Latest / The Money Puzzle / What financial risks to avoid in the year ahead (with Liam Shorte)

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What financial risks to avoid in the year ahead (with Liam Shorte) · The Money Puzzle

0:10
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirkby, the Wealth editor at The Australian. Welcome aboard everybody, Well,
0:18
Speaker 1: how is your financial year going? We are moving towards
0:22
Speaker 1: the end of January. You've had a few weeks now.
0:24
Speaker 1: Have you enacted those plans formulating in your mind all
0:28
Speaker 1: through the holidays about what you were going to do?
0:31
Speaker 1: Have you got on top of those posts you had
0:33
Speaker 1: about maximizing your situation as an investor? Have you sold
0:37
Speaker 1: those stocks that you know are no good and you
0:41
Speaker 1: won't let go? And most importantly, have you got a plan?
0:45
Speaker 1: Have you got a plan for this year? And my
0:47
Speaker 1: guest today is what I would think of as a
0:49
Speaker 1: classic financial planner and keeps his eyes firmly fixed on
0:53
Speaker 1: the issues that matter most two investors, and that often
0:56
Speaker 1: comes down to actual detail or the nitty grit if
1:00
Speaker 1: you like, of managing money as much as it does
1:03
Speaker 1: what we all have to talk about, which is markets
1:05
Speaker 1: and global forces and geopolitics which drive markets seem short
1:12
Speaker 1: of the Sonas Group, He's volunteer to answer the first
1:15
Speaker 1: batch of questions from investors for the year. How are
1:21
Speaker 1: you Liam.
1:22
Speaker 2: I'm very good. James has a lovely breakover Christmas in
1:24
Speaker 2: New Year, so ready to go for twenty twenty five.
1:27
Speaker 1: I like the sound of that. I like the sound
1:29
Speaker 1: of the refreshed guest. Very good, very good. All right
1:33
Speaker 1: now we still are just about and perhaps no more
1:37
Speaker 1: after this, but I think people do like to reset
1:40
Speaker 1: and get a sense of, you know, how is last
1:42
Speaker 1: year of what's coming down the line. We've covered that
1:45
Speaker 1: in the show fairly well, and most people would have
1:47
Speaker 1: listened now to the summer series where we laid out
1:51
Speaker 1: what the expectations are and some guides if you like,
1:54
Speaker 1: for the year ahead in all acid classes, shares and
1:57
Speaker 1: property and everything else. Just from your point of view, Liam,
2:01
Speaker 1: in terms of every year, some planners will be so
2:05
Speaker 1: sort of focused on a textbook approach. Would be like
2:09
Speaker 1: that they refuse to think that there's anything different one
2:12
Speaker 1: year after another, that the basic stay the same, but
2:14
Speaker 1: there's always new things. And just give us, if you would,
2:17
Speaker 1: your estimation of what the risks and opportunities are specifically
2:22
Speaker 1: this year. What about the risks, because I know there
2:24
Speaker 1: is there's certainly some points you want to make.
2:26
Speaker 2: Now we've had a couple of good years for people
2:28
Speaker 2: to invest in cash and fixed interest term of positive
2:31
Speaker 2: rates have been above five percent, and they did really well,
2:35
Speaker 2: and they've got accustomed to it. And now what we're
2:37
Speaker 2: seeing is as those rates start to drop and people
2:41
Speaker 2: understand that they're probably going to drop a fair bit
2:43
Speaker 2: in this year, probably about over zero point eight percent
2:47
Speaker 2: by the end of the year, but it's still a
2:49
Speaker 2: drop below that five percent. Key what I'm afraid of
2:51
Speaker 2: is that people are now going to be poached or
2:54
Speaker 2: attracted to new investments that are still offering more than
2:58
Speaker 2: five percent and in some case is double that by
3:01
Speaker 2: making it sound like they're safe investments. That The one
3:04
Speaker 2: I'm worried about is private credit and private equity. Often
3:07
Speaker 2: these are badged up as wholesale investments sold to wholesale investors,
3:12
Speaker 2: which means it just means somebody with assets over two
3:15
Speaker 2: and a half million or an income over two hundred
3:18
Speaker 2: and fifty zer now in one of the capital cities
3:21
Speaker 2: that a person's house may qualify them for that. So
3:24
Speaker 2: what concern is these investments are being targeted at people
3:29
Speaker 2: because their wholesale investor status, they don't have to give
3:32
Speaker 2: as much information. There's no protection in the background if
3:36
Speaker 2: it goes wrong, because they're not retail funds. So all
3:40
Speaker 2: I'm saying to people is, instead of trying to chase returns,
3:44
Speaker 2: understand that the cash raid is going to drop a
3:46
Speaker 2: little bit and your term deposits will drop a bit.
3:49
Speaker 2: Maybe look to do a two or three year term
3:51
Speaker 2: to posit that your four point seven or four point
3:53
Speaker 2: eight percent rather than worrying about, you know, sort of
3:56
Speaker 2: trying to get more than five percent in a different investment.
3:59
Speaker 1: That's thing you know, people have we you know this
4:02
Speaker 1: can't this this broadcam census and team that rates cycle
4:06
Speaker 1: the top, then that rates will fall in the year ahead.
4:09
Speaker 1: I've not actually come I'm not entirely convincedly in myself
4:11
Speaker 1: that they will, but they may, and the US certainly,
4:15
Speaker 1: I'm particularly not convinced that they might fall anymore.
4:17
Speaker 2: There.
4:18
Speaker 1: But having said that, that doesn't matter, because the banks
4:21
Speaker 1: will upset their rates anyway, won't they. They'll do what
4:24
Speaker 1: they like regardless of official rates to some degree. So
4:27
Speaker 1: you're altually coming upon this when you talk about this
4:30
Speaker 1: whole rush to private credit and unlisted opportunities, but mostly
4:37
Speaker 1: what they call private credit. Private and let's distinguish that
4:41
Speaker 1: from private equity or whatever. This is private credit where
4:44
Speaker 1: people are it's put in front of investors that they
4:48
Speaker 1: can get in on this sort of line of business
4:50
Speaker 1: that was always there, and for some reason we are
4:53
Speaker 1: led to believe that all of a sudden it suits everyone.
4:57
Speaker 1: And why hadn't everyone been in it all the time?
5:00
Speaker 1: Tell me, if you would, how that comes across and
5:04
Speaker 1: how how are people like our listeners encountering this. Is
5:08
Speaker 1: it in the way of a listed option, a listed
5:11
Speaker 1: investment on the market. Is it a private fund? How
5:14
Speaker 1: how does this stuff get offered? Is it just ads
5:16
Speaker 1: basically in newspapers and on websites.
5:19
Speaker 2: Yeah. Look, often it's being prompted by you know, promotion
5:23
Speaker 2: to accountants or to probably trusted advisors, and they're you know,
5:27
Speaker 2: they're being sold. But it's usually unlisted and you're talking
5:31
Speaker 2: a managed funder unit trust. The key factors that we've
5:34
Speaker 2: seen it is because it's private credit, it's loans to companies,
5:38
Speaker 2: and a lot of this has come from the fact
5:39
Speaker 2: that in construction of property development at the moment, they're
5:42
Speaker 2: finding it hard to raise money from the normal lenders,
5:45
Speaker 2: the banks and other providers, so they're looking for an
5:49
Speaker 2: alternative source of financing, and that's where these private credit
5:52
Speaker 2: funds are built up. So they're packaging up these It
5:55
Speaker 2: might be you know a number of different developments around
5:58
Speaker 2: the country and you're funding that the developer. But it
6:01
Speaker 2: doesn't really sound like that in the perspectives. It's just
6:04
Speaker 2: and it is a very short perspectives because it's for wholesale.
6:08
Speaker 2: It's basically been sold as you know sort of, it's
6:10
Speaker 2: you lending to private companies, you know, and it's pretty
6:14
Speaker 2: secured secured over investments, and you know, but you know,
6:18
Speaker 2: you start looking at things like it may be locked
6:20
Speaker 2: in for three to four years, so there's no liquidity,
6:23
Speaker 2: there's no guarantee on the return on the investments, even
6:26
Speaker 2: though there's assets backing it. Well. You know, for example,
6:29
Speaker 2: if there's a development that falls apart and doesn't go ahead,
6:34
Speaker 2: most of the money could be lost on that. It
6:36
Speaker 2: just depends on what they recover selling the land that's there.
6:39
Speaker 2: So I just warned people to to think twice, get
6:43
Speaker 2: an independent view of something like that, and really ask themselves,
6:48
Speaker 2: am I a wholesaler sophisticated investor do it have I
6:51
Speaker 2: really got the knowledge to manage something like this and
6:54
Speaker 2: to be involved in something like this, and there is
6:58
Speaker 2: the person who's selling it to be are they connected
7:00
Speaker 2: to it in any way integrated?
7:03
Speaker 1: I must ask you two things. One is, this isn't
7:07
Speaker 1: all private, right? There is listed versions of this, isn't there?
7:09
Speaker 2: Yes?
7:10
Speaker 1: So that means you don't have to be a sophisticated investor, right.
7:12
Speaker 1: So if it's on the share market, you can buy
7:15
Speaker 1: five hundred buxworth. So but as you say, the sort
7:18
Speaker 1: of target audience is so cold sophisticated investor audience, which
7:23
Speaker 1: is something of a misleading term these days if it
7:26
Speaker 1: was ever or anything else, but certainly misleading these days
7:29
Speaker 1: because it allows the seller of the product to not
7:31
Speaker 1: take half as many as they don't have half as
7:33
Speaker 1: much responsibility to you because you're classified as sophisticated. You're
7:37
Speaker 1: classified sophisticated. Nothing to do with your sophistication, just a
7:40
Speaker 1: matter of your bank accounts and how much you have.
7:42
Speaker 1: And they haven't indexter changed that threshold. Consequently, the number
7:48
Speaker 1: of people who qualify has become enormous, really, and they
7:51
Speaker 1: are reviewing that, but for the moment everyone's taking advantage
7:55
Speaker 1: of it. I went to a presentation with the top
7:58
Speaker 1: really the top and I'm not want to pin someone here,
8:01
Speaker 1: but I went to the presentation from the leading private
8:04
Speaker 1: credit group probably in Australia and one of the originals.
8:09
Speaker 1: And of course people would have made money out of
8:11
Speaker 1: this fund and funds from this house in the early days,
8:15
Speaker 1: and now of course they see now they just know,
8:18
Speaker 1: you know, this is what we're going to go for
8:19
Speaker 1: the middle Australia. We can get the average investor. And
8:22
Speaker 1: the same group has gone very big and they've moved
8:25
Speaker 1: from their little suburban office block up in the suburbs
8:30
Speaker 1: into the middle of town. I'm sure you have an
8:33
Speaker 1: idea who I'm talking about. Anyway, it was such a
8:36
Speaker 1: good presentation. It was so convincing, and it was about
8:39
Speaker 1: how the banks were pulling back and the banks weren't
8:41
Speaker 1: really lending anymore, and this was the opportunity for lifetime
8:46
Speaker 1: and you know, don't miss this, You're going to If
8:48
Speaker 1: you miss this, you're going to regret it. Blah blah blah,
8:52
Speaker 1: And it was quite convincing. What's the flow in their presentation?
8:55
Speaker 1: Do you think.
8:56
Speaker 2: It's the nature of the assets that are backing these
9:00
Speaker 2: funds has changed dramatically since COVID. The financing is tougher
9:04
Speaker 2: materials have gone up to cost the trades to complete
9:08
Speaker 2: these developments, and council requirements to complete these developments. Is
9:11
Speaker 2: it all?
9:11
Speaker 1: It's propertly Liam, is it?
9:12
Speaker 2: I mean?
9:13
Speaker 1: Is there nothing else to these guys are doing?
9:14
Speaker 2: There is some yeah, you know, we talked to private
9:18
Speaker 2: equity separate, but there's also you know, financing for companies
9:21
Speaker 2: that want to do some growth and things like that.
9:23
Speaker 2: The ones I'm worried about are the ones that are
9:25
Speaker 2: backing construction. I know that we have to build in
9:28
Speaker 2: this country, and I know that's required, but I don't
9:31
Speaker 2: think that should be done on the back of people
9:32
Speaker 2: that don't understand what they're getting into. If I was
9:35
Speaker 2: doing funding a private developer, I would be wanting eighteen
9:38
Speaker 2: to twenty five percent return. So when somebody sees something
9:41
Speaker 2: that says ten to twelve percent and it's a great opportunity,
9:44
Speaker 2: I don't think that's a great opportunity because you're taking
9:46
Speaker 2: a lot of risk that the development can go wrong,
9:49
Speaker 2: and we you know, I think there's over seven hundred
9:51
Speaker 2: construction companies went bust in Victoria last year, and I'm
9:54
Speaker 2: not sure the number of New South Wales and the
9:56
Speaker 2: other States. But that should tell you alone. And the
10:01
Speaker 2: thing you mentioned the banks are pulling back from this area. Yeah,
10:05
Speaker 2: the banks have assessed the risk and decided.
10:07
Speaker 1: It's too book. That's right. It was good, it was
10:11
Speaker 1: good business. You'd imagine they'd be in there. I want
10:13
Speaker 1: to simplify it, but there is that line of thinking, okay,
10:16
Speaker 1: very good. So it's interesting that to do this with you,
10:19
Speaker 1: just to sort of narrow down and say, Okay, there
10:22
Speaker 1: standing risk and what about the harder question imagined for
10:25
Speaker 1: someone like you to answer, what about the outstanding opportunities
10:28
Speaker 1: This year?
10:28
Speaker 2: It can be really volative, continued volatile year. There's a
10:31
Speaker 2: bit of euphoria today that Gazza seems to be you
10:35
Speaker 2: on its first step, but that that could fall apart
10:38
Speaker 2: very quickly, and if it does, then may be a
10:40
Speaker 2: shock to the market. So this is a year to
10:43
Speaker 2: keep some money in cash. Trump is coming in. If
10:45
Speaker 2: he suddenly announces tariffs or threadns tariffs, the markets may drop.
10:51
Speaker 2: That's always his first gamble gambit, so he often pulls
10:54
Speaker 2: back from that. So when he does threaten them, the
10:57
Speaker 2: markets may fall. That maybe your time to buy into
10:59
Speaker 2: a nicely diversified ETF and just get yourself a little
11:02
Speaker 2: bit of extra exposure and just ride that wave of
11:05
Speaker 2: recovery once he calms down and says, okay, instead of
11:08
Speaker 2: a twenty five percent taro, if I'm going to do
11:09
Speaker 2: a five percent taro for you know, I'm not going
11:12
Speaker 2: to attack Canada and Mexico because they are good.
11:14
Speaker 1: Neighbors in itself. By the dips. Is this fairly bullish view,
11:19
Speaker 1: isn't it?
11:20
Speaker 2: Well? If if you're buying into a solid blue chap
11:23
Speaker 2: etf well diversified for the long term, it's nice to
11:26
Speaker 2: get in at five or ten percent below where it's
11:29
Speaker 2: currently trading. Yeah. And I'm a long term investor, James,
11:32
Speaker 2: So I'm not trying to trade the market. I'm just
11:34
Speaker 2: looking for opportunities for at the moment, I'm looking at
11:37
Speaker 2: it and going, oh, I really don't want to put
11:39
Speaker 2: more into the market at the moment. But if I've
11:41
Speaker 2: got an opportunity to get in at five or ten
11:43
Speaker 2: percent less, yeah, So for the long term, I'd like
11:46
Speaker 2: to just move a little bit of money from cash
11:48
Speaker 2: and fixed interest where we've done really well, just to
11:51
Speaker 2: take a little bit of an extra risk going forward.
11:53
Speaker 2: But also I'm taking some money out of things like
11:55
Speaker 2: CommonWell Bank and things that just can't back their valuations.
12:01
Speaker 2: And I'm just saying a lot of my clients are
12:02
Speaker 2: in pension phase, so there's no CGT, so I'm able
12:05
Speaker 2: to take some money out of there, and just I'm
12:07
Speaker 2: looking for opportunities of where to place that.
12:09
Speaker 1: Okay, that's right, Okay, very interesting two issues there. One
12:13
Speaker 1: is obviously that idea that the fixed interest has the
12:17
Speaker 1: cycle has topped, as you say, and you said at
12:20
Speaker 1: the start, perhaps if you still want that, perhaps you
12:23
Speaker 1: fix at the inn and around these levels, knowing that
12:25
Speaker 1: you know, there's very few times in history really where
12:28
Speaker 1: you get where your cash rad is above this to say,
12:32
Speaker 1: four to six percent. That's a sort of standard range,
12:34
Speaker 1: isn't it.
12:35
Speaker 2: And I was just getting some quotes this morning, James.
12:38
Speaker 2: So you can get a four year annuity for four
12:42
Speaker 2: point nine percent, or a five year one at four
12:44
Speaker 2: point nine to five. So that's locking in four point
12:47
Speaker 2: nine five percent paid each year for the next five years.
12:50
Speaker 2: You know, if you're somebody in pension phase that needs
12:52
Speaker 2: to fund your your pensions, that's a lovely guarantee for
12:56
Speaker 2: the next time.
12:57
Speaker 1: That's you said, a newity. That's not a fix. That's
12:59
Speaker 1: not that cash deposit.
13:01
Speaker 2: Yeah, the term deposits. For the same time, you're looking
13:04
Speaker 2: at four point five to four point seven, So you
13:07
Speaker 2: can get that a little bit extra by going through
13:10
Speaker 2: an annuity provided and there's challenger and resolution life and comeback.
13:14
Speaker 2: So just shop around and just have a look.
13:17
Speaker 1: You're putting cash with the annuity provider, is.
13:19
Speaker 2: It, yes, into a fixed term annuity?
13:23
Speaker 1: Yes, I see a right, okay, and they tend to
13:25
Speaker 1: pay a little more, do they.
13:26
Speaker 2: Yeah, well, at the moment they do. Okay, you can
13:29
Speaker 2: still get The trick is you can open an incentive
13:32
Speaker 2: save over with one of the banks, or you know,
13:33
Speaker 2: a high interest savings acount and still get over five.
13:36
Speaker 2: But we know at some stage during the year that's
13:38
Speaker 2: going to drop. Even if interest rates don't drop, the
13:41
Speaker 2: banks will start dropping them themselves. You had three months
13:44
Speaker 2: ago the term deposit rates dropped the four point seventy
13:46
Speaker 2: five because the thought rates would really start dropping from February.
13:50
Speaker 2: Now we're back up to where we can get five
13:52
Speaker 2: percent for term deposits at the moment for one year,
13:54
Speaker 2: four point nine for two years, and then it starts
13:57
Speaker 2: dropping off. But when I was so I was looking
13:59
Speaker 2: for alternatives. And I looked at some the nudities over
14:01
Speaker 2: the last few days and I can get four point
14:04
Speaker 2: seven to four point nine to five from two year
14:06
Speaker 2: to five years. So you talk about laddering to make
14:10
Speaker 2: sure that you're covering your future capital needs to pay
14:13
Speaker 2: pensions or to pay your living expenses. And by using
14:16
Speaker 2: those term the puzzles and the nudies over twelve twenty four, yeah,
14:20
Speaker 2: three years, four years, and five years, they can lock
14:23
Speaker 2: in and be sure that then with the rest of
14:25
Speaker 2: their money, they don't have to react to market changes.
14:28
Speaker 2: They can invest longer term knowing that they've covered their.
14:31
Speaker 1: Cost, they've got this core and they know they're going
14:33
Speaker 1: to get for it over a period of time. Very yeah,
14:36
Speaker 1: very interesting. Okay, all right, And just on the other issue,
14:39
Speaker 1: just before we go to the break, taking some off
14:42
Speaker 1: the table. Obviously, after a very good year on equity markets,
14:45
Speaker 1: there are certainly a very good year when we look
14:47
Speaker 1: at it, it was only it was a goodish year
14:49
Speaker 1: for equity markets, but it was a spectacularly year for
14:52
Speaker 1: bank stocks. So you're talking about taking a little bit
14:54
Speaker 1: off the top of the bank stocks.
14:56
Speaker 2: Yeah, and look last year I was winging that back
15:00
Speaker 2: in nab and an Ain said, we're so far behind
15:03
Speaker 2: and they just had they had a great year and
15:05
Speaker 2: they've pulled up. I don't understand Commonell Bank at the
15:08
Speaker 2: moment why it's up where it is. So I am
15:10
Speaker 2: taking profits on that, but you know, I'm not coming
15:13
Speaker 2: out of them. I'm just saying, you know, let's just
15:15
Speaker 2: take a bit of a risk off the table. It's
15:17
Speaker 2: been a good run and you know, you know, in
15:21
Speaker 2: a lot of cases now I need to prepare for
15:23
Speaker 2: future pension payments and things like that. So I am
15:27
Speaker 2: just building up that cash with the idea that if
15:29
Speaker 2: the market does take a big drop, I have the
15:31
Speaker 2: option to go in and get in a little low
15:34
Speaker 2: price if I need to.
15:35
Speaker 1: Right, Okay, very good, Very good. All right, we'll take
15:38
Speaker 1: short break, Folks'll be back in a minute. Hello, Welcome
15:48
Speaker 1: back to the Australians and Honey Puzzle podcast. I'm James Kirby,
15:51
Speaker 1: was editor at The Australian, talking to financial advisor Liam
15:54
Speaker 1: Short of the Sonas Group, who's often on the show.
15:57
Speaker 1: Always a popular guest. I'm one of my first guests
16:01
Speaker 1: of the year for the Money Puzzle. Okay, Liam, I've
16:05
Speaker 1: collected quite a few questions for you. We may not
16:07
Speaker 1: get through them all, and keep the questions coming everybody.
16:11
Speaker 1: They're really good, and I've noticed that they're getting more
16:13
Speaker 1: and more diverse in nature, which is great actually, and
16:17
Speaker 1: all sorts of Sometimes people literally just make a comment
16:20
Speaker 1: or an observation. That's all welcome. Okay, Catherine says, I
16:26
Speaker 1: love the podcast. I'm so glad. I wish I'd come
16:28
Speaker 1: across this sort of information years ago. Thank you, Catherine.
16:32
Speaker 1: The hard part for me was understanding and making the
16:34
Speaker 1: first investment, taking that initial plunge, then coping with everything else.
16:39
Speaker 1: I guess I learned by doing, But in hindsight I
16:43
Speaker 1: really had issues finding good, clean information and independent advice.
16:47
Speaker 1: I do not really think it is possible to make
16:49
Speaker 1: good decisions without having basic knowledge, given the number of
16:53
Speaker 1: bad operators out there. Okay, Catherine, now can you please
16:58
Speaker 1: talk about it realistic long term journey to financial literacy
17:03
Speaker 1: and security. Please and recommend basic courses on finance because
17:07
Speaker 1: I have found there is a lot of bad advice
17:09
Speaker 1: out there. Okay. It's a great question, you know, with
17:14
Speaker 1: something we should cover more often. Someone who's starting or
17:18
Speaker 1: is somewhere near the start of an investment journey. And
17:22
Speaker 1: I wish I do wish I could tell you there's
17:24
Speaker 1: a course that you can sign up for. I really do.
17:28
Speaker 1: I don't know it, and I hate to tell you
17:31
Speaker 1: that a lot of the private courses are deeply skeptical
17:34
Speaker 1: about courses offered by anyone selling anything. What do you think, Liam, Yeah.
17:39
Speaker 2: Well look for me. There's two things you need to
17:41
Speaker 2: start with. One, understand your cash flow. So just go
17:45
Speaker 2: to moneysmart dot co the you and look for the
17:47
Speaker 2: budget planner.
17:48
Speaker 1: It's good, Yeah, to download that.
17:50
Speaker 2: Budget planner spreadsheet and get out six months of credit
17:54
Speaker 2: card and debit card and expenses and put it into there.
17:56
Speaker 2: Have a glass of wine, just take your time doing it.
17:59
Speaker 2: But the value of understanding whether or not you've got
18:01
Speaker 2: spare money to save or whether you've got commitments that
18:04
Speaker 2: mean you can't take a risk, that's the first a
18:07
Speaker 2: deal goal. And then go back to that money Smart
18:10
Speaker 2: website and start reading some of the articles on different
18:13
Speaker 2: things in there.
18:14
Speaker 1: Okay, I mean we should tell listeners that the particular
18:17
Speaker 1: attraction of the money Smart website is said, it's from
18:19
Speaker 1: the government, it's from ask and it's something that Acik
18:22
Speaker 1: has done and stuck with and it's evolved and it
18:25
Speaker 1: is damn good. So money Smart, which is money smart
18:29
Speaker 1: dot gov dot au, the ACIIC website where whatever else
18:33
Speaker 1: is going on at that website and whatever is the
18:35
Speaker 1: nature or the articulation of ideas And initially, if you
18:40
Speaker 1: like basic elementary investment ideas and protections for you, it
18:47
Speaker 1: is from the government and they are not selling anything.
18:51
Speaker 2: And then move on from there when you're ready to
18:53
Speaker 2: start learning about investing. Then if you want to know
18:55
Speaker 2: about shares and listed products, the ASEX have courses on shares, ETFs,
19:03
Speaker 2: bonds and they're all split down into nice little short
19:06
Speaker 2: modules of about ten to fifteen minutes each, really easy
19:10
Speaker 2: to understand. If you're interested in SMSF, the ATO have
19:14
Speaker 2: a set of about twenty six little two to three
19:16
Speaker 2: minute videos on every aspect of running an SMSF. And
19:20
Speaker 2: they've also now just issued a course. The course, I'm
19:24
Speaker 2: afraid is not what I expected. It's they've designed it
19:27
Speaker 2: as the one to punish people who broke the rules
19:29
Speaker 2: and force.
19:30
Speaker 1: Them to read it, so they spend all their time
19:33
Speaker 1: thinking of telling you what not to do.
19:35
Speaker 2: Yeah, well, it's just it's very boring. It's all written,
19:38
Speaker 2: whereas those videos were excellent. So I would start with
19:41
Speaker 2: the videos and then move to the thing, and then
19:44
Speaker 2: just start going. If you're interested in something specific, go
19:48
Speaker 2: onto a forum maybe on Facebook or somewhere that's talking
19:51
Speaker 2: about those forget about what they're recommending on there. Listen
19:55
Speaker 2: look for what people say where they learned from. You know,
19:59
Speaker 2: they if they the course they did or a book
20:01
Speaker 2: that they read. And that's why I go back to
20:03
Speaker 2: that money Smart. I know a lot of people love
20:05
Speaker 2: Scott Papes Pare for the Investor and things like that.
20:08
Speaker 2: I believe now he might be doing a lot of
20:10
Speaker 2: work with money Smart. So you're looking for your places
20:15
Speaker 2: where you're getting educational content and no one's trying to
20:18
Speaker 2: sell you anything. Like as a financial advisor, I'm not
20:21
Speaker 2: licensed to sell property or to advise on property. But
20:25
Speaker 2: because I do SMSFS, I've got a whole section on
20:27
Speaker 2: my SMSF coach, So I have fifteen different articles on
20:31
Speaker 2: everything to do with property in an SMSF purely because
20:34
Speaker 2: if I have someone who comes to me and wants
20:36
Speaker 2: to know whether it's right for them, I want them
20:38
Speaker 2: to be educated about it and know the risks and
20:41
Speaker 2: know what they can do before they commit to doing
20:43
Speaker 2: something like that.
20:44
Speaker 1: Terrific Okay, yeah, yeah, Catherine, keep that in mind and
20:48
Speaker 1: everyone keep that in mind. So I did like the
20:51
Speaker 1: ideas they're the money Smart okay, which is on by ASIC,
20:55
Speaker 1: which is own by the government, as the sort of
20:57
Speaker 1: elementary protect yourself because you've got to protect first for
21:00
Speaker 1: do anything. I think that's a very well good way.
21:02
Speaker 1: In Liam, the ATO, the Australian Tax Office on this
21:06
Speaker 1: is on super and on SMS in particular, as Liam
21:10
Speaker 1: says that I imagine the weakness of the ATO delivery of
21:15
Speaker 1: information is that they're so concentrated on what you're not
21:18
Speaker 1: allowed to do they might forget to tell you what
21:20
Speaker 1: you can do. That's because they are the regulator as well.
21:22
Speaker 1: But anyway, it is the government rather than someone's selling something.
21:26
Speaker 1: You mentioned the AX, which is a course a listed company,
21:29
Speaker 1: but nonetheless, traditionally it was very strong on education, used
21:32
Speaker 1: to be very good. I went through a patch where
21:34
Speaker 1: they were where they weren't very good, and I think
21:37
Speaker 1: they definitely have revived considerably the AX. And it's interesting
21:40
Speaker 1: to hear that they have those short videos, courses and modules.
21:43
Speaker 1: So that's another place you could look, and I would
21:45
Speaker 1: trust them on that issue of education and education alone
21:49
Speaker 1: very good. So hopefully that's a start, Catherine. I mean, yes,
21:52
Speaker 1: there's books, Yes, there are courses, extreame. I think the
21:58
Speaker 1: talking off the cuff here. Scariest thing I see in
22:00
Speaker 1: terms of people getting to know investing is people who
22:03
Speaker 1: don't know anything starting into something ridiculously elaborate, like trading
22:09
Speaker 1: CFOs or warrants or options. As if you could walk
22:12
Speaker 1: off the street and do that. I mean, I'm doing
22:14
Speaker 1: this for thirty thirty years, and I would be very
22:17
Speaker 1: and I'm qualified as a security advisor. I still wouldn't
22:20
Speaker 1: do it that way. So so let me just put
22:23
Speaker 1: that on the table or yes, thank you Catherine. Okay,
22:27
Speaker 1: a question from Brett there.
22:28
Speaker 2: Liam, Yeah, I'll read this one. Ut I have an
22:31
Speaker 2: internal debate on continuing my financial advisor, who currently manages
22:35
Speaker 2: my portfolio of three hundred and ninety thousand. I've worked
22:38
Speaker 2: out I can do it myself using index funds and
22:40
Speaker 2: morning Star services for tracking in re search, saving one
22:44
Speaker 2: point zero five in fees. My main concern is my
22:47
Speaker 2: own time. I work more than fifty hours a week
22:50
Speaker 2: in my current job, and with kids, I'm not sure
22:52
Speaker 2: I can devote enough time to manage the portfolio successfully.
22:55
Speaker 2: How much time should I expect to set aside each
22:58
Speaker 2: week to manage this myself. That goes back to what
23:00
Speaker 2: he mentioned about moving to index funds and using some
23:04
Speaker 2: morning start to manage is your portfolio or the research
23:07
Speaker 2: on it. It's whether he is he going to start trading,
23:10
Speaker 2: which you've just mentioned is a really hard thing to do.
23:12
Speaker 1: How active is he or is he going.
23:15
Speaker 2: To choose some decent diversified index funds and maybe some
23:18
Speaker 2: satellite funds and some individual stocks and just you know,
23:23
Speaker 2: keep an eye on them, but not be looking to
23:25
Speaker 2: flip them every time, you know, the market moves, so
23:28
Speaker 2: you know, if he sets it up properly, be aware
23:32
Speaker 2: that I would not do this with just individual shares themselves.
23:36
Speaker 2: I would be using index funds or managed funds. You
23:39
Speaker 2: could set them up and the most you would have
23:41
Speaker 2: to do is want to two hours a week, and
23:43
Speaker 2: most of that would be reading about what's happening in
23:45
Speaker 2: the world and understanding what's happened in the world, Even
23:47
Speaker 2: something as simple as watching Alan Coler on the seven
23:50
Speaker 2: o'clock news to understand what's going on and the effect
23:53
Speaker 2: on your portfolio. So and it may be something that
23:55
Speaker 2: he does as a bit of downtime for himself from
23:58
Speaker 2: the from working the kids. But really it comes back
24:01
Speaker 2: to that, why are you doing it if you think
24:04
Speaker 2: you can trade and beat the market? I'd say, because
24:08
Speaker 2: you're busy gonna It's gonna end up being one of
24:11
Speaker 2: those things that falls in the background. You'll have gone
24:13
Speaker 2: into some stupid stock that you had great somebody said
24:17
Speaker 2: as a great outlook, and then you go back and
24:19
Speaker 2: look at it two months later and you've lost sixty
24:21
Speaker 2: percent of your mind.
24:22
Speaker 1: Sir, you didn't look at it for a month and
24:23
Speaker 1: you said, what on earth, Oh, what's going on? Fifty percent? Yes, okay, Brett.
24:28
Speaker 1: So I hope you hear that. I would just add
24:30
Speaker 1: one thing about morning Star, and I like morning Star
24:34
Speaker 1: and I have a lot of respect from morning Star. However,
24:37
Speaker 1: I would tell you that, you know, no researcher is perfect,
24:41
Speaker 1: and their analysis is, in my experience, it's a heavily
24:46
Speaker 1: it's heavily quant it's heavily numbers based. And often I
24:51
Speaker 1: see sometimes this stuff makes perfect sense, and sometimes I
24:54
Speaker 1: see they have a stock recommended and I say, oh God,
24:58
Speaker 1: how could you recommend that, but they're working entirely on
25:01
Speaker 1: the numbers, and the numbers might well be very interesting,
25:07
Speaker 1: but I might be familiar with the company and the
25:10
Speaker 1: people and the history of that particular company, and it
25:15
Speaker 1: will completely change my view. So just keep that in
25:17
Speaker 1: mind about that sort of thing. Research. It's a straight
25:20
Speaker 1: quand research.
25:21
Speaker 2: Yeah. One thing to mention there, James, is whichever broker
25:25
Speaker 2: or online trading platform you're using, normally they'll have a
25:28
Speaker 2: research and a news section for each stock, a lot
25:31
Speaker 2: of the better ones. They'll also have a consensus section,
25:35
Speaker 2: which shows you what all the brokers are thinking about it.
25:37
Speaker 2: They may not name the brokers, see that all look,
25:40
Speaker 2: seven brokers have it as a hold, two have it
25:43
Speaker 2: as a strong buy, and one has it as a
25:45
Speaker 2: strong sell. That gives you an idea that, yes, it's
25:48
Speaker 2: probably not a bad one to get into, and then
25:50
Speaker 2: you could do a bit more research and try and
25:52
Speaker 2: find out why a few of them are recommending it.
25:54
Speaker 2: Really well. But if you suddenly find a morning starts
25:57
Speaker 2: recommending something and six other brokers are saying sell, that's fine.
26:02
Speaker 2: So that's your safety blanket to check, you know, is
26:06
Speaker 2: the thinking that of the research house I'm using, is
26:08
Speaker 2: it way out of whack with what the market thinks.
26:12
Speaker 1: And to be fair, they are not brokers in the
26:14
Speaker 1: sense they're not they're raising money for anybody, so you
26:16
Speaker 1: don't have any of those complications with morning Star. Wars
26:19
Speaker 1: is a very good thing. They're doing some very good work.
26:22
Speaker 1: I will put that down. But I personally have an
26:24
Speaker 1: observation that sometimes there's almost a certain myopic aspect to
26:29
Speaker 1: the work which is so heavily based on numbers and
26:32
Speaker 1: not what's going on around that particular stock. That's just
26:35
Speaker 1: something you see sometimes with all sorts of people, including
26:38
Speaker 1: some fund managers to who are again good, but have
26:41
Speaker 1: that issue that completely believe the numbers and the other
26:44
Speaker 1: thing is that the numbers are not true. I give
26:47
Speaker 1: the companies bullsheitting on the numbers. Well you know, I'm sorry,
26:50
Speaker 1: but the whole estimation goes out the window. Okay, we'll
26:53
Speaker 1: take short break back in a moment. Hello and welcome
27:03
Speaker 1: back to The Australian's Money Puzzle podcast. James Kirby talking
27:06
Speaker 1: to Liam Short of the Sonas Group. Sonas Group. He's
27:10
Speaker 1: a financial advisor regular on the show. So I'll just
27:13
Speaker 1: start with the one from Ranjeev, who says I would
27:15
Speaker 1: appreciate it if you could send me the list of
27:17
Speaker 1: top financial advisors published by the Australian. Yes, well, now, Rangjiev,
27:22
Speaker 1: I can't do that, but I can only point you
27:24
Speaker 1: to to how that comes out. So that's the Baron's
27:27
Speaker 1: list of the top one hundred and fifty advisor which
27:29
Speaker 1: is put together by the Australian in conjunction with Barons
27:32
Speaker 1: of New York every year. If you're really quick and clever,
27:37
Speaker 1: I would say to any listener, it's a great list
27:39
Speaker 1: worth getting, and you could just buy the magazine on
27:41
Speaker 1: the day, which is in September every year it comes out.
27:44
Speaker 1: But if you miss the magazine in paper, then the
27:47
Speaker 1: only way to see that list in its entirety one
27:51
Speaker 1: hundred and fifty advisors is to go onto the Australian
27:53
Speaker 1: and to subscribe. Nothing is free. I'm afraid someone has
27:58
Speaker 1: to pay somewhere for all this. So that's how it goes,
28:00
Speaker 1: all right for tax, Randjiev, And hopefully that would be
28:04
Speaker 1: useful to you when you do that, all right? Question
28:07
Speaker 1: from Bruce Liam.
28:08
Speaker 2: Yeah, so, Bruce asks, I always enjoy your too weekly podcast,
28:12
Speaker 2: but something that stirs me up every time that I
28:14
Speaker 2: hear you say it is that a person can only
28:16
Speaker 2: have a maximum of one point nine million in their
28:18
Speaker 2: superannuation tax free pension phase account. That is not true.
28:23
Speaker 2: So that's what he's saying, And what is true is
28:25
Speaker 2: that you can only start a pension with one point
28:28
Speaker 2: nine and they can, which you know it's correct on
28:31
Speaker 2: that point. It's called a transfer balance cap, and that's
28:34
Speaker 2: the maximum amount that you can move from accumulation to
28:37
Speaker 2: pension phase to start a pension. And at the moment
28:40
Speaker 2: that's one point nine million, probably going to go up
28:43
Speaker 2: to two million on the first of July. But yes,
28:45
Speaker 2: if it grows and let's say you earn seven percent
28:48
Speaker 2: and you're only taking four percent pension, yes your balance
28:51
Speaker 2: can go up. So that's not an issue. One of
28:53
Speaker 2: the catches that he probably you've probably been talking about
28:57
Speaker 2: is there's also called a total superbalance. Once your balance
29:01
Speaker 2: and super hits one point nine million, you can no
29:04
Speaker 2: longer put any more non concessional amounts into your super.
29:09
Speaker 2: You can only do the thirty thousand concessional each year.
29:12
Speaker 2: So there are two different limits, but unfortunes are set
29:14
Speaker 2: at the same amounts and they cause a lot of confusion.
29:17
Speaker 2: But you can only put a maximum of one point
29:19
Speaker 2: nine in before you're stopped pulling any voluntary contributions, and
29:23
Speaker 2: you can only start a pension with a maximum of
29:26
Speaker 2: one point nine million at the moment. So that answers
29:29
Speaker 2: the first part of his question.
29:31
Speaker 1: Yeah, so you can read the second part in the moment.
29:33
Speaker 1: I might just add it for Bruce and everyone else
29:36
Speaker 1: on this one. The Super arrangements, as I so often mentioned,
29:41
Speaker 1: are ridiculously absurdly complex, often contradictory, and it's just a
29:49
Speaker 1: patchwork quid that's been designed over the year, over the years,
29:52
Speaker 1: and people keep getting ideas to add and subtract to it,
29:54
Speaker 1: and it's just ridiculous. It's like learning another language. I
29:57
Speaker 1: have learned the language as many people have need to,
30:01
Speaker 1: but I can't explain the whole thing every time. That's
30:03
Speaker 1: the problem, Bruce. I mean, if I's been asked, if
30:06
Speaker 1: I give the proper answer, the full comprehensive answer to
30:09
Speaker 1: every question on Super, honestly, everyone would just fall asleep,
30:12
Speaker 1: they'd walk away, and no one would listen to the show.
30:15
Speaker 1: So we use this sort of shorthand, like one point
30:18
Speaker 1: nine is the most you can have in super before
30:21
Speaker 1: you start paying tax. One point we should say one
30:25
Speaker 1: point nine is the most you can have and your
30:27
Speaker 1: transfer balance when you speak, when you move from miccuing
30:30
Speaker 1: relation to the pension, as Liam just said, and then
30:33
Speaker 1: from then on it actually can get bigger. So yes,
30:35
Speaker 1: you can have, over the fullness of time more than
30:38
Speaker 1: one point nine as it grows. Yes you can, but.
30:41
Speaker 2: We just can't.
30:41
Speaker 1: It's just it's impractical for commentators like myself to spell
30:46
Speaker 1: that out each time. So so that's the explanation. I
30:50
Speaker 1: hope it's good enough for you, all right. The rest
30:52
Speaker 1: of that question from Bruce Liam, if you would.
30:54
Speaker 2: Yes, he says, also, yes, perhaps AUSSI shares might have
30:57
Speaker 2: had less favorable in these recent years compared with US shares,
31:01
Speaker 2: but I also recall how around year two thousand, US
31:04
Speaker 2: shares were not doing as well as Aussie shares, and
31:07
Speaker 2: I reasoned at the time that Ozzie shares would always
31:09
Speaker 2: do okay because all the money that lands on our
31:12
Speaker 2: superannuation fund managers desks every day and which they need
31:15
Speaker 2: to do something with like buying Aussie shares. Anyway, so
31:18
Speaker 2: may I suggest that you add some nuance when you
31:21
Speaker 2: tell listeners about this so again he's right. Two thousand
31:26
Speaker 2: was a very volatile time for US stocks, but that's
31:29
Speaker 2: because there was opportunities in the tech stocks at those
31:33
Speaker 2: times it was the tech bubble. There was no access
31:37
Speaker 2: in Australia to any of those opportunities. So in the
31:40
Speaker 2: run up to it, international shares were doing brilliantly because
31:42
Speaker 2: they were invested in these shares, But there was a risk,
31:45
Speaker 2: And that's why you've always got to look at the
31:46
Speaker 2: risk of what you're getting yourself into. At the moment,
31:49
Speaker 2: you'd be really worried about getting into AI is such
31:53
Speaker 2: a good run, you'd be worried about you'd be worried
31:56
Speaker 2: about putting more money into international tech stocks. But for
32:00
Speaker 2: people who understand that area, have done their research, they
32:03
Speaker 2: may be comfortable to do so.
32:04
Speaker 1: Can I just do you think there's any merit in
32:08
Speaker 1: Bluth's line of thinking that there's so much money in
32:12
Speaker 1: the superinnuation funds that Australian shares will be okay because
32:16
Speaker 1: they need to do something with it. Is there is
32:18
Speaker 1: that a reliable way of not anymore?
32:21
Speaker 2: Because you look at Australian Super it's got its own
32:23
Speaker 2: office in New York and London. Now same with a
32:26
Speaker 2: lot of the other companies. Probably sixty to seventy five
32:29
Speaker 2: percent of every dollar that comes in in super now
32:32
Speaker 2: is going overseas in either international bonds, international government bonds,
32:36
Speaker 2: international shares, infrastructure. Look at the amount of you know,
32:40
Speaker 2: international investments and that all of these super funds are
32:43
Speaker 2: involved in nowadays. So the problem in Australia, I feel
32:48
Speaker 2: is yes it everyone feels it's fairly secure because you know,
32:52
Speaker 2: you've got thirty two percent in banks and insurances in
32:55
Speaker 2: our index, you've got our long term big resource stock companies.
32:59
Speaker 2: But that's probably our biggest risk is that we're such
33:02
Speaker 2: a focused, small in a small, fun country that if
33:08
Speaker 2: one or two sectors take a hit, it can really
33:11
Speaker 2: put Australia shares on in the bad books.
33:13
Speaker 1: Half half the market it is two sectors, and half
33:15
Speaker 1: the market is four banks and three miners. Really yeah,
33:18
Speaker 1: and banks and miners are forty five percent or.
33:21
Speaker 2: So of the market cap. And one of the things
33:24
Speaker 2: I'm really talking to my clients about is talk to
33:26
Speaker 2: your children and understand the next generation and their loyalty
33:30
Speaker 2: to the banks. Okay, they have not grown up with
33:33
Speaker 2: A and Z and CBA and all of those being
33:35
Speaker 2: in their ear they will move for a five dollars
33:38
Speaker 2: voucher or something exciting that's offered free as part of
33:41
Speaker 2: an app to a company. When they're going for a mortgage,
33:45
Speaker 2: they're going to a mortgage broker. I think seventy two
33:47
Speaker 2: percent of loans now are done to mortgage brokers. So
33:50
Speaker 2: they're not having contact, well, they can't even have contact
33:53
Speaker 2: with their bank manager because there is no bank manager
33:55
Speaker 2: in the local branch anymore and they've got no authority.
33:58
Speaker 2: So you know, all big four banks at the moment,
34:02
Speaker 2: I really worry about who is going to be our
34:05
Speaker 2: big four banks in ten years time, because it's who
34:08
Speaker 2: has your data? Is the one that's going to be
34:11
Speaker 2: selling to you and the one that you're going to
34:12
Speaker 2: be because they'll be sending messages to you and texts
34:17
Speaker 2: and emails and you know, three your searches, they will
34:21
Speaker 2: be targeting you. And this is the Amazon banks and
34:24
Speaker 2: the Apple banks and the paypals, and they have so
34:27
Speaker 2: much information. And look, I know our own banks have
34:30
Speaker 2: that information from the FBOs machines and things like that.
34:33
Speaker 2: And I've seen CommonWell Banks computer studio where they can
34:37
Speaker 2: see when people are spending in different suburbs at different times.
34:40
Speaker 2: But it's once you step up to the information that
34:43
Speaker 2: Apple has from people's Apple Pay and iPhones and their searches.
34:47
Speaker 2: You know, I know in the US at the moment,
34:49
Speaker 2: Apple have their savings account that they've opened up and
34:53
Speaker 2: are letting people invest. It's paying about one to one
34:56
Speaker 2: point five percent above the normal big bank right, So
35:00
Speaker 2: then you.
35:00
Speaker 1: Just wouldn't you just eat that up if you could
35:02
Speaker 1: have that. I mean, I'm on the phone all day,
35:04
Speaker 1: I use it for all my payments basically, and if
35:07
Speaker 1: I was getting one and a half percent above above
35:10
Speaker 1: the official rate.
35:12
Speaker 2: They're targeting the people they want as customers because they've
35:14
Speaker 2: seen it their spend history, and so I do worry
35:18
Speaker 2: about who's going to be the big banks in ten
35:19
Speaker 2: years time.
35:20
Speaker 1: M M okay, interesting and that and that in some
35:23
Speaker 1: way makes you feel more comfortable in taking some profit
35:26
Speaker 1: off your com bank shares that went up fifty percent
35:29
Speaker 1: last exactly, Okay, terrific. Hey, we might leave it at that,
35:33
Speaker 1: Liam for today. Thank you very much, Liam of Sona's Group.
35:37
Speaker 2: No worries. Always enjoy James.
35:39
Speaker 1: I always enjoy having you on, Liam, and thank you
35:42
Speaker 1: for listening. And remember We're wide open for some more
35:46
Speaker 1: very clever questions, like the ones we had today the
35:50
Speaker 1: money puzzle at the Australian dot com dot au. Talk
35:53
Speaker 1: to you soon, h