24,440 --> 00:03:29,320 Speaker 1: in Australia than a self managed super fund investor borrowing 67 00:03:29,400 --> 00:03:32,120 Speaker 1: for property. Explain why that is and is that a 68 00:03:32,200 --> 00:03:32,760 Speaker 1: key factor? 69 00:03:33,960 --> 00:03:37,160 Speaker 2: Yeah, it's an enormous factor. And it's a double wammy too. 70 00:03:37,280 --> 00:03:40,320 Speaker 2: So this really came about above a loss during the 71 00:03:40,400 --> 00:03:44,880 Speaker 2: Royal Commission in Banking and Finance, and those conditions going 72 00:03:44,920 --> 00:03:49,120 Speaker 2: through that process resulted in I presume the major banks, 73 00:03:49,120 --> 00:03:51,240 Speaker 2: you know, the Big four, all looking at this and saying, hey, 74 00:03:51,240 --> 00:03:54,520 Speaker 2: in a risk adjusted sense, lending money to superannuation funds 75 00:03:54,600 --> 00:03:56,960 Speaker 2: is just dumb. You have this what's called a limited 76 00:03:57,040 --> 00:03:59,360 Speaker 2: recourse borrowing agreement, which means as the bank, you're not 77 00:03:59,400 --> 00:04:02,119 Speaker 2: actually able to attack the asset itself as you would 78 00:04:02,240 --> 00:04:05,240 Speaker 2: with a traditional whether it's an investment property loan or 79 00:04:05,280 --> 00:04:08,160 Speaker 2: a home loan. So there's less recourse and so as 80 00:04:08,200 --> 00:04:09,920 Speaker 2: a result, they said, if we were going to play 81 00:04:09,920 --> 00:04:11,680 Speaker 2: in this space, we'd have to increase rates a lot 82 00:04:11,720 --> 00:04:13,880 Speaker 2: and a lot of them left. Now, that left a 83 00:04:13,880 --> 00:04:16,520 Speaker 2: whole heap of second and thirdtier lenders. You know, for example, 84 00:04:16,560 --> 00:04:18,839 Speaker 2: commonly right now you might get lending through pepper Money 85 00:04:18,920 --> 00:04:24,120 Speaker 2: Liberty latrobe to access self meta superannuation funds and old debt, 86 00:04:24,120 --> 00:04:26,320 Speaker 2: and of course when competition's down then you're not going 87 00:04:26,360 --> 00:04:29,400 Speaker 2: to get sharp prices. Now, the consequence that we have 88 00:04:29,480 --> 00:04:31,640 Speaker 2: here is not just that the rates are really high. 89 00:04:31,960 --> 00:04:37,120 Speaker 2: On average, you'll probably pay somewhere between seventy let's say, 90 00:04:37,160 --> 00:04:40,000 Speaker 2: two point seventy five and one percent higher than you 91 00:04:40,040 --> 00:04:43,040 Speaker 2: would on your home loan rate. But James, it's also 92 00:04:43,080 --> 00:04:45,919 Speaker 2: the fact that the tax deduction is so much poorer too, 93 00:04:46,120 --> 00:04:49,839 Speaker 2: because the tax rate inside the superannuation fund is only 94 00:04:49,880 --> 00:04:50,600 Speaker 2: fifteen percent. 95 00:04:52,480 --> 00:04:54,200 Speaker 1: So the negative gearing isn't as good. 96 00:04:54,240 --> 00:04:57,479 Speaker 2: Eh, it's nowhere near as powerful. That's rightever it would be. 97 00:04:57,520 --> 00:05:01,400 Speaker 1: But wasn't that always the case? Wasn't it? 98 00:05:01,520 --> 00:05:04,080 Speaker 2: Certainly? The tax rate absolutely. But if I think back 99 00:05:04,120 --> 00:05:07,560 Speaker 2: to advising people in the twenty tens, for instance, it 100 00:05:07,600 --> 00:05:09,200 Speaker 2: was really common for someone to say, I've got a 101 00:05:09,240 --> 00:05:12,320 Speaker 2: self man and super fund with a property inside it, 102 00:05:12,360 --> 00:05:14,800 Speaker 2: and I'm paying three point five percent. There was a 103 00:05:14,839 --> 00:05:17,080 Speaker 2: little period there we could get almost exactly the same 104 00:05:17,120 --> 00:05:19,440 Speaker 2: rate as home loan rates to two and a half 105 00:05:19,520 --> 00:05:22,560 Speaker 2: percent for your SMSF debt. Yeah, and I can tell 106 00:05:22,600 --> 00:05:24,800 Speaker 2: you when you were just for two and a half percent. 107 00:05:24,760 --> 00:05:26,679 Speaker 1: Interest only sometimes yeah. 108 00:05:26,520 --> 00:05:27,680 Speaker 2: Yeah, when you were just for two and a half 109 00:05:27,720 --> 00:05:30,839 Speaker 2: percent interest, yeah, absolutely it works. But that's just the point. 110 00:05:30,880 --> 00:05:32,839 Speaker 2: We're not in that environment anymore. We're in a higher 111 00:05:32,839 --> 00:05:35,840 Speaker 2: for longer environment. Really nice to see some a little 112 00:05:35,880 --> 00:05:38,719 Speaker 2: bit more reprieve coming through more recently, but these rates 113 00:05:38,720 --> 00:05:41,000 Speaker 2: aren't going to come down rapidly the way we could expect. 114 00:05:41,279 --> 00:05:44,560 Speaker 2: And even so today, right now, it doesn't stuck up. 115 00:05:45,000 --> 00:05:47,200 Speaker 1: Okay, now let's look at it more close to you. 116 00:05:47,320 --> 00:05:49,240 Speaker 1: So so it's a sort of swing factor as such, 117 00:05:49,360 --> 00:05:52,559 Speaker 1: and if the banks came back in that might change. 118 00:05:52,600 --> 00:05:56,599 Speaker 1: But you find other issues upfront. Transaction costs Obviously it 119 00:05:56,720 --> 00:06:00,000 Speaker 1: was a powerful point to you. I mean, they're always 120 00:06:00,040 --> 00:06:03,440 Speaker 1: there in property. So I'm just wondering in terms of 121 00:06:03,880 --> 00:06:06,760 Speaker 1: ranking the weakness if you like up the proposal of 122 00:06:06,800 --> 00:06:10,400 Speaker 1: investing in super property, how you might spell that out. 123 00:06:11,640 --> 00:06:15,320 Speaker 2: Of course, I guess you're right. The transaction costs are 124 00:06:15,320 --> 00:06:17,720 Speaker 2: obviously painful when you buy a property, and for every 125 00:06:17,720 --> 00:06:20,560 Speaker 2: property investor is likely to understand some of those challenges 126 00:06:20,600 --> 00:06:23,760 Speaker 2: around not just stamp duty and conveyancing costs, but you know, 127 00:06:23,960 --> 00:06:25,680 Speaker 2: perhaps you might have a buyers agent some of those 128 00:06:25,680 --> 00:06:30,200 Speaker 2: other costs that you're incurring. Probably the overarchingly the biggest 129 00:06:30,839 --> 00:06:34,320 Speaker 2: detriment to the argument of investing money inside a self 130 00:06:34,320 --> 00:06:36,880 Speaker 2: manage superannuation if I'm buying a property, is that for 131 00:06:36,920 --> 00:06:41,359 Speaker 2: the vast majority of Australians, the money's already invested. And 132 00:06:41,720 --> 00:06:44,320 Speaker 2: it's a very important point if we consider your traditional 133 00:06:44,400 --> 00:06:47,440 Speaker 2: residential property investor, who you might have enough equity in 134 00:06:47,480 --> 00:06:49,880 Speaker 2: their existing home for instance, to say, right, maybe we 135 00:06:49,920 --> 00:06:53,880 Speaker 2: can get an investment property. Well, that money's not invested 136 00:06:54,000 --> 00:06:56,760 Speaker 2: right now. You know, you're certainly you're getting some benefit 137 00:06:56,760 --> 00:06:59,200 Speaker 2: from perhaps offsetting against the home loan. But what we're 138 00:06:59,200 --> 00:07:02,680 Speaker 2: doing is we're locking a new investment with its own features, 139 00:07:03,960 --> 00:07:08,080 Speaker 2: whereas with a superannuation fund for most Australians, we are 140 00:07:08,120 --> 00:07:11,120 Speaker 2: taking money out of an environment where the money is 141 00:07:11,200 --> 00:07:15,640 Speaker 2: already professionally managed. And I'd like to imagine for most Australians, 142 00:07:15,720 --> 00:07:19,320 Speaker 2: especially in the current economic climate, doing pretty well. And 143 00:07:19,400 --> 00:07:22,160 Speaker 2: so when you take money out of that environment and 144 00:07:22,200 --> 00:07:25,559 Speaker 2: then put it somewhere else, in order to outperform James, 145 00:07:25,600 --> 00:07:27,760 Speaker 2: you really have to hit it out of the park 146 00:07:27,800 --> 00:07:30,800 Speaker 2: with that investment to catch up on all those transaction 147 00:07:30,960 --> 00:07:32,760 Speaker 2: fees and just get yourself ahead. 148 00:07:33,000 --> 00:07:36,280 Speaker 1: You make that point that maybe you know in the 149 00:07:36,360 --> 00:07:39,280 Speaker 1: last thirty years it might have worked, but you're very 150 00:07:39,280 --> 00:07:42,480 Speaker 1: skeptical about Oh oh my gol. From here, I'm just 151 00:07:42,560 --> 00:07:45,600 Speaker 1: quoting from your own post on this to my amazement, 152 00:07:45,600 --> 00:07:47,880 Speaker 1: buying a property through a certain it is super fund 153 00:07:47,920 --> 00:07:50,400 Speaker 1: would likely leave me more than a million dollars worse 154 00:07:50,440 --> 00:07:54,480 Speaker 1: off over the next fifteen years compared to simply maintaining 155 00:07:54,800 --> 00:07:58,440 Speaker 1: a high growth superannuation portfolio. I check the numbers, I 156 00:07:58,560 --> 00:08:03,760 Speaker 1: check them again, and they were right. Okay, let's just 157 00:08:03,760 --> 00:08:07,000 Speaker 1: play Devil's advocate here. Let's say there was a thumper 158 00:08:07,040 --> 00:08:10,760 Speaker 1: of a stock market crash and I remember having a 159 00:08:10,840 --> 00:08:14,360 Speaker 1: property in my SMSF in the GFC, and I was 160 00:08:14,440 --> 00:08:17,080 Speaker 1: so so glad I had it because it was the 161 00:08:17,120 --> 00:08:20,960 Speaker 1: only thing that wasn't at least in visibly falling through 162 00:08:21,000 --> 00:08:24,160 Speaker 1: the floor. So what sort of a defense is that 163 00:08:24,320 --> 00:08:25,160 Speaker 1: for the proposal. 164 00:08:26,000 --> 00:08:28,680 Speaker 2: Oh, it's a great argument, and it's certainly something to 165 00:08:28,680 --> 00:08:32,880 Speaker 2: be considered, because when I think about stock market crashes, 166 00:08:32,920 --> 00:08:35,760 Speaker 2: my mindset is not if, but when they are part 167 00:08:35,760 --> 00:08:38,320 Speaker 2: of investing in the equity market, and that's going to happen. 168 00:08:38,880 --> 00:08:40,920 Speaker 2: Having said that, where we start to go now is 169 00:08:40,960 --> 00:08:44,280 Speaker 2: around a non financial argument in the sense that there's 170 00:08:44,320 --> 00:08:46,520 Speaker 2: the benefit the peace of mind of having the money 171 00:08:46,520 --> 00:08:49,400 Speaker 2: in an asset that perhaps isn't as volatile. Now, if 172 00:08:49,400 --> 00:08:51,280 Speaker 2: we have an individual year, if we said what's going 173 00:08:51,320 --> 00:08:53,080 Speaker 2: to happen over the next three to five years, and 174 00:08:53,120 --> 00:08:55,640 Speaker 2: you had to make that decision, let's ignore transaction fees. 175 00:08:55,640 --> 00:08:57,959 Speaker 2: Just because we're talking purely one versus the other. You 176 00:08:58,640 --> 00:09:01,360 Speaker 2: could mount a better argument for property on the basis 177 00:09:01,360 --> 00:09:04,080 Speaker 2: that it's less likely to be less volatile and less 178 00:09:04,080 --> 00:09:06,880 Speaker 2: susceptible to you know, that big share market crash like 179 00:09:06,920 --> 00:09:09,960 Speaker 2: the GFC or COVID and those sorts of collapses. But 180 00:09:10,080 --> 00:09:12,439 Speaker 2: noting that when we're talking about a fifteen year time frame, 181 00:09:12,480 --> 00:09:16,000 Speaker 2: which in theory is two full market cycles, Like let's 182 00:09:16,160 --> 00:09:19,360 Speaker 2: reflect on fifteen years post GFC to twenty twenty two, 183 00:09:19,520 --> 00:09:23,199 Speaker 2: for example, we know we had we'd had enough time 184 00:09:23,280 --> 00:09:25,480 Speaker 2: for those returns to well and truly be washed out 185 00:09:25,480 --> 00:09:29,040 Speaker 2: of the market. So over that longer term timeframe, which 186 00:09:29,040 --> 00:09:31,760 Speaker 2: I think is the way that most Australians view their superannuation, 187 00:09:32,360 --> 00:09:34,599 Speaker 2: I still know that we can rely on the numbers. 188 00:09:35,200 --> 00:09:37,959 Speaker 1: Okay, right. I found the interesting one of the very 189 00:09:37,960 --> 00:09:41,640 Speaker 1: interesting things you pointed out was that that issue of 190 00:09:42,320 --> 00:09:45,400 Speaker 1: just to spell it out, the strategy could never recover 191 00:09:45,520 --> 00:09:50,040 Speaker 1: from the huge upfront transaction costs, ongoing SMSF administration fees 192 00:09:50,080 --> 00:09:54,120 Speaker 1: and property holding costs and higher interest rates on SMSF loans. 193 00:09:54,280 --> 00:09:56,480 Speaker 1: That's so interesting. I think you were on top of 194 00:09:56,520 --> 00:09:59,120 Speaker 1: all that. You didn't mention. You probably didn't have to mention. 195 00:09:59,200 --> 00:10:01,000 Speaker 1: But something that comes up on the shore regularly is 196 00:10:01,320 --> 00:10:03,240 Speaker 1: it's a lot more work to run a property than 197 00:10:03,280 --> 00:10:06,160 Speaker 1: to run an ETF. I mean, what do you do 198 00:10:06,240 --> 00:10:07,600 Speaker 1: with the ETF. You look at it now and again 199 00:10:07,640 --> 00:10:11,120 Speaker 1: the numbers change ever so slowly. A property is it's 200 00:10:11,120 --> 00:10:13,680 Speaker 1: a headache, right, if you've got it, it's a headache, 201 00:10:13,880 --> 00:10:15,160 Speaker 1: but it's yeah, it spot on. 202 00:10:15,440 --> 00:10:16,880 Speaker 2: Yeah. And not to mention, of course, you know, with 203 00:10:16,920 --> 00:10:19,319 Speaker 2: an ETF, because it's a lot more liquid, you can 204 00:10:19,320 --> 00:10:21,760 Speaker 2: make more strategic decisions around it, like if there were 205 00:10:21,800 --> 00:10:23,840 Speaker 2: a big crash, you could say, okay, well we're gonna 206 00:10:23,880 --> 00:10:25,800 Speaker 2: I don't want to have that level of exposure anymore 207 00:10:25,840 --> 00:10:28,000 Speaker 2: and so on, whereas you're less able to do that 208 00:10:28,040 --> 00:10:30,320 Speaker 2: with a property. If I may, I would love to 209 00:10:30,360 --> 00:10:32,240 Speaker 2: canvass one thing because when I put this out to 210 00:10:32,240 --> 00:10:34,440 Speaker 2: the world. I had all manner of comments. 211 00:10:34,440 --> 00:10:38,000 Speaker 1: So yeah, what was a response like, let's just let's 212 00:10:38,000 --> 00:10:40,480 Speaker 1: put the property sort of, you know, the fervent property 213 00:10:40,480 --> 00:10:43,040 Speaker 1: lovers to one side. What was the general response to you. 214 00:10:44,600 --> 00:10:47,120 Speaker 2: There's a lot of gratitude for actually having shared the 215 00:10:47,280 --> 00:10:49,520 Speaker 2: entire numbers of it, and not just saying, hey, here's 216 00:10:49,520 --> 00:10:52,240 Speaker 2: how I here's my gut, but saying, like, the mats 217 00:10:52,240 --> 00:10:53,720 Speaker 2: behind it is here, and if you want to play 218 00:10:53,720 --> 00:10:55,600 Speaker 2: with the mats and adjust it, feel free. But here's 219 00:10:55,600 --> 00:10:57,560 Speaker 2: the mats, and you know you can find that. You 220 00:10:57,559 --> 00:11:01,240 Speaker 2: can find all that information online. But for the people 221 00:11:01,240 --> 00:11:03,920 Speaker 2: that were critical of it, particularly in that property space, 222 00:11:03,960 --> 00:11:06,199 Speaker 2: you know, most of them naturally had a property lean 223 00:11:06,280 --> 00:11:07,719 Speaker 2: And I don't say that in a negative way. I 224 00:11:07,760 --> 00:11:11,760 Speaker 2: actually with reflecting on their answers and looking at them closely, 225 00:11:12,200 --> 00:11:15,520 Speaker 2: what they were really saying is, you've used the long 226 00:11:15,640 --> 00:11:18,480 Speaker 2: term average, the thirty year long term average for property 227 00:11:18,520 --> 00:11:20,719 Speaker 2: growth according to core Logic. It's the best long term 228 00:11:20,800 --> 00:11:23,760 Speaker 2: data point I could find. And their argument was, we 229 00:11:23,840 --> 00:11:26,880 Speaker 2: think that we can outperform that. We think if you 230 00:11:26,960 --> 00:11:28,920 Speaker 2: go to a you go to a great buyers agent, 231 00:11:29,280 --> 00:11:32,040 Speaker 2: and you buy the right asset, you can do a 232 00:11:32,120 --> 00:11:35,400 Speaker 2: higher earnings rate than that and for what it's worth. James, 233 00:11:35,440 --> 00:11:38,240 Speaker 2: I actually support that I have investment properties. I always 234 00:11:38,280 --> 00:11:40,440 Speaker 2: go to a buyers agent when I do that. I 235 00:11:40,480 --> 00:11:43,040 Speaker 2: absolutely believe in the value of getting professional advice there 236 00:11:43,080 --> 00:11:47,719 Speaker 2: and paying for it. And to that end, I think overarchingly, 237 00:11:48,160 --> 00:11:50,120 Speaker 2: the real thing that I want to drive and the 238 00:11:50,160 --> 00:11:52,880 Speaker 2: motivation to put this out to the world, was to 239 00:11:53,640 --> 00:11:56,840 Speaker 2: encourage Australians to be so much more scrupulous around the 240 00:11:56,920 --> 00:11:58,880 Speaker 2: asset that is being purchased. If you are to do 241 00:11:58,960 --> 00:12:03,640 Speaker 2: this saying it's impossible, I'm saying, yeah, your observation was 242 00:12:03,679 --> 00:12:05,120 Speaker 2: for and most people most of the time. 243 00:12:05,720 --> 00:12:08,720 Speaker 1: That's with most properties. It's a very bad idea to 244 00:12:08,720 --> 00:12:11,000 Speaker 1: put it in an SMSF. Yeah, but you allow for 245 00:12:11,080 --> 00:12:15,040 Speaker 1: exceptions because old properties or property is individual. As they say. 246 00:12:15,840 --> 00:12:17,600 Speaker 2: Of course, if you had the good fortune to buy 247 00:12:17,640 --> 00:12:19,240 Speaker 2: in Perth a few years ago, then you've got a 248 00:12:19,280 --> 00:12:21,240 Speaker 2: totally different story and you can say it smashed the 249 00:12:21,240 --> 00:12:24,760 Speaker 2: super funds despite them doing well. There's always exceptions, but 250 00:12:24,800 --> 00:12:27,640 Speaker 2: for what Welcome your comments, James, But I often meet 251 00:12:27,640 --> 00:12:30,480 Speaker 2: with people who have properties in their SMSF and it 252 00:12:30,520 --> 00:12:33,040 Speaker 2: breaks my heart to see people that have purchased. You know, 253 00:12:33,160 --> 00:12:36,640 Speaker 2: thirteen years ago. I bought this apartment in out of 254 00:12:36,640 --> 00:12:39,640 Speaker 2: suburbs Melbourne. I spent five hundred grand on it thirteen 255 00:12:39,720 --> 00:12:43,280 Speaker 2: years ago. It's worth exactly the same amount because it's 256 00:12:43,320 --> 00:12:45,360 Speaker 2: the strategy might have been the right strategy, but the 257 00:12:45,480 --> 00:12:48,440 Speaker 2: due diligence around the asset. They might have just taken 258 00:12:48,520 --> 00:12:51,120 Speaker 2: the property consultant's word for it, or just bought one 259 00:12:51,120 --> 00:12:54,000 Speaker 2: that was nearby that they knew was available. I cannot 260 00:12:54,000 --> 00:12:55,959 Speaker 2: stress you enough. If you are looking to do this, 261 00:12:56,080 --> 00:12:59,560 Speaker 2: you must be relentless about getting the right people on 262 00:12:59,600 --> 00:13:01,960 Speaker 2: your team in the right research to say v sas 263 00:13:02,000 --> 00:13:04,880 Speaker 2: an asset that's going to significantly outperform the long term 264 00:13:05,040 --> 00:13:07,080 Speaker 2: trend of property more generally. 265 00:13:08,000 --> 00:13:10,640 Speaker 1: Yeah, okay, and it's a big call. It's a big call. 266 00:13:10,679 --> 00:13:12,079 Speaker 1: All right, we'll take a short break. We'll be back 267 00:13:12,080 --> 00:13:25,360 Speaker 1: in a moment. Hello and welcome back to the Australians 268 00:13:25,440 --> 00:13:28,520 Speaker 1: Money Puzzle Podcast. I'm James Kirby and I'm talking to 269 00:13:28,640 --> 00:13:31,920 Speaker 1: James O'Reilly. Now I should have introduced James more fully 270 00:13:32,040 --> 00:13:36,000 Speaker 1: at the start. James works with Northeast Well that's his group. 271 00:13:36,040 --> 00:13:40,960 Speaker 1: He's responsible investment advocate as well and on top of that, 272 00:13:41,240 --> 00:13:45,160 Speaker 1: the host of the Australian Retirement podcast, which is quite 273 00:13:45,200 --> 00:13:46,920 Speaker 1: well known, and that is why, of course he's been 274 00:13:46,960 --> 00:13:51,600 Speaker 1: so smooth and articulate in his responses and segment one 275 00:13:51,679 --> 00:13:54,559 Speaker 1: because he has his own podcast all right now, James, 276 00:13:54,720 --> 00:13:57,520 Speaker 1: one of the questions that I normally have questions at 277 00:13:57,520 --> 00:13:59,160 Speaker 1: the end, but I have a question and it's kind 278 00:13:59,200 --> 00:14:00,959 Speaker 1: of in there in the a while, and I wanted 279 00:14:00,960 --> 00:14:03,559 Speaker 1: someone to answer it. I was waiting for someone basically 280 00:14:03,559 --> 00:14:06,040 Speaker 1: to come along who could answer it. It's from Pete 281 00:14:06,040 --> 00:14:08,679 Speaker 1: and he asks a very simple question, what really is 282 00:14:08,720 --> 00:14:13,000 Speaker 1: ethical investing? Now? That's something we could go all over 283 00:14:13,040 --> 00:14:15,680 Speaker 1: the place on and it's a movable feast to some extent. 284 00:14:16,400 --> 00:14:20,720 Speaker 1: There are new government labeling laws coming in in Australia, 285 00:14:20,760 --> 00:14:22,840 Speaker 1: which is a good thing to really try and define 286 00:14:22,840 --> 00:14:26,840 Speaker 1: it and stop the greenwashing. But in your world financial advice, 287 00:14:27,040 --> 00:14:31,440 Speaker 1: responsible investing, how does that basically take shape? If you've 288 00:14:31,440 --> 00:14:33,120 Speaker 1: got that on your shinkle outside of the door, I'm 289 00:14:33,120 --> 00:14:37,720 Speaker 1: a responsible investment advocate, does it? I presume some people 290 00:14:37,800 --> 00:14:39,600 Speaker 1: say that's not my kind of thing. I just want 291 00:14:39,600 --> 00:14:42,840 Speaker 1: the best results. But when people come through the door 292 00:14:43,720 --> 00:14:47,200 Speaker 1: on that proposal, how is it different? From anyone else. 293 00:14:48,880 --> 00:14:50,800 Speaker 2: Yeah, thanks mate, but very thank you for the kind 294 00:14:50,840 --> 00:14:54,760 Speaker 2: words back there. So our philosophy, the way that it's 295 00:14:54,840 --> 00:14:59,120 Speaker 2: different is that where possible, we are going to be 296 00:14:59,280 --> 00:15:03,320 Speaker 2: seeking to look at your capital responsibly and specifically sustainably 297 00:15:03,760 --> 00:15:06,320 Speaker 2: is our mandate. Now, I say where possible, because as 298 00:15:06,360 --> 00:15:09,280 Speaker 2: you've pointed out, people all have different values and different 299 00:15:09,280 --> 00:15:11,120 Speaker 2: things that they want to they want to focus on. 300 00:15:11,560 --> 00:15:14,440 Speaker 2: There was a wonderful study done by the RIBA, which 301 00:15:14,480 --> 00:15:18,040 Speaker 2: is the Responsible Investment Association of Australasia, and they do 302 00:15:18,120 --> 00:15:20,040 Speaker 2: an equivalent sort of this study every year and it 303 00:15:20,080 --> 00:15:22,120 Speaker 2: always seems to say about the same thing, which is 304 00:15:22,160 --> 00:15:25,320 Speaker 2: words to the effect of around ninety percent of Australians 305 00:15:25,720 --> 00:15:29,920 Speaker 2: expect that their financial advisor should be considering responsible investment 306 00:15:29,920 --> 00:15:33,000 Speaker 2: as part of their overall philosophy. And what that speaks 307 00:15:33,040 --> 00:15:34,840 Speaker 2: to I believe, and I think it's reinforced with the 308 00:15:34,880 --> 00:15:37,200 Speaker 2: way that we serve people, is that the vast majority 309 00:15:37,240 --> 00:15:40,280 Speaker 2: of Australians would like to have some sort of focus 310 00:15:40,520 --> 00:15:44,360 Speaker 2: on responsible investing if it were tabled to them as 311 00:15:44,400 --> 00:15:48,080 Speaker 2: part of the overall advice process. But unfortunately with financial advice, 312 00:15:48,520 --> 00:15:52,560 Speaker 2: as far as I'm concerned, my experience is far less 313 00:15:52,600 --> 00:15:55,360 Speaker 2: than a quarter of the time. Is it tabled and 314 00:15:55,520 --> 00:15:58,520 Speaker 2: or properly tabled to say, have you given thought to 315 00:15:58,600 --> 00:16:01,120 Speaker 2: investing in line with your values? And they're particular things 316 00:16:01,120 --> 00:16:03,760 Speaker 2: that you would like to either focus on or are 317 00:16:03,760 --> 00:16:05,800 Speaker 2: the things that you would like to exclude and not 318 00:16:05,840 --> 00:16:08,360 Speaker 2: be invested in. And that's what we want to afford 319 00:16:08,400 --> 00:16:08,840 Speaker 2: people to. 320 00:16:08,800 --> 00:16:11,040 Speaker 1: Do today, oh, yesterday or this week. How does that 321 00:16:11,040 --> 00:16:13,160 Speaker 1: make a difference. Are either certain investments that are off 322 00:16:13,200 --> 00:16:18,640 Speaker 1: the table and are there certain investments or behaviors that 323 00:16:18,720 --> 00:16:20,040 Speaker 1: you actively seek to follow? 324 00:16:21,640 --> 00:16:26,240 Speaker 2: Yah, our default is as in without When we have 325 00:16:26,280 --> 00:16:29,440 Speaker 2: someone that says, yes, I'm open minded to investing money responsibly, 326 00:16:29,480 --> 00:16:31,680 Speaker 2: but I don't have any really strict views around the 327 00:16:31,720 --> 00:16:34,440 Speaker 2: sort of things I'd like to include and exclude. Is 328 00:16:34,480 --> 00:16:38,440 Speaker 2: to use what's called the United Nations Sustainable Development Goals. 329 00:16:38,640 --> 00:16:41,000 Speaker 2: A lot of listeners might have heard of the expression SDGs, 330 00:16:41,280 --> 00:16:44,520 Speaker 2: and that's these sustainable development goals have been to put forward. 331 00:16:44,560 --> 00:16:47,320 Speaker 2: There are sixteen of them by the United Nations. Things like, 332 00:16:47,320 --> 00:16:51,560 Speaker 2: for example, poverty, education, and a whole heap of important 333 00:16:51,600 --> 00:16:55,000 Speaker 2: fundamental things that should hopefully result in a better planet. 334 00:16:55,280 --> 00:16:58,520 Speaker 2: And so, especially in today's day and age, there are 335 00:16:58,560 --> 00:17:01,280 Speaker 2: some wonderful tools that a enable portfolios to be really 336 00:17:01,360 --> 00:17:05,040 Speaker 2: easily screened to say, well, what's in this portfolio. We've 337 00:17:05,080 --> 00:17:08,119 Speaker 2: got this ABC High Growth fund, for instance, where's the 338 00:17:08,160 --> 00:17:11,720 Speaker 2: money invested? What are the companies actually doing within that fund? 339 00:17:12,000 --> 00:17:14,359 Speaker 1: Are you comfortable that the definitions that are used in 340 00:17:14,400 --> 00:17:18,280 Speaker 1: the screening really reflect what you and your scient have 341 00:17:18,320 --> 00:17:19,040 Speaker 1: been talking about. 342 00:17:19,680 --> 00:17:21,480 Speaker 2: That is a very good question. I think that we're 343 00:17:21,480 --> 00:17:23,320 Speaker 2: getting a lot better at this. You mentioned at the 344 00:17:23,320 --> 00:17:26,480 Speaker 2: beginning that we are seeing in a wonderful way a 345 00:17:26,680 --> 00:17:30,320 Speaker 2: much heavier focus and a much stricter focus around doing 346 00:17:30,400 --> 00:17:32,800 Speaker 2: exactly what you say is on the tin. And we've 347 00:17:32,800 --> 00:17:35,680 Speaker 2: seen examples in the past where you have a particular 348 00:17:35,720 --> 00:17:37,520 Speaker 2: fund that says, here are the things that we want 349 00:17:37,560 --> 00:17:39,119 Speaker 2: to screen out of, and then you look at the 350 00:17:39,160 --> 00:17:40,840 Speaker 2: constituents of the fund and say, well, how do we 351 00:17:40,840 --> 00:17:43,399 Speaker 2: have this position in it, for example, because that doesn't 352 00:17:43,400 --> 00:17:47,560 Speaker 2: belong here. So I'm comfortable in the sense that we 353 00:17:48,040 --> 00:17:50,240 Speaker 2: I think we do a reasonable amount of due diligence here, 354 00:17:50,560 --> 00:17:54,960 Speaker 2: but also I emphasize here that the focus d' especially 355 00:17:55,040 --> 00:17:57,280 Speaker 2: given the responsible investing. As far as I'm concerned, it's 356 00:17:57,280 --> 00:18:02,280 Speaker 2: still early in its journey focuses on progress rather than perfection. 357 00:18:02,720 --> 00:18:05,040 Speaker 2: You know, and I've explained to many members before, we 358 00:18:05,080 --> 00:18:07,360 Speaker 2: will do our level best. If we uncover that there's 359 00:18:07,359 --> 00:18:09,840 Speaker 2: a particular fund that's investing in a particular way that's 360 00:18:09,840 --> 00:18:13,080 Speaker 2: at conflict with what your perceptions are, we will either 361 00:18:13,119 --> 00:18:15,000 Speaker 2: prictic we'll let you know about or address it as 362 00:18:15,040 --> 00:18:18,280 Speaker 2: soon as we as soon as we can. But broadly 363 00:18:18,440 --> 00:18:19,639 Speaker 2: we're in a better spot. 364 00:18:20,000 --> 00:18:22,719 Speaker 1: Okay, hopefully that's useful to you, Pete. I mean, in 365 00:18:22,760 --> 00:18:26,600 Speaker 1: practical terms, with an advisor, at least it becomes they 366 00:18:26,640 --> 00:18:30,720 Speaker 1: in turn, in trying to implement or overlay ethical investing 367 00:18:31,200 --> 00:18:33,480 Speaker 1: on an advisory package, if your life for an individual, 368 00:18:33,800 --> 00:18:37,080 Speaker 1: they're depending to some extent on labeling and screening, and 369 00:18:37,119 --> 00:18:41,480 Speaker 1: these are practical aspects inside financial planning. The problem and 370 00:18:41,520 --> 00:18:46,200 Speaker 1: the backlash largely over ESG and that broader area of 371 00:18:46,240 --> 00:18:50,520 Speaker 1: ethical investing, reflected by Trump in particular and the US administration, 372 00:18:50,840 --> 00:18:53,200 Speaker 1: was that, I mean, some people don't agree with it 373 00:18:53,240 --> 00:18:57,400 Speaker 1: at all, obviously, but people who are neither particularly devoted 374 00:18:57,440 --> 00:19:01,359 Speaker 1: on either side. The labeling has been an issue, and 375 00:19:01,400 --> 00:19:03,320 Speaker 1: there has been greenwashing, and it has been easy to 376 00:19:03,400 --> 00:19:06,440 Speaker 1: talk investments and to jump on the bandwagon. Basically, there 377 00:19:06,520 --> 00:19:10,400 Speaker 1: is a strong ray turn in the Europe particularly on this, 378 00:19:10,760 --> 00:19:14,119 Speaker 1: and the Albanese government is also changing and bringing in 379 00:19:14,160 --> 00:19:17,800 Speaker 1: stricter labeling laws, and that hopefully was start to clarify 380 00:19:17,800 --> 00:19:19,959 Speaker 1: and make it all easier and more believable, I think 381 00:19:20,040 --> 00:19:24,800 Speaker 1: for everybody in the near future perfectly then interesting that 382 00:19:25,080 --> 00:19:28,560 Speaker 1: whole piece around ethical investing, I mean, one of the 383 00:19:28,600 --> 00:19:32,520 Speaker 1: things that comes up all the time is how the 384 00:19:32,560 --> 00:19:35,880 Speaker 1: whole industry operates. I have a question also from Carl, 385 00:19:35,960 --> 00:19:38,040 Speaker 1: which is not a million miles away. We had Liam 386 00:19:38,040 --> 00:19:40,879 Speaker 1: Short on the show a while ago and he was 387 00:19:40,920 --> 00:19:44,679 Speaker 1: warning about these free superviews. I wonder sometimes about ethical 388 00:19:44,680 --> 00:19:47,160 Speaker 1: investing in relation to financial advice, that if we could 389 00:19:47,160 --> 00:19:51,080 Speaker 1: at least stamp out bad behavior, that that would be 390 00:19:51,119 --> 00:19:53,800 Speaker 1: a win. Let the investment industries figure out the labels. 391 00:19:53,800 --> 00:19:58,600 Speaker 1: But Carr's question says, for instance, on a recent show 392 00:19:58,640 --> 00:20:02,440 Speaker 1: with Liam Short, where Liam was warning about the marketing 393 00:20:02,480 --> 00:20:07,000 Speaker 1: of free super reviews, James, you said nothing is free 394 00:20:07,040 --> 00:20:10,520 Speaker 1: in financial services. Carl says, I just want to highlight 395 00:20:10,560 --> 00:20:14,359 Speaker 1: that financial counselors are a free service and people experiencing 396 00:20:14,359 --> 00:20:19,200 Speaker 1: financial hardship can contact the National Debt helpline, whether it's 397 00:20:19,280 --> 00:20:23,000 Speaker 1: one or several sessions with the financial counselor, they're highly experienced, 398 00:20:23,080 --> 00:20:28,360 Speaker 1: passionate group of professionals who make a real difference. Okay, 399 00:20:28,560 --> 00:20:31,120 Speaker 1: thank you, Carl. In fact, we've had a financial counselor 400 00:20:31,160 --> 00:20:34,560 Speaker 1: on the show. Rob Burgess was on some time ago, 401 00:20:35,080 --> 00:20:37,719 Speaker 1: but more generally, James. Because because you're a financial advisor, 402 00:20:37,800 --> 00:20:43,800 Speaker 1: James O'Riley, and because you are a responsible investment advocate there, 403 00:20:44,000 --> 00:20:47,040 Speaker 1: do you think that ethical investing as it applies to 404 00:20:47,080 --> 00:20:50,399 Speaker 1: financial advice. It seems to me they never seem to 405 00:20:50,440 --> 00:20:52,920 Speaker 1: be able to stamp out the bad guys. And we've 406 00:20:52,920 --> 00:20:56,160 Speaker 1: had the first Guardian affair this year. We've had quite 407 00:20:56,160 --> 00:20:59,919 Speaker 1: a spectacular string of embarrassments and scandals in financial advice 408 00:21:00,080 --> 00:21:02,600 Speaker 1: this year. It seems, I mean, can it ever be 409 00:21:02,600 --> 00:21:07,680 Speaker 1: stamped out? Is that the ethical challenge really in financial advice? Yeah? 410 00:21:07,760 --> 00:21:10,520 Speaker 2: I suppose it is, James, in the sense that you're right, 411 00:21:10,560 --> 00:21:12,439 Speaker 2: We've taken a lot of steps already as far as 412 00:21:12,480 --> 00:21:15,120 Speaker 2: I'm concerned, in order to make sure that financial advice 413 00:21:15,240 --> 00:21:18,359 Speaker 2: is better delivered. There's now higher standards around becoming a 414 00:21:18,400 --> 00:21:21,199 Speaker 2: financial advisor. The requirement to get a degree to complete 415 00:21:21,480 --> 00:21:23,800 Speaker 2: an exam which really dials into financial advice. You know, 416 00:21:23,840 --> 00:21:26,920 Speaker 2: these things are these mechanisms were designed to weed out 417 00:21:26,920 --> 00:21:30,959 Speaker 2: people simply just slipping into the profession with the license 418 00:21:30,960 --> 00:21:35,880 Speaker 2: they got from their weedies box then and then performing 419 00:21:35,960 --> 00:21:39,320 Speaker 2: or doing work that wasn't in client's best interest. I 420 00:21:39,320 --> 00:21:41,359 Speaker 2: think we can get a lot better at this is 421 00:21:41,400 --> 00:21:45,320 Speaker 2: my initial answer. And like with First Guardian for example, 422 00:21:45,520 --> 00:21:48,199 Speaker 2: that was as far as I'm concerned, that was a 423 00:21:48,240 --> 00:21:51,040 Speaker 2: known issue for a long time before it actually came 424 00:21:51,080 --> 00:21:53,960 Speaker 2: to the fore of becoming this enormous issue that it 425 00:21:54,040 --> 00:21:56,880 Speaker 2: is now. Now, you know, there's a lot of ways 426 00:21:56,880 --> 00:21:58,639 Speaker 2: that potentially you can address that. One of the obvious 427 00:21:58,720 --> 00:22:02,080 Speaker 2: ones is to whether it's giving acid more control, giving 428 00:22:02,160 --> 00:22:05,719 Speaker 2: them more information more regularly, and enabling them to more 429 00:22:05,800 --> 00:22:09,520 Speaker 2: quickly look at any financial advisors practice or a licensee 430 00:22:09,520 --> 00:22:11,600 Speaker 2: and say, okay, we've got concerns. Now we're going to 431 00:22:11,600 --> 00:22:14,200 Speaker 2: deep dive into this a little bit more. I would 432 00:22:14,320 --> 00:22:17,520 Speaker 2: love the day. I love to imagine a day where 433 00:22:17,320 --> 00:22:19,720 Speaker 2: there is none of this going on in financial advice. 434 00:22:19,880 --> 00:22:22,640 Speaker 2: But also I've got a healthy dose of cynicism too, 435 00:22:23,119 --> 00:22:25,480 Speaker 2: and I think that when you've got environments where people 436 00:22:25,520 --> 00:22:28,159 Speaker 2: are trusting others with their money. There's always going to 437 00:22:28,160 --> 00:22:29,840 Speaker 2: be a level of unscrupulous behavior. 438 00:22:30,119 --> 00:22:33,520 Speaker 1: Maybe that's a more pragmatic aspiration that it's like becomes 439 00:22:33,560 --> 00:22:37,760 Speaker 1: like the law or accountancy, where yes, there are scandals, 440 00:22:37,800 --> 00:22:42,159 Speaker 1: it's just not a scandalized profession. And maybe financial advice 441 00:22:42,240 --> 00:22:45,000 Speaker 1: is inching towards that, though unfortunately this year would not 442 00:22:45,000 --> 00:22:46,720 Speaker 1: seem to be a year where it make grip progress. 443 00:22:46,800 --> 00:22:49,359 Speaker 1: All right, we have some very good questions. In fact, 444 00:22:49,520 --> 00:22:51,639 Speaker 1: just a question which we want to do with the 445 00:22:51,640 --> 00:22:54,040 Speaker 1: third segment. But it's really interesting and I haven't heard 446 00:22:54,080 --> 00:22:57,199 Speaker 1: this question before. It's from Drew and it picks up 447 00:22:57,240 --> 00:22:59,680 Speaker 1: on something that I think it's going to become a 448 00:22:59,720 --> 00:23:02,960 Speaker 1: really shoe because of the creep, if you like, of 449 00:23:03,320 --> 00:23:06,560 Speaker 1: the superannuation guarantee, which is is there a point where 450 00:23:06,560 --> 00:23:12,240 Speaker 1: you really shouldn't be forced to save for super when 451 00:23:12,280 --> 00:23:22,920 Speaker 1: you have more than enough? Back in a moment, Hello, 452 00:23:23,000 --> 00:23:26,400 Speaker 1: Welcome back to The Australian's Money Puzzle podcast. James Kirby 453 00:23:26,760 --> 00:23:32,080 Speaker 1: and James O'Reilly, who is from the North East Wealth 454 00:23:32,119 --> 00:23:35,080 Speaker 1: Group on the show and also from the Money from 455 00:23:35,119 --> 00:23:40,000 Speaker 1: the Australian Retirement podcast and a regular podcaster himself. Our 456 00:23:40,000 --> 00:23:43,800 Speaker 1: guest this week, the questions from Drew. You've seen it, James, 457 00:23:43,840 --> 00:23:45,840 Speaker 1: let me read it out. I've tried to edit it 458 00:23:45,880 --> 00:23:47,400 Speaker 1: as much as I can. I think it's really good. 459 00:23:47,440 --> 00:23:50,919 Speaker 1: Here goes. I'm forty three, and I've had a successful 460 00:23:50,920 --> 00:23:56,080 Speaker 1: career and always been a high income earner with superannuation 461 00:23:56,160 --> 00:24:02,320 Speaker 1: benefits that exceed the compulsory contributions by employers. I'm fortunate 462 00:24:02,359 --> 00:24:06,040 Speaker 1: to have a good superbalance. Suffice to say, if I 463 00:24:06,080 --> 00:24:08,960 Speaker 1: was to stop contributing to my Super, the compounding interest 464 00:24:09,280 --> 00:24:11,159 Speaker 1: would take my balance above three millions. So he's going 465 00:24:11,600 --> 00:24:13,120 Speaker 1: he's going to hit the new tax sooner or later. 466 00:24:13,320 --> 00:24:16,840 Speaker 1: Here's his key point. Every year I exceed the cap 467 00:24:16,920 --> 00:24:21,520 Speaker 1: and I have to pay the fifteen percent on the 468 00:24:21,560 --> 00:24:24,120 Speaker 1: amount over and this is this division two nine three, 469 00:24:24,119 --> 00:24:28,320 Speaker 1: which is basically a high income earner super tax. But 470 00:24:28,400 --> 00:24:32,400 Speaker 1: he says, with limitations on Super and penalties for being 471 00:24:32,400 --> 00:24:35,000 Speaker 1: a high income earner, I would like your opinion on 472 00:24:35,119 --> 00:24:37,760 Speaker 1: the idea of opting out of compulsory super if your 473 00:24:37,760 --> 00:24:40,680 Speaker 1: balance is high enough, and take that payment as part 474 00:24:40,680 --> 00:24:43,640 Speaker 1: of your salary. I see where you're coming from, Drew. 475 00:24:45,000 --> 00:24:48,720 Speaker 1: There's a point now where the twelve percent compulsory super 476 00:24:48,880 --> 00:24:52,879 Speaker 1: is pushing people over into penalized areas already, pushing them 477 00:24:52,880 --> 00:24:54,919 Speaker 1: into that division two nine three already if people are 478 00:24:55,000 --> 00:24:57,200 Speaker 1: familiar with that. But the bigger point that Drew was 479 00:24:57,240 --> 00:25:02,359 Speaker 1: asking is in the compulsory supersystem. The idea was to 480 00:25:02,440 --> 00:25:05,119 Speaker 1: let everyone make sure they have some super, which was great. 481 00:25:05,760 --> 00:25:07,720 Speaker 1: We get to the point at twelve percent where a 482 00:25:07,720 --> 00:25:14,280 Speaker 1: lot of people are being mandatory super contributions where their 483 00:25:14,280 --> 00:25:17,600 Speaker 1: money could be better spent elsewhere, or at least some 484 00:25:17,640 --> 00:25:19,840 Speaker 1: of it, because it probably more than covers for their 485 00:25:20,200 --> 00:25:23,000 Speaker 1: retirement comfortable retirement by the numbers at least. What do 486 00:25:23,040 --> 00:25:24,040 Speaker 1: you think, James Riley? 487 00:25:25,880 --> 00:25:28,840 Speaker 2: Wow, great question, Dre Thanks very much for putting it forward. 488 00:25:29,160 --> 00:25:31,320 Speaker 2: And also great that you're doing well. It looks like 489 00:25:31,359 --> 00:25:33,119 Speaker 2: things are going really well for you. So hats off 490 00:25:33,160 --> 00:25:33,560 Speaker 2: team mate. 491 00:25:33,600 --> 00:25:35,719 Speaker 1: Yes, at forty three, he's in a good position. This 492 00:25:35,880 --> 00:25:36,760 Speaker 1: certainly sounds. 493 00:25:36,520 --> 00:25:38,200 Speaker 2: Like not bad at all. 494 00:25:38,520 --> 00:25:41,080 Speaker 1: Yeah. I think it's a genuine issue. And all right, okay, 495 00:25:41,400 --> 00:25:42,760 Speaker 1: you know, no one's going to march in the streets 496 00:25:42,800 --> 00:25:45,879 Speaker 1: about it, of course, but this is an investment and 497 00:25:46,640 --> 00:25:49,199 Speaker 1: wealth show. We will talk about it. So what do 498 00:25:49,240 --> 00:25:49,639 Speaker 1: you think. 499 00:25:50,800 --> 00:25:52,240 Speaker 2: Well, there's two things that stand out to me. The 500 00:25:52,240 --> 00:25:54,439 Speaker 2: first one is the financial argument for it, and then 501 00:25:54,480 --> 00:25:57,440 Speaker 2: the second is the broader argument in terms of what's 502 00:25:57,440 --> 00:26:01,120 Speaker 2: the purpose of superannuation system. Let's start with broader argument, 503 00:26:01,400 --> 00:26:04,199 Speaker 2: because yes, as you've eloquently pointed out, the purpose of 504 00:26:04,240 --> 00:26:08,040 Speaker 2: that superannuation system was to ensure that Australians had were 505 00:26:08,119 --> 00:26:11,520 Speaker 2: self funding their own retirements, and especially in the years 506 00:26:11,560 --> 00:26:15,399 Speaker 2: gone by, the superannuation system was far more advantageous in 507 00:26:15,440 --> 00:26:17,720 Speaker 2: terms of concessional tax and what you could do there 508 00:26:17,720 --> 00:26:20,360 Speaker 2: to encourage that more Australians saved for their own retirement. 509 00:26:20,920 --> 00:26:24,000 Speaker 2: So if we're using that lens only, then it makes 510 00:26:24,040 --> 00:26:25,800 Speaker 2: perfect sense in my mind's eye for there to be 511 00:26:25,840 --> 00:26:29,080 Speaker 2: a certain number level whereby you say, well, actually you're 512 00:26:29,359 --> 00:26:31,879 Speaker 2: good here, and it now becomes never becomes optional. 513 00:26:31,920 --> 00:26:34,320 Speaker 1: I might just pick it, but we're running out of time, 514 00:26:34,359 --> 00:26:37,119 Speaker 1: so I think we might just leave that there. No, 515 00:26:37,200 --> 00:26:39,320 Speaker 1: we will leave that there for our listeners to chew on. 516 00:26:40,040 --> 00:26:42,920 Speaker 1: I think you've answered it very succinctly, and Drew has 517 00:26:42,960 --> 00:26:45,080 Speaker 1: put it very well, and it's an issue I think 518 00:26:45,080 --> 00:26:49,520 Speaker 1: that would come up again, folks. If the super guarantee 519 00:26:49,640 --> 00:26:52,480 Speaker 1: mandatory charge has gone to twelve percent, is there a 520 00:26:52,560 --> 00:26:56,560 Speaker 1: point at which you shouldn't be made put money into 521 00:26:56,640 --> 00:26:58,600 Speaker 1: super if you don't need it. I mean, I would 522 00:26:58,640 --> 00:27:01,640 Speaker 1: have thought it was pretty obvious the answer. Let's see 523 00:27:01,720 --> 00:27:05,520 Speaker 1: what you have to say. The email is the Money 524 00:27:05,560 --> 00:27:10,119 Speaker 1: Puzzle at the Australian dot com dot Au. Very good, James, Alright, 525 00:27:10,119 --> 00:27:11,840 Speaker 1: sorry we've run out of time. Well, great to have 526 00:27:11,920 --> 00:27:15,680 Speaker 1: you on the show. From Northeast Wealth and the Retirement Podcast. 527 00:27:15,920 --> 00:27:16,639 Speaker 1: We'll talk again. 528 00:27:16,680 --> 00:27:18,359 Speaker 2: Thanks James, really grateful to be here. 529 00:27:18,560 --> 00:27:20,720 Speaker 1: Lovely to have you on the show. Okay, let's have 530 00:27:20,800 --> 00:27:23,480 Speaker 1: some more emails The Money Puzzle at the Australian dot 531 00:27:23,520 --> 00:27:25,480 Speaker 1: com dot Au. Talk to you soon.