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Divorce…your financial guide · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:14
Speaker 1: James Kirby. Welcome aboard everybody. I hope you've managed to
0:18
Speaker 1: have a few days off over these rolling holidays Easter
0:22
Speaker 1: and that day and everything else. And often at holiday
0:25
Speaker 1: times we do something slightly different, which we will today,
0:28
Speaker 1: but it is not in the nature of light entertainment.
0:31
Speaker 1: If you want to figure out how to start your
0:34
Speaker 1: classic car collection or how to build a wine collection,
0:38
Speaker 1: we have done that. Have a look in the archive
0:40
Speaker 1: that's waiting for you. Today. We're going to look at
0:44
Speaker 1: the issue which I have seen so many times, literally
0:48
Speaker 1: dictate the lifelong financial fortunes of an enormous amount of people.
0:56
Speaker 1: And it's not super and it's not your house. It's divorced.
1:00
Speaker 1: And I have a financial advisor who is a specialist
1:03
Speaker 1: in the area. He's an independent financial advisor. He's been
1:06
Speaker 1: on the show before. His name is Nathan Fradley from
1:10
Speaker 1: Nathan Fradley Advice. And we're going to put you through.
1:12
Speaker 1: We're going to put you through, We're going to take
1:14
Speaker 1: you through this issue today. I want you, Nathan.
1:17
Speaker 2: I'm great, thanks having me back on.
1:19
Speaker 1: Delighted to have you back on Okay, It's something that
1:25
Speaker 1: we can all pay enormous attention to building an investment
1:31
Speaker 1: portfolio and optimizing our cash and everything else, interplay between
1:37
Speaker 1: pensions and super whatever, which we talk about every day
1:40
Speaker 1: on this show. We don't talk about divorce, And the
1:42
Speaker 1: fact is that so many times people with their financial
1:46
Speaker 1: world cut in half or more than that. So can
1:50
Speaker 1: I ask you, and you deal in this area, and
1:53
Speaker 1: you've built a reputation in this area, what are the
1:58
Speaker 1: hidden traps? What are the outstandings mistakes that people from
2:05
Speaker 1: either side other marriage make in this area financially, if.
2:11
Speaker 3: We're looking at it during the divorce process, I'd say
2:17
Speaker 3: divorce is probably the hardest thing that most people will
2:21
Speaker 3: go through in their entire life. It's definitely the most expensive.
2:24
Speaker 3: To your point, it is an empire killer from that realm.
2:27
Speaker 3: But because it is lost and it's grief, people tend
2:32
Speaker 3: to lose some of the rationality in the decision making.
2:38
Speaker 3: They get stuck in sometimes a sense of justice. Sometimes
2:42
Speaker 3: they are concept of I get my day in court.
2:44
Speaker 3: Sometimes just someone gets in a third party gets in
2:48
Speaker 3: an ear of one party. So I'd say that when
2:51
Speaker 3: we're doing the financial aspect of a divorce process or
2:55
Speaker 3: any separation, focusing on rational outcomes and what life is
3:01
Speaker 3: going to be like afterwards instead of getting stuck on
3:04
Speaker 3: what life could have been like or what happened. Generally
3:08
Speaker 3: costs fifty percent less money and legal fees than six
3:12
Speaker 3: months off the divorce proceedings. So I think when we
3:15
Speaker 3: get great success in divorce process, most people think divorce.
3:19
Speaker 2: They go, what's the set percentage?
3:20
Speaker 3: How much do I get if they've lived with me
3:22
Speaker 3: for two years?
3:23
Speaker 2: What's the rule? There are no rules.
3:26
Speaker 1: There are no rules.
3:27
Speaker 3: Did you say in the sense of there's no hard
3:30
Speaker 3: and fast and there's certain dates and court time frames
3:33
Speaker 3: that need to be met and must be separated for
3:35
Speaker 3: twelve months to get divorced and things like that. But
3:36
Speaker 3: in terms of financial split, a divorce has a divorce
3:40
Speaker 3: aspect of it, the legal aspect of set breaking that marriage.
3:44
Speaker 3: It's also got a financial or property settlement, and then
3:47
Speaker 3: if there's children, that's a child aspect, So the financial
3:49
Speaker 3: aspect is separate from the divorces.
3:51
Speaker 1: So yeah, we always think of divorce as lawyers right
3:54
Speaker 1: on both sides, not financial advisors, and that is that
3:57
Speaker 1: the reality too.
3:59
Speaker 3: Yeah, what I'm doing in this space is very new,
4:02
Speaker 3: and financial advisors historically when they've gotten involved, they get
4:05
Speaker 3: involved after settlement things are done.
4:07
Speaker 2: I've now got this pool of money.
4:08
Speaker 3: What do I do?
4:09
Speaker 2: But when we look at the.
4:10
Speaker 3: Really successful processes, two people who decide they're not going
4:14
Speaker 3: to continue in a relationship together before lawyers get involved,
4:18
Speaker 3: although you should always get them involved at some point
4:21
Speaker 3: before they're even involved, you can have discussions which can
4:24
Speaker 3: then turn into mediations, which can then turn into lawyer
4:27
Speaker 3: led mediations before a court tells you this is the outcome.
4:33
Speaker 1: That would require. I expect this would for balance, This
4:37
Speaker 1: would require both parties having an advisor, and that would
4:40
Speaker 1: require whatever way you cut it, it would demand a
4:45
Speaker 1: certain amount of cash. Yeah.
4:48
Speaker 3: Yes, So there's actually a form of separation called collaborative
4:52
Speaker 3: divorce where you have two lawyers, a communication specialist that's
4:56
Speaker 3: usually like a psychologist, and a financial neutral And it's
5:00
Speaker 3: a fantastic process for the right people, but when you
5:04
Speaker 3: have four professionals in the room, it can be increasingly expensive.
5:08
Speaker 1: And is the financial persons supposed to carve it out
5:12
Speaker 1: fairly financially between the two people getting divorced.
5:15
Speaker 2: In collaborative divorces.
5:16
Speaker 3: Their job is to equalize understanding, to ensure that there's
5:21
Speaker 3: nothing missed that could be substantially detrimental in a separation.
5:24
Speaker 3: So it's like catching things before they go wrong. But
5:27
Speaker 3: they will never give advice to either party individually, even
5:31
Speaker 3: after the divorce. They'll always refer out from that position there.
5:35
Speaker 3: So there's one way that people can do it. But
5:37
Speaker 3: in the work that I do, it's more working with
5:39
Speaker 3: I often work with the financially disempowered person in the
5:41
Speaker 3: relationship because often is the case that one person, as
5:45
Speaker 3: we do with most jobs in relationships, one person takes.
5:48
Speaker 1: Up the job.
5:49
Speaker 2: I'll do the cooking, you do the washing.
5:51
Speaker 3: I'll take care of the budgeting, and you can take
5:53
Speaker 3: care of managing the kids, time tables, whatever it might be,
5:56
Speaker 3: and we divide labor, and that can be proper madic.
6:00
Speaker 3: If there's anything I'd say to never have to get
6:03
Speaker 3: advice from me unto force, I would say is if
6:07
Speaker 3: you can have an equal understanding of what's happening with money,
6:10
Speaker 3: one person can manage the day to day, but if
6:12
Speaker 3: you both fully understand what's going on, it can decrease
6:16
Speaker 3: so many or decrease the chance of things going on
6:18
Speaker 3: because there is a greater level of clarity.
6:21
Speaker 1: It sounds to me what you're saying to our listeners,
6:24
Speaker 1: and to some extent we will just say that there.
6:30
Speaker 1: What you're saying is one person can manage the money
6:32
Speaker 1: if they want, but both parties should look after themselves
6:41
Speaker 1: by being across what's happening with their money. How much
6:46
Speaker 1: is our mortgage, how much do we actually make together?
6:49
Speaker 1: How many bank accounts do we have, how much is
6:51
Speaker 1: in them? Can you give us some examples when you
6:54
Speaker 1: say making sure everything's accounted for? Is? Are you talking
6:57
Speaker 1: about stuff like money? Literally secret colms, people having money
7:02
Speaker 1: talked away that the other partner didn't do.
7:03
Speaker 3: It?
7:04
Speaker 1: Was that common? Can you give you some examples.
7:06
Speaker 2: That can happen?
7:07
Speaker 3: But I find that happens when things have started going
7:09
Speaker 3: wrong already. So if you've got a couple who'll across
7:13
Speaker 3: the decisions, he's a really easy tell. If I'm the
7:17
Speaker 3: person who manages the money and I'm making sure our
7:20
Speaker 3: plans are on track and we're investing, we're doing all
7:23
Speaker 3: these things, and the other person comes to me and says, hey,
7:26
Speaker 3: let's go on this holiday, or the kids got this excursion,
7:28
Speaker 3: or I want to buy this thing, or and you're
7:31
Speaker 3: always saying no, that says that the other person doesn't
7:35
Speaker 3: have a good handle on the situation, because if you
7:37
Speaker 3: both understand it, it's not a decision of I'm not
7:40
Speaker 3: the no guy, I'm not the one that's always asking
7:43
Speaker 3: for things. It's we both understand the situation and the
7:46
Speaker 3: context of what we can and can't afford. So that's
7:49
Speaker 3: a really early indicator that if you us feel like
7:52
Speaker 3: I wish we could do more, but I'm always feel
7:53
Speaker 3: like we're saying no because we're trying to plan for the.
7:55
Speaker 2: Future, but they just don't get it. Because they don't
7:57
Speaker 2: get it.
7:58
Speaker 1: I wonder my hunch is that the disastrous couple is
8:03
Speaker 1: the couple where neither actually pay attention to the money.
8:08
Speaker 1: Have you come across divorce proceedings where both parties were
8:11
Speaker 1: appalling in terms of that they just didn't pay any attention.
8:16
Speaker 3: Or they a little bit of dangerous information. They did
8:20
Speaker 3: little things, but not everything. I thought you were taking
8:22
Speaker 3: care of that. No, I thought you were taking care
8:24
Speaker 3: of that. I was doing this thing, but I wasn't
8:25
Speaker 3: doing that thing. And yeah, it's often the case where
8:29
Speaker 3: the person who comes to me starts learning about how
8:31
Speaker 3: things are done.
8:32
Speaker 2: Why did we even do it that way? That doesn't make.
8:35
Speaker 3: Any sense at all, because granted their former partner was
8:38
Speaker 3: doing the best they could in the knowledge that they had,
8:40
Speaker 3: but they may not have known what to do. It
8:42
Speaker 3: may have just been thrustle them. You're good with money
8:44
Speaker 3: because you saved a bit more before we go together.
8:47
Speaker 1: So you've got money because you're an accountant and whatever,
8:51
Speaker 1: I'm a portrait artist or whatever. Okay, So what about
8:56
Speaker 1: when you have people in that situation? The home, which
9:02
Speaker 1: in the Australian in every country matters, but in Australia
9:06
Speaker 1: is enhanced because it's also, on top of being a home,
9:10
Speaker 1: on top of having an elevated value VISI v. History
9:14
Speaker 1: and other countries, it also is a tax protected vehicle.
9:19
Speaker 1: So when there's a divorce, is it the case again
9:23
Speaker 1: I'm just exploring here, Is it the case that the
9:26
Speaker 1: person who does not get the house but gets other
9:30
Speaker 1: assets has a much more complex future than the person
9:36
Speaker 1: who got the house.
9:38
Speaker 2: Maybe?
9:39
Speaker 3: And so this sort of falls into one of the
9:42
Speaker 3: old urban legends around around separation that if I keep
9:45
Speaker 3: the house, I'll be better off. And there's plenty of
9:48
Speaker 3: reasons for that, not having to base damp duty when
9:49
Speaker 3: you purchase a new house, which is often missed in
9:52
Speaker 3: separation agreements. Yeah, finding housing. You keep the house. Now
9:58
Speaker 3: I've got to go and find somewhere to live, find
9:59
Speaker 3: somewhere to rent. I got it's been near the kids.
10:01
Speaker 3: I've got to do that, like all those kinds of things.
10:03
Speaker 3: And then obviously the capital gains implications, I'll take the investments, you.
10:06
Speaker 2: Take the house.
10:07
Speaker 3: What happens in time, But I think what when we
10:10
Speaker 3: look at that The root of that problem is actually
10:13
Speaker 3: stems from not just what is the split or how
10:17
Speaker 3: do we divide assets now? But looking forward, And this
10:20
Speaker 3: is where I think financial advice is going to start
10:22
Speaker 3: playing a lot more of a role as people see
10:23
Speaker 3: the benefit of this is when if you look at
10:26
Speaker 3: i'll take fifty percent, or.
10:27
Speaker 2: I'll keep the house. You keep this.
10:28
Speaker 3: That's great until we realize that the person who's kept
10:31
Speaker 3: the house, who was a lower income earner, hasn't really
10:35
Speaker 3: been able to earn that much, can't afford to maintain
10:37
Speaker 3: the mortgage, can't afford the upkeep on the property, can't
10:39
Speaker 3: and then two years they sell it anyway, so that
10:41
Speaker 3: family asset is gone.
10:44
Speaker 2: So this is where when we're looking.
10:45
Speaker 3: At at a separation and trying to decide what's the
10:49
Speaker 3: best way to split assets.
10:50
Speaker 2: And when I do this work.
10:51
Speaker 3: I'm representing one party is looking at it and saying, yes,
10:54
Speaker 3: this might be where you want to be now, but
10:56
Speaker 3: where do you want to be in the medium longer term?
10:58
Speaker 2: Can you even.
10:58
Speaker 3: Afford to keep this place? And how does that fit
11:01
Speaker 3: into your broader lifestyle? The kids are sixteen and seventeen,
11:04
Speaker 3: you want to be in the area for schooling for
11:06
Speaker 3: the next two years than what or these sort of
11:08
Speaker 3: factors start coming in. But yeah, there is definitely a
11:11
Speaker 3: lot of advantages to the family home. There's also a
11:14
Speaker 3: lot of cultural connection to it. As you said, the
11:17
Speaker 3: great Australian dream of owning your own home or owning
11:19
Speaker 3: someone else's is run so strongly in our blood. Keeping
11:23
Speaker 3: that property sometimes can feel like something I want to
11:26
Speaker 3: keep the house. I found the house, I put all
11:28
Speaker 3: the work into the house, I painted the house. There's
11:30
Speaker 3: this emotional connection to something that may not be in
11:34
Speaker 3: the best interest to retain.
11:36
Speaker 1: So it's not necessarily the case then that the complexity
11:40
Speaker 1: is all upon the person who got other things other
11:43
Speaker 1: than the home.
11:45
Speaker 3: Yeah, I'm finding more that keeping the home is not
11:48
Speaker 3: just not viable for either party, which is becoming increased
11:51
Speaker 3: in the common that so much of the wealth is
11:53
Speaker 3: in the home that the amount of debt the retainer
11:56
Speaker 3: would have to take on either they can't get it
11:58
Speaker 3: or they could can't maintain it, which just makes no sense.
12:01
Speaker 3: That seeming that's coming up a lot more than it
12:03
Speaker 3: used to.
12:03
Speaker 1: Okay, can you give us two seconds on super and
12:06
Speaker 1: how it works, because it's still important now.
12:09
Speaker 3: Yeah, with superinnuation, there's really the common question again, can
12:14
Speaker 3: we combine our super And there's sorts of things where
12:15
Speaker 3: people in a relationship you can't. There's a couple of
12:18
Speaker 3: rules around contribution splitting things like that, but there is
12:21
Speaker 3: a rule around splitting of super innovation in a separation
12:25
Speaker 3: and it forms part of the whole arrangement. So there's
12:27
Speaker 3: no hard and fast you get half my super or
12:30
Speaker 3: you'll come to an agreement that says this is how
12:32
Speaker 3: we're splitting up the assets, and those assets will be
12:35
Speaker 3: made of this much super, this much cash, this house.
12:38
Speaker 2: That sort of stuff.
12:39
Speaker 3: And then when that happens, there's a form, a family
12:43
Speaker 3: law form that most super funds will have that rolls
12:45
Speaker 3: the money from one fund to another. It's a relatively
12:47
Speaker 3: straightforward process of these days from an administrative perspective.
12:51
Speaker 2: But getting to.
12:51
Speaker 3: That point, sometimes you get people who are very short
12:54
Speaker 3: term in they're thinking, I want at least possible super
12:57
Speaker 3: because I want is much.
12:58
Speaker 2: Money in my bank account.
12:59
Speaker 3: Other times they'll be focusing on that super Again, it
13:01
Speaker 3: really plays back to how they're going to maintain their
13:04
Speaker 3: life and moving forward, and is super the best place
13:07
Speaker 3: for it if they don't take the super how they're
13:09
Speaker 3: going to get money to retire?
13:10
Speaker 2: All that kind of stuff.
13:11
Speaker 1: Okay, is there any variation when it comes to self
13:15
Speaker 1: managed super funds? Let's see mom and Dad are the
13:19
Speaker 1: SERF match super fund.
13:22
Speaker 2: The two trustees a really fun one.
13:25
Speaker 3: Actually, I just did SPT points for advisers on this
13:27
Speaker 3: recently because back in what's again, when you look at
13:31
Speaker 3: the dynamics of relationships, we have a self managed super
13:34
Speaker 3: fund because the person who was running the money is
13:36
Speaker 3: it was a good idea. Maybe their business premises is
13:39
Speaker 3: owned inside of the fund.
13:40
Speaker 1: So the same issue emergen as I imagine the person
13:43
Speaker 1: really runs it.
13:44
Speaker 3: Yeah, but what you again have is the amplified effect
13:46
Speaker 3: that all trustees have to know how to run the fund.
13:49
Speaker 2: And have full responsibility for it.
13:51
Speaker 3: And you've also then got to be acting in the trustees'
13:54
Speaker 3: best interest and or best financial interest, and.
13:57
Speaker 2: They have divoting life goals.
13:59
Speaker 3: So it might makes sense to retain the fund right now,
14:02
Speaker 3: but because of business premises is in it, you can't
14:04
Speaker 3: split it and almost into things. But people repartner lives
14:08
Speaker 3: change direction, maybe they just don't get along, and maintaining
14:12
Speaker 3: that connection can be really hard. I've seen cases where
14:15
Speaker 3: partners have taken limited power of attorney over their form
14:18
Speaker 3: of spouse's power to trust, the obligations, and that's just
14:21
Speaker 3: a nightmare of disaster. Wedding to happen self maniership of
14:24
Speaker 3: fund becomes a lot more.
14:26
Speaker 1: Complicated, more complicated understand and tell me what if it
14:28
Speaker 1: was the case that they wanted to split and they
14:31
Speaker 1: wanted to split everything and the core of the self
14:33
Speaker 1: maner super fund was a business premises because they used
14:36
Speaker 1: to have a shop or whatever. Do you have to
14:40
Speaker 1: sell the property at market value and split it is
14:43
Speaker 1: that what.
14:43
Speaker 3: Happened again would come back to how you decided to
14:45
Speaker 3: divide up the assets, whether the balances were segmented, in
14:48
Speaker 3: the first place, there's no have tos.
14:51
Speaker 2: But in regards to the divorce process.
14:53
Speaker 3: But from a super fund perspective, it has to be
14:56
Speaker 3: arms length transactions, market value.
14:58
Speaker 2: Everything has to be above boarder clients.
15:00
Speaker 3: So there's no give from a family or perspective, and
15:03
Speaker 3: that your super responsibilities to struss they are the same.
15:05
Speaker 1: Responsible and the fund must get the value market value
15:08
Speaker 1: for the asset whatever it is, including that whatever you
15:11
Speaker 1: had in it, including a business premises. Okay, really interesting,
15:14
Speaker 1: absolutely absorbing. Let's come back and we're going to cover
15:18
Speaker 1: folks how to divorce in the best possible financial fashion.
15:24
Speaker 1: Back in a moment. Hello and welcome back to the
15:38
Speaker 1: Australian's Money Puzzle podcast. Okay, today we are talking about
15:44
Speaker 1: divorce and money, the best way that you or you
15:51
Speaker 1: and your partner can divorce financially. And I have Nathan
15:56
Speaker 1: Fradley on the show, who is specializes in this is
16:00
Speaker 1: really across it and I'm going to ask him now
16:03
Speaker 1: about the best how to do this the best way financially.
16:08
Speaker 1: What are your mean what are your mean lessons, Neathan
16:12
Speaker 1: from years of working in this area.
16:15
Speaker 3: I'm going to be vague on the legal side of it.
16:17
Speaker 3: Because I'm not a lawyer, but the financial advisor supports
16:21
Speaker 3: the lawyer in this process. But what I've seen work
16:25
Speaker 3: really well. Firstly, working with professionals will make your life easier.
16:30
Speaker 3: People fear divorce lawyers or financial plans because of cost,
16:34
Speaker 3: but inevitably, by working with professionals things to done more efficiently.
16:39
Speaker 3: You're getting your unbiased or your biased to you advice.
16:42
Speaker 3: It saves you money the end of the day, because
16:45
Speaker 3: what can happen is it falls around. But I think
16:47
Speaker 3: that getting the right advice is really important and that
16:50
Speaker 3: sets you up, which is a bit of gimmy for me.
16:53
Speaker 3: But I'd say in terms of when you're looking at
16:56
Speaker 3: yourself and how you're going through this, it's going to
16:58
Speaker 3: be awful for everyone in the situation the longer you
17:01
Speaker 3: can stay rational look at things not just on I
17:04
Speaker 3: mentioned before one face value. Now, but what does this
17:07
Speaker 3: mean for me at the end after this is done,
17:09
Speaker 3: what does life look like because I'm starting again and
17:13
Speaker 3: understand that it's going to be okay. That decreases the
17:15
Speaker 3: temperature in the room in the separation, and know that
17:19
Speaker 3: you'll be all right and then work through I think
17:22
Speaker 3: that's really important. And then this is going to be
17:26
Speaker 3: harder to say. It's easier to say than do, but
17:29
Speaker 3: assuming best intent with your partner will be helpful a
17:34
Speaker 3: lot of the time, especially working with the more less
17:37
Speaker 3: sophisticated person in the relationship. The former partner will do
17:40
Speaker 3: things and because it's for twenty years, they've just done
17:44
Speaker 3: things with money, and the now awakened part is.
17:47
Speaker 2: Going, why do they do that? Why do they do that?
17:49
Speaker 2: Are they hiding money? Are they hiding assets of things?
17:52
Speaker 3: And a lot of my job in this instance is explaining,
17:54
Speaker 3: you know, this is how this works, this is what
17:56
Speaker 3: they're trying to do. I can see how this has
17:59
Speaker 3: played out the way it has and unless they're going
18:02
Speaker 3: for that or this will come out in the whitewash
18:04
Speaker 3: because of the disclosure of assets. That again decreases the temperature.
18:09
Speaker 3: The lower the temperature, the comma we are, the camera
18:11
Speaker 3: we are, the easier the process can be, and the
18:13
Speaker 3: more we can focus on the things that we actually
18:15
Speaker 3: want to fight about instead of fighting about everything.
18:18
Speaker 1: I expect you have what goes without saying that if
18:21
Speaker 1: the person the partner on the other side has a
18:25
Speaker 1: lawyer and an advisor and you only have a lawyer
18:28
Speaker 1: it sounds to me like you should have an advisor.
18:30
Speaker 1: I think that sounds like basic logic in terms of
18:33
Speaker 1: the balance of power. The other thing I would ask
18:35
Speaker 1: you is what about priorities? When you're sitting there with
18:37
Speaker 1: the client and you're saying, Okay, here we go. This
18:41
Speaker 1: is a divorce. Again, my client is a very sophisticated operator,
18:47
Speaker 1: but is not interested and has never been financial. The
18:51
Speaker 1: person on the other side is a similar person, but
18:55
Speaker 1: their life has been in finance and they are innately
19:00
Speaker 1: well disposed towards getting the best financial outcome. So when
19:04
Speaker 1: you're looking at your client, the non financial one basically
19:08
Speaker 1: who never asked what they were signing over the years,
19:12
Speaker 1: are often didn't ask what's your priorities? What do you
19:15
Speaker 1: say to yourself? What are my priorities for my client?
19:17
Speaker 1: Is it accommodation, is it cash, flu is it.
19:21
Speaker 2: Super all of those things?
19:24
Speaker 3: So I think the number one priority is understanding your
19:28
Speaker 3: point about just signing things. It's a classic example of
19:32
Speaker 3: trust that distributes to both parties, and the person just
19:35
Speaker 3: signs it every year and all of a sudden they're going,
19:36
Speaker 3: what am I signing? I don't actually understand what's happening.
19:39
Speaker 3: I think getting across and understanding the current state of
19:42
Speaker 3: play is really important because that helps them make a
19:45
Speaker 3: better decision. That can be as simple as the budget,
19:49
Speaker 3: which you just mentioned, but is crucial. Where does that
19:52
Speaker 3: money actually go? I can't believe we spent that much.
19:56
Speaker 3: But also, now that we're separating, we're probably going to
19:59
Speaker 3: run two households. How long can we afford.
20:01
Speaker 2: To do that for?
20:02
Speaker 3: We've got these kids fees, We've got these medical costs
20:05
Speaker 3: at this sort of stuff that piles in.
20:07
Speaker 2: Who's covering what? How is it paid for?
20:09
Speaker 3: Keeping that as clean as possible and as transparent as
20:12
Speaker 3: possible again decrease the temperature, but also allows a cleaner
20:16
Speaker 3: process at the end of the day because it really
20:18
Speaker 3: gives evidence to what the needs are of individuals, and
20:24
Speaker 3: I suppose then helps us frame the outcome. What are
20:26
Speaker 3: things going to be at the end of the day.
20:28
Speaker 3: Because there's a difference between winning a divorce and winning
20:32
Speaker 3: a divorce there is I'm going for seventy percent, I'm
20:35
Speaker 3: going for blood, or there is a fair and equitable
20:39
Speaker 3: arrangement that we come to, which means that I'm going
20:42
Speaker 3: to end up in a situation where I can move
20:44
Speaker 3: on and be okay.
20:44
Speaker 1: Can you give me an example when you say someone's
20:47
Speaker 1: going for blood, Can you give me an example of
20:48
Speaker 1: the low hanging fruit for the arch aggressor.
20:54
Speaker 2: Valuations?
20:55
Speaker 1: Evaluations?
20:56
Speaker 3: Evaluations is, yeah, I have a pointed a value are Oh,
20:59
Speaker 3: this is a I've used before, And it turns out
21:02
Speaker 3: there's been some communication about the nature of this obscure
21:05
Speaker 3: business that they had, or they might have farm land or.
21:09
Speaker 2: Something like that.
21:09
Speaker 3: Whether it's a business or there's an asset that's hard
21:12
Speaker 3: to value that's illiquid, that's a massive area for I
21:16
Speaker 3: suppose play, and also a dynamic of understanding that a
21:21
Speaker 3: person who bought it for a certain reason may not
21:23
Speaker 3: have told the other party what the potential opportunities in
21:26
Speaker 3: this business. Maybe they're in the business and it hasn't
21:29
Speaker 3: quite clicked over that winning point, so it's not really
21:32
Speaker 3: much of a business. Don't worry about that one. I
21:34
Speaker 3: think it's going under any way, these sorts of things.
21:37
Speaker 3: The accounting side of it, it's a little bit easier
21:39
Speaker 3: because of forensic accounts and what have you to uncover.
21:42
Speaker 3: But I think the nature of businesses or certain investments
21:45
Speaker 3: and assets is a low hanging fur the more aggressive one.
21:49
Speaker 1: That's really interesting and oldmore plays back to your original
21:52
Speaker 1: point at the start of getting advisors in before the settlement,
21:57
Speaker 1: because the settlement assumes the evaluation. We're correct, Yeah, so
22:02
Speaker 1: what what happens? So let's say so let's say the
22:04
Speaker 1: dispute emergers, and what happens is that the partner said
22:09
Speaker 1: such and such a business was worth X, and the
22:13
Speaker 1: evaluation is clearly comically low. What do you do?
22:19
Speaker 3: My job in that situation sits more of a supportive position.
22:25
Speaker 3: What are the lawyers will tend to do is send
22:27
Speaker 3: letters back and forth in various tones, depending on the
22:30
Speaker 3: style of lawyer they are, whether they are more litigious
22:32
Speaker 3: or more cooperative, and they will come to an agreement
22:35
Speaker 3: of an independent valuer that the clients agree to spend
22:39
Speaker 3: money on. There could be one that's one hundred thousand dollars,
22:42
Speaker 3: there could be one that's ten thousand dollars, and that
22:44
Speaker 3: sort of thing plays out, and then that is valuation
22:47
Speaker 3: you end up going off. Also, the timeframe evaluation is important.
22:51
Speaker 3: If we've got an existing business and we've separated on
22:53
Speaker 3: the first of April, that we might use that as
22:56
Speaker 3: the date where all valuations are done too, because we
23:00
Speaker 3: don't want firstly, this separation is going to be impacting
23:03
Speaker 3: the business, and we don't want any nefarious or potential
23:06
Speaker 3: nefarious activity of moving money or profits around and things
23:09
Speaker 3: like that, or even just the suspicion of that doesn't
23:11
Speaker 3: help anyone. And then it also means that the person
23:14
Speaker 3: who is who runs that business isn't feeling, oh, I
23:16
Speaker 3: might just sandbag my financials and go slow for the
23:19
Speaker 3: next two years so that I don't have to give
23:21
Speaker 3: as much away. It just takes off the table. But yeah,
23:24
Speaker 3: it's getting the right valuers in. And valuers are amazing
23:27
Speaker 3: what they do, a meta variety of them in different specialties.
23:31
Speaker 1: What do you mean amazingly varied in their talents?
23:34
Speaker 3: Just that the angles that valuers take these are largely
23:37
Speaker 3: people who work in M and A. They don't just
23:39
Speaker 3: look at it and go, oh, this is a business
23:41
Speaker 3: of X style, therefore it's worth X times eap it
23:44
Speaker 3: or revenue or something. They'll look at it from multiple angles.
23:46
Speaker 3: They do cash flow, they'll do forecasting. The reports that
23:49
Speaker 3: you get from valuations can be really good, and then
23:52
Speaker 3: that can give an indication of whether something seems reasonable.
23:57
Speaker 3: What my job is then to look at and go
23:59
Speaker 3: if is this, if this has seemed reasonable, what would
24:02
Speaker 3: this mean for the client?
24:04
Speaker 2: Do they keep fighting? Is this enough?
24:07
Speaker 3: Do that?
24:07
Speaker 2: Yeah?
24:07
Speaker 3: That's where I come in of if this was the
24:10
Speaker 3: outcome we got, what would that mean for you? Do
24:12
Speaker 3: you want to keep fighting for another two years? Or
24:15
Speaker 3: do you take this and go?
24:16
Speaker 1: You're something like an expert witness there. Yeah, yeah, okay,
24:19
Speaker 1: I can I ask you one last thing on this
24:20
Speaker 1: issue about money being touped away a secret accounts, sir
24:23
Speaker 1: and all that sort of thing. Is the tax system
24:26
Speaker 1: and financial system sufficiently transparent now that you would be
24:30
Speaker 1: confident that you have a clear picture of the money
24:34
Speaker 1: held in accounts by both parties?
24:38
Speaker 3: I would like to think so. But USB stics with crypto.
24:43
Speaker 3: Whilet's exists, sometimes people have lost them genuinely.
24:49
Speaker 1: I think that's I never thought of that. Crypto rights
24:53
Speaker 1: increasingly common, I'm sure.
24:55
Speaker 3: Yeah, yeah, I think I would like to have confidence
24:59
Speaker 3: that people disclose sets disclosed international holdings do the right thing.
25:03
Speaker 3: But I'm sure there is examples of that not being
25:06
Speaker 3: the case.
25:07
Speaker 1: But yeah, and of course, once upon a time whatever
25:09
Speaker 1: Swiss accounts. So we're only for the very very wealthy.
25:11
Speaker 1: You know, I can open a Swiss account in ten minutes.
25:13
Speaker 1: I could open a Swiss account when the minute we
25:16
Speaker 1: finished this show, I could have it done in twenty minutes. Yes, okay, terrific,
25:20
Speaker 1: Very interesting, Nathan. I think we might hold it there
25:23
Speaker 1: and go to questions, and I expect we may get
25:26
Speaker 1: some questions off the back of today's show specifically, but
25:30
Speaker 1: let's see all right back in a moment. Hello, Welcome
25:41
Speaker 1: back to the Australians Money Puzzitive podcast James Kirkby with
25:44
Speaker 1: Nathan Fradley. Wasn't that interesting, folks? On how divorce the
25:48
Speaker 1: financial the financials of divorce. I hope it was useful
25:51
Speaker 1: to youth the show wanted to do for some time. Hey, Nathan,
25:55
Speaker 1: just before on the questions that are of course not
25:57
Speaker 1: necessarily enough about divorce, they are this week's questions. You're
26:01
Speaker 1: a financial advisor the government we're in the middle of
26:04
Speaker 1: an election. There was also some promises about financial advice
26:07
Speaker 1: being reformed and straightened out. Here we are with only
26:10
Speaker 1: a short period to go before the election. Did they
26:14
Speaker 1: make any progress? Do you think on financial advice and
26:17
Speaker 1: how it works for as far as most people are concerned?
26:20
Speaker 1: In terms of simplifying it, in terms of widening the
26:23
Speaker 1: availability of advice to everybody.
26:27
Speaker 3: I think that they did some things. Some changes happened,
26:33
Speaker 3: but nothing I would say that moved the needle enough.
26:36
Speaker 3: There was one experience exemption for education standards, which came
26:40
Speaker 3: in so late that I think a lot of people
26:42
Speaker 3: who had the experience, who didn't do the education would
26:45
Speaker 3: have left the industry already.
26:47
Speaker 2: And they proposed a piece of legislation.
26:49
Speaker 3: Then they didn't go down very well, so they changed
26:51
Speaker 3: the acronym and re launched it, and then they launched
26:55
Speaker 3: a half version of that right beforehand. But if I
26:58
Speaker 3: went the full term the industries largely it's changed, It's evolved,
27:04
Speaker 3: but not at the end of any substantial show.
27:07
Speaker 1: At the end of the day, this is all about
27:08
Speaker 1: how much financial advice costs, and if it costs five
27:11
Speaker 1: thousand a year or so to have an annual review
27:14
Speaker 1: of your advice. These are industry figures when we're talking
27:19
Speaker 1: about specific projects. Unfortunately, divorce being the issue of djuur,
27:25
Speaker 1: here any guidelines to what it would cost people to
27:28
Speaker 1: use an advisor.
27:30
Speaker 3: In the situation my I cank my face sit somewhere
27:35
Speaker 3: around seven and a half to thirty depending.
27:38
Speaker 1: We'll leave it at that. We'll assume that is a
27:40
Speaker 1: sort of industry standard, and that is quite a ranger
27:42
Speaker 1: give us.
27:42
Speaker 2: It's much more than the standard.
27:44
Speaker 1: Or I see, Pat asks, do you think the big
27:46
Speaker 1: super funds like A or T being now? I think
27:50
Speaker 1: the number two fund, because of course it was the
27:53
Speaker 1: combination of Sun Super and q C will return a
27:56
Speaker 1: positive or negative return at the end of this year
27:59
Speaker 1: and the next. I be better off putting my money
28:01
Speaker 1: in a bank term deposit Number one. Pat, We don't
28:03
Speaker 1: give advice number two. We are not going to talk
28:06
Speaker 1: about whether that particular fund art will give you a
28:09
Speaker 1: positive or negative return. But we're happy to talk about
28:11
Speaker 1: whether all the funds, the big funds, the Austrian super
28:16
Speaker 1: Uni super Art and all the usual suspects, Host plus
28:19
Speaker 1: aware on they go, will they give a positive or
28:22
Speaker 1: negative return at the end of this year and the next.
28:25
Speaker 1: Nobody knows, Pat, Sorry, nobody knows the future. Even on
28:28
Speaker 1: this show. We don't know the future. But the second
28:31
Speaker 1: part of your question, would I be better off putting
28:33
Speaker 1: my money in a bank deposit? Nathan, I come into
28:35
Speaker 1: you and I say I'm in industry fund or retail
28:38
Speaker 1: fund number four. They've had some really good years and
28:42
Speaker 1: it looks pretty bad this last few months. I see
28:45
Speaker 1: that they will be lucky to pull off a positive
28:48
Speaker 1: return this year. Should I put my money in a
28:50
Speaker 1: term bank deposit? In other words, should I go to cash?
28:53
Speaker 1: What do you say?
28:56
Speaker 3: My answer, which I'm sure is frustrating, is it largely
28:59
Speaker 3: depends on who you are, what your situation is.
29:00
Speaker 1: What did it ever make sense to order cash.
29:03
Speaker 3: If maybe you needed the money in the next twelve
29:06
Speaker 3: months and you any loss of capital would mean you
29:11
Speaker 3: couldn't achieve what you needed to achieve, or the thought
29:14
Speaker 3: of losing any money kept you awake at night. But
29:17
Speaker 3: trying to time the perfect day to do that, as
29:20
Speaker 3: we've known with recent volatility, let alone normal volatility, is
29:23
Speaker 3: impossible and you will get it wrong.
29:25
Speaker 1: Okay, but it's worth anning. We've had the worst day
29:29
Speaker 1: on the share market since COVID, and we've had the
29:31
Speaker 1: best day since COVID on the share market in recent weeks.
29:36
Speaker 1: In fact, it happened inside a week. These are wild times.
29:39
Speaker 1: And the other thing I think that's important to anyone
29:42
Speaker 1: considering going to cash, going partially to cash, is that
29:46
Speaker 1: the rates are dropping. You might tune into the show
29:49
Speaker 1: with Liam Short, which was the last recorded show, where
29:54
Speaker 1: he is explaining that though the RBA only official rates
29:58
Speaker 1: by a quarter of percent, banks, don't you love it.
30:01
Speaker 1: They've already cut in three times. They've put the equivalent
30:04
Speaker 1: of three RBA quarter percent cuts in already to the
30:06
Speaker 1: bank deposits. So they are dropping, my friends, unfortunately, just
30:10
Speaker 1: when you want them, of course, to be an alternative
30:13
Speaker 1: but all relevant, I hope for you, Pat all right, Luke, Well,
30:17
Speaker 1: he just wants to make the point that I have
30:19
Speaker 1: We had mentioned in the show that some people might
30:22
Speaker 1: say in rocky markets, volatile markets like we're having, that
30:27
Speaker 1: they are frustrated with big super funds and feel powerless,
30:30
Speaker 1: and that perhaps it would be time to have a
30:33
Speaker 1: self managed superfund. And I don't know if this is
30:37
Speaker 1: a coincidence, but self managed super funds are about to
30:40
Speaker 1: record their best year for a long best year ever,
30:42
Speaker 1: forty thousand commencements apparently on the way. And so Luke says,
30:49
Speaker 1: a self managed super fund is completely unnecessary for listed assets,
30:54
Speaker 1: and I'm not sure how you could justify it for
30:58
Speaker 1: this purpose, especially a portfolio of exchange traded funds. The
31:03
Speaker 1: additional layer of costs adds up. Even an industry super
31:09
Speaker 1: fund allows you to select your investments, and as thet
31:11
Speaker 1: allocations the reasoning provided of market volunteerity is no reason
31:16
Speaker 1: to go to a self managed super fund. I don't know.
31:20
Speaker 1: It depends who you are and your level of confidence
31:22
Speaker 1: in your level of understanding in the markets. I do
31:26
Speaker 1: take the point though, it's fair enough, isn't it. But
31:29
Speaker 1: luc is saying that you can have ANYTF option now
31:33
Speaker 1: in big industry funds more unless you can say okay,
31:36
Speaker 1: So if you had ten ETFs in an industry super fund,
31:38
Speaker 1: you do wonder why you would have a super fund,
31:40
Speaker 1: a self manageable fund that just had ten ETFs, and
31:43
Speaker 1: comparing one against the other, you wonder whether it be
31:46
Speaker 1: worth the effort.
31:48
Speaker 3: I think it's my general philosophy so that I can
31:50
Speaker 3: do it simpler, easier, or with less riskquy wouldn't I?
31:53
Speaker 3: And so if the ETFs that you're wanting to invest
31:56
Speaker 3: in you want some control, you want to take out
31:58
Speaker 3: of it at some level. If they're available and you
32:01
Speaker 3: can put the weight in them that you'd like to,
32:04
Speaker 3: because that's often a limiting factor, then and you can
32:07
Speaker 3: do it at a cheaper cost, with less responsibility and
32:10
Speaker 3: less administration.
32:11
Speaker 2: Why wouldn't you.
32:12
Speaker 3: I think where people have ETF portfolio that aren't available
32:16
Speaker 3: on these menus, Remember they are restricted, they're going to
32:18
Speaker 3: take a more conservative view on what they can add
32:21
Speaker 3: because they're on the hook for allowing their members.
32:24
Speaker 1: So they've got to be there's very much the sort
32:26
Speaker 1: of bread and butter vanilla.
32:29
Speaker 3: And they're going to put caps. I think there's often
32:31
Speaker 3: a complaint that maybe the cap on a Goald ETF
32:34
Speaker 3: is too low.
32:35
Speaker 1: You're talking about industry funds.
32:36
Speaker 2: Now, yeah, industry funds.
32:37
Speaker 3: Yeah, they're going to say you can only put up
32:39
Speaker 3: to twenty percent of your money in this particular ETF
32:42
Speaker 3: because of the risk grading we've given it.
32:43
Speaker 2: And that might be a reason.
32:45
Speaker 3: I think one of the big super funds was in
32:47
Speaker 3: the news recently for commentary around crypto ETFs and why
32:50
Speaker 3: they wouldn't allow people to invest in them. And if
32:52
Speaker 3: you can't do what you want to do and it
32:55
Speaker 3: makes sense to do, and you're taking control of it
32:57
Speaker 3: and responsibility for it, and you understand and the responsibilities
33:00
Speaker 3: of a self manishiper fund the work involved, then that's
33:03
Speaker 3: when you start looking at that as an option.
33:05
Speaker 1: Okay, very good, all right, I can see your I
33:07
Speaker 1: can see how your balanced demeanor is useful in the
33:10
Speaker 1: job you don Yeah, yeah, yeah, thank you very much
33:16
Speaker 1: for being on the show today. Great to talk to
33:18
Speaker 1: you again. It was a very interesting single subject show
33:23
Speaker 1: that we should have done a long time ago. It
33:26
Speaker 1: was only when I saw, when I thought about it
33:28
Speaker 1: and I thought about you, that you do that. I said,
33:30
Speaker 1: this is the time to do it. This is when
33:32
Speaker 1: there is actually something of a lull between these at
33:36
Speaker 1: this time of the year. Very good to step out
33:38
Speaker 1: and have a look at something like that. Okay, hey,
33:41
Speaker 1: thank you Nathan Fradley. Great to have you on the show.
33:43
Speaker 1: Thanks Jev, and thank you everybody for listening. Remember the
33:47
Speaker 1: email the money Puzzle at the Australian dot com dot au.
33:51
Speaker 1: Today's show was produced by Leah Sammaglu Talk to you soon,
34:00
Speaker 1: SA The Fool