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Money Shock - Dealing with a financial emergency · 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, the wealth editor at The Australian. Welcome aboard, everybody.
• 0:19
  Speaker 1: I've had a lot of financial advisors on the show.
• 0:23
  Speaker 1: And I've had advisors who, although they wouldn't say this
• 0:27
  Speaker 1: on the show, but in reality, they're not actually going
• 0:30
  Speaker 1: to let anybody in the door without 10 million or
• 0:34
  Speaker 1: more to invest. That's how they work. Several of them
• 0:37
  Speaker 1: you hear regularly. I've had other advisors who are in
• 0:41
  Speaker 1: the broader business at the early stages probably of their
• 0:45
  Speaker 1: own businesses where they're collecting new clients and they're happy
• 0:48
  Speaker 1: to get people in at very modest levels, knowing that
• 0:53
  Speaker 1: those same people will hopefully stay with them forever, that
• 0:56
  Speaker 1: their kids will stay with them forever and they developed.
• 0:59
  Speaker 1: So I've had all sorts of advisors, but I've never
• 1:02
  Speaker 1: had an advisor like I have on today. She has
• 1:05
  Speaker 1: a singular story. And I think it will lead us
• 1:10
  Speaker 1: to a very interesting episode of the show. And it
• 1:15
  Speaker 1: actually will be a conversation, I think, substantially about how money,
• 1:21
  Speaker 1: we talk about making money, what we want to do,
• 1:25
  Speaker 1: what it will allow us to do. We rarely talk
• 1:28
  Speaker 1: about what we need to do, how it can actually
• 1:32
  Speaker 1: defend you as an insurance, if you like, for peace
• 1:35
  Speaker 1: of mind and something that really, really matters. If there's
• 1:38
  Speaker 1: an emergency and she has a story to tell, I
• 1:40
  Speaker 1: can tell you. Her name is Nicola Besic and she
• 1:43
  Speaker 1: works as an advisor with FMD Advisors. She didn't always
• 1:47
  Speaker 1: work as an advisor. She started out as a lawyer
• 1:51
  Speaker 1: and she also runs the Pro Bono Financial Advice Network,
• 1:55
  Speaker 1: which I will also tell you about. But first we'll
• 1:58
  Speaker 1: say hello. How are you, Nicola?
• 2:00
  Speaker 2: Hello. I'm well, thank you. Thank you so much for
• 2:04
  Speaker 2: that introduction. I'm sitting here... A little bit in tears
• 2:09
  Speaker 2: thinking about my story and how I've evolved to get
• 2:15
  Speaker 2: to this point in my career. Yes.
• 2:19
  Speaker 1: Look, I have no scientific evidence on this whatsoever, except
• 2:24
  Speaker 1: to say long experience. And in the six years that
• 2:28
  Speaker 1: we've been doing the top financial advisors list, for instance,
• 2:32
  Speaker 1: which we do every year in conjunction with Barons of
• 2:35
  Speaker 1: New York, I often have found that when you go
• 2:41
  Speaker 1: to meet the advisors that are among the best, they
• 2:49
  Speaker 1: often did something quite different before they became an advisor.
• 2:54
  Speaker 1: They have that wider worldview. And they did a different discipline.
• 3:00
  Speaker 1: And so with you, you were a lawyer, first of all.
• 3:02
  Speaker 1: So tell us, how long were you a lawyer? Like,
• 3:06
  Speaker 1: were you just a year or two or were you
• 3:08
  Speaker 1: well into it? And what sort of law did you
• 3:09
  Speaker 1: do before you transferred?
• 3:14
  Speaker 2: I was well into it. I was close to 10 years.
• 3:17
  Speaker 2: I specialised in intellectual property law, specifically. Particularly patent law.
• 3:24
  Speaker 2: So I was technically a patent attorney and worked in,
• 3:31
  Speaker 2: I'm also a Kiwi, so worked in New Zealand for
• 3:34
  Speaker 2: about five years before moving over to Melbourne here working
• 3:40
  Speaker 2: for a reasonably large law firm.
• 3:41
  Speaker 1: So that was like a career progression, was it, to
• 3:44
  Speaker 1: come to Melbourne and step up in the law and
• 3:47
  Speaker 1: into a larger law firm?
• 3:49
  Speaker 2: It was. It was, particularly in New Zealand because intellectual
• 3:54
  Speaker 2: property law firms, they're a very small number. It's quite
• 3:58
  Speaker 2: a specialised area. I've got a science background, so all– well,
• 4:04
  Speaker 2: most patent attorneys have a technical background. So I specialised
• 4:09
  Speaker 2: in genetics and went from sitting in a lab going,
• 4:16
  Speaker 2: I've got to do something more with this– degree that
• 4:20
  Speaker 2: can actually apply more worldwide experience. And so I had
• 4:26
  Speaker 2: the option of going into the intellectual property law space
• 4:31
  Speaker 2: and learning that specific area of law or heading into
• 4:34
  Speaker 2: genetic counseling. So I decided to go down the IP
• 4:39
  Speaker 2: law route and really focus on that area. It was
• 4:44
  Speaker 2: actually quite an interesting space with what you'd come across.
• 4:48
  Speaker 1: I expect so. At one stage, I was a technology
• 4:51
  Speaker 1: editor and I was very interested in that area. But
• 4:54
  Speaker 1: of course, I was only interested in the stuff that
• 4:57
  Speaker 1: journalists are interested in. But it was really, really interesting
• 5:00
  Speaker 1: on patents, technology patents, etc., software patents, etc. And the
• 5:06
  Speaker 1: crazy things that are patented, like the Harley Davidson sound,
• 5:09
  Speaker 1: I believe, is patented, for instance, which is an interesting one.
• 5:15
  Speaker 1: There's some people who don't like that sound, but let
• 5:17
  Speaker 1: me tell you, it's patented. We are wandering here and
• 5:20
  Speaker 1: the listener is saying, hey, James, where are you going here?
• 5:23
  Speaker 1: So the reason I want to talk to Nicola, folks,
• 5:26
  Speaker 1: is a very particular story. So, Nicola, there you were
• 5:29
  Speaker 1: and you were in mid-career, shall we say, as a
• 5:33
  Speaker 1: corporate lawyer. very, very particular speciality in patent law, which
• 5:37
  Speaker 1: I imagine is a super hot area and very global
• 5:42
  Speaker 1: area in.
• 5:46
  Speaker 2: Law.
• 5:47
  Speaker 1: And you had no intention of being a financial advisor,
• 5:51
  Speaker 1: though I'm sure you were well paid, etc. But then
• 5:54
  Speaker 1: you had a first-hand example of why we need to
• 5:59
  Speaker 1: be across our financial affairs. Just tell us briefly what occurred.
• 6:07
  Speaker 1: And your family were back in New Zealand, I'm guessing,
• 6:10
  Speaker 1: and you were in Melbourne.
• 6:12
  Speaker 2: That's correct. What had happened was my dad was diagnosed
• 6:17
  Speaker 2: with multiple sclerosis. He was 55 at that time. So
• 6:23
  Speaker 2: heading towards his later years, career stage and very much
• 6:27
  Speaker 2: gearing up for what we would say retirement we 55
• 6:32
  Speaker 2: to 65 a lot of people are thinking about retirement
• 6:35
  Speaker 2: and his diagnosis and result of essentially using losing the
• 6:45
  Speaker 2: the use of his right side, so he couldn't write,
• 6:48
  Speaker 2: walking was problematic. That really changed him and what he
• 6:54
  Speaker 2: could do work-wise. So he ended up leaving his job,
• 7:01
  Speaker 2: but the thing with him was he could leave his
• 7:04
  Speaker 2: job because he had an income protection policy in place,
• 7:08
  Speaker 2: and that paid for his salary for the next.
• 7:13
  Speaker 1: 10 or so years. Can I ask you, what was
• 7:16
  Speaker 1: his job? Was he self-employed or was he employed?
• 7:18
  Speaker 2: He was a very senior executive working for Telecom, so
• 7:27
  Speaker 2: the equivalent of Telstra here in Australia.
• 7:31
  Speaker 1: So it would strike me, if you were in Telstra,
• 7:35
  Speaker 1: the last thing you'd need to be income protection insurance.
• 7:39
  Speaker 1: I associate I had income protection insurance for maybe a
• 7:43
  Speaker 1: decade when I was in charge of a startup company.
• 7:47
  Speaker 1: And I did feel not so much precarious, but I
• 7:50
  Speaker 1: was acutely aware that it could all come tumbling down
• 7:52
  Speaker 1: or something could go very wrong. But now, in a
• 7:58
  Speaker 1: global media group, I don't have it. And I didn't
• 8:01
  Speaker 1: have it before that. So it strikes me that he
• 8:05
  Speaker 1: may have been cautious. Were your family and were you
• 8:10
  Speaker 1: cautious anyway financially?
• 8:12
  Speaker 2: This is an interesting question because as a family, we
• 8:18
  Speaker 2: didn't really talk about money that much. And that's a
• 8:24
  Speaker 2: very common statement that people make. For me, seeing what
• 8:30
  Speaker 2: Dad went through, that made me start thinking about my
• 8:35
  Speaker 2: own situation financially. Like you said, I was in law,
• 8:39
  Speaker 2: earning good money, and it really changed the way I
• 8:46
  Speaker 2: thought about things. It changed having Dad go through what
• 8:52
  Speaker 2: he went through.
• 8:53
  Speaker 1: I went.
• 8:54
  Speaker 2: I've got to make sure my partner and I are
• 8:56
  Speaker 2: set up. I've got to make sure that if something
• 8:58
  Speaker 2: happens to me or to Mark that we're.
• 9:05
  Speaker 1: Covered. You had an elevated awareness.
• 9:09
  Speaker 2: Correct.
• 9:11
  Speaker 1: Of the financial trauma that could occur. Just tell us
• 9:18
  Speaker 1: a little bit more with your dad. Income protection is
• 9:21
  Speaker 1: notoriously expensive.
• 9:22
  Speaker 2: Yes.
• 9:25
  Speaker 1: Extremely narrow, it seemed to me, in the terms of
• 9:30
  Speaker 1: the payouts. So would you mind just explaining to the
• 9:34
  Speaker 1: listeners what it is and whether it was worth it
• 9:37
  Speaker 1: in your case and what were the risks, what might
• 9:39
  Speaker 1: have happened to not make it worth it?
• 9:43
  Speaker 2: So there's a slight difference with what Dad had. Dad
• 9:48
  Speaker 2: had an insurance policy based in New Zealand and so
• 9:51
  Speaker 2: it was part of his... package, so to speak. So
• 9:56
  Speaker 2: a lot of companies have that policy in place and
• 10:01
  Speaker 2: they pay for those premiums and so forth. So I
• 10:04
  Speaker 2: think he was quite lucky because.
• 10:09
  Speaker 1: The company was paying for the income protection policy. Okay. Well,
• 10:14
  Speaker 1: that is, I imagine, relatively unusual. Yes. Okay.
• 10:17
  Speaker 2: Yes.
• 10:17
  Speaker 1: Okay.
• 10:18
  Speaker 2: Where you think about where Australians are at the moment,
• 10:24
  Speaker 2: a lot of people have insurance, particularly income protection or
• 10:31
  Speaker 2: total and permanent disability insurance, life insurance, all attached to
• 10:34
  Speaker 2: their superannuation policies. And a lot of that is based
• 10:40
  Speaker 2: on just set nominal amounts that the super fund will
• 10:46
  Speaker 2: say based on the income that they're getting in from
• 10:49
  Speaker 2: the employment and the salary contribution. So not a lot
• 10:54
  Speaker 2: of people realise that they actually have these insurance policies
• 10:59
  Speaker 2: in place.
• 11:00
  Speaker 1: If they're in a big fund.
• 11:02
  Speaker 2: Correct.
• 11:02
  Speaker 1: If they're in a big fund.
• 11:03
  Speaker 2: Correct.
• 11:05
  Speaker 1: In self-managed super, obviously, you're on your own.
• 11:07
  Speaker 2: That's right. That's right. And so a lot of people
• 11:13
  Speaker 2: don't necessarily stop and look at superannuation to start with,
• 11:19
  Speaker 2: but they don't necessarily then go, okay, what else do
• 11:22
  Speaker 2: I have to look at from a superannuation perspective? cover perspective,
• 11:28
  Speaker 2: so not just the balance, but insurance is how much
• 11:32
  Speaker 2: is that insurance for and what am I going to
• 11:37
  Speaker 2: get if something happens to me? And generally people, going
• 11:42
  Speaker 2: off a little bit of a tangent here, but a
• 11:45
  Speaker 2: lot of people don't look at those things until it's
• 11:48
  Speaker 2: too late, until something happens. Yes. They go and see
• 11:55
  Speaker 2: someone to work out this mess that they're in.
• 11:59
  Speaker 1: So the cruel part of this is if you're diagnosed, right,
• 12:03
  Speaker 1: it's too late.
• 12:04
  Speaker 2: Correct.
• 12:05
  Speaker 1: Isn't that it, basically? If I'm diagnosed with something now
• 12:08
  Speaker 1: and I go back into income protection, they're going to
• 12:10
  Speaker 1: say forget it. So it's very much you precluding something.
• 12:18
  Speaker 1: It's very much a personal insurance issue. I'm not here
• 12:21
  Speaker 1: to sell income protection. I'm still sceptical about it, Nicola,
• 12:26
  Speaker 1: because it's so expensive. It's so, so expensive.
• 12:29
  Speaker 2: And that's the biggest thing, isn't it, is there's always
• 12:33
  Speaker 2: this balance between making sure that when you, say, have
• 12:39
  Speaker 2: an insurance policy, for example... that it's there for the
• 12:43
  Speaker 2: right reasons and it's there for what you want it
• 12:49
  Speaker 2: to be for. So say, for example, someone who has
• 12:58
  Speaker 2: coming to the end of their career, they've built up
• 13:00
  Speaker 2: a really nice nest egg, they're only going to be
• 13:03
  Speaker 2: working for, you know, another year or something, then you
• 13:07
  Speaker 2: kind of question it. As opposed to someone who may
• 13:12
  Speaker 2: be just starting out and building their wealth and wanting
• 13:18
  Speaker 2: to maximise their income, at that stage their biggest asset
• 13:24
  Speaker 2: is the time that they have to accumulate wealth but
• 13:27
  Speaker 2: also their ability to earn an income. And so it
• 13:31
  Speaker 2: is that... I think this is where the benefit of
• 13:35
  Speaker 2: having an advisor comes into it, being able to have
• 13:37
  Speaker 2: those conversations and say, is this actually still right for
• 13:44
  Speaker 2: you right now based on your situation and where you're going?
• 13:47
  Speaker 2: And the cost of it is ever increasing and we've
• 13:55
  Speaker 2: seen premiums increase time and time again. And a lot
• 13:59
  Speaker 2: of people do sit there and go– what is the
• 14:05
  Speaker 2: benefit that I'm going to get out of this? And
• 14:09
  Speaker 2: it's a reasonable question, particularly if you start thinking about
• 14:14
  Speaker 2: where we're at today with cost of living pressures and
• 14:20
  Speaker 2: this knowledge that when we get to retirement we're that
• 14:27
  Speaker 2: the age pension system, for example, was probably going to
• 14:29
  Speaker 2: be extremely different to what it is right now. So
• 14:32
  Speaker 2: we do have to be more cautious about what is
• 14:38
  Speaker 2: being paid out of our super funds in terms of
• 14:41
  Speaker 2: fees and charges and things like that. So it is
• 14:44
  Speaker 2: a tough one.
• 14:45
  Speaker 1: And in terms of you becoming an advisor then from
• 14:48
  Speaker 1: that period, in your dad's case, and he had MS,
• 14:53
  Speaker 1: which is... It's progressive, obviously.
• 14:56
  Speaker 2: Correct.
• 14:57
  Speaker 1: And you can't, it can't be cured.
• 15:01
  Speaker 2: No.
• 15:03
  Speaker 1: But the, you just said, was there a distinct link
• 15:07
  Speaker 1: between that happening and you becoming an advisor?
• 15:12
  Speaker 2: It, it was, what happened was dad was diagnosed and
• 15:19
  Speaker 2: I remember, I remember that conversation. I, had with him
• 15:25
  Speaker 2: around his illness, his diagnosis, and being able to get
• 15:31
  Speaker 2: this insurance payout. And I sat there and I went,
• 15:37
  Speaker 2: I'm going to have to start learning about money. I
• 15:40
  Speaker 2: have to learn about this unknown language that effectively it
• 15:47
  Speaker 2: is and how it all works.
• 15:49
  Speaker 1: And you were a very advanced professional, but you were
• 15:52
  Speaker 1: passionate And I meet this so often. Doctors, dentists, lawyers,
• 15:55
  Speaker 1: they're terrific at what they do, but they don't know
• 15:58
  Speaker 1: anything about– and they're terrible investors often as well.
• 16:02
  Speaker 2: Yes, yes.
• 16:03
  Speaker 1: Have you come across that?
• 16:05
  Speaker 2: Yes, definitely, definitely. Highly intelligent, smart people, well-known in their
• 16:13
  Speaker 2: field and, you know, have– a really, really high level
• 16:20
  Speaker 2: of income, but they don't understand it. And this is
• 16:24
  Speaker 2: the biggest thing with money is it is a language.
• 16:29
  Speaker 2: Once you understand it, it becomes more and more, it's
• 16:34
  Speaker 2: like anything when you're learning something.
• 16:36
  Speaker 1: It's very interesting you say that. There was a woman,
• 16:39
  Speaker 1: Edna Carew, who was on the Financial Review a long,
• 16:42
  Speaker 1: long time ago. And she had a series of books
• 16:45
  Speaker 1: called The Language of Money. It was one of the
• 16:46
  Speaker 1: early sort of personal finance books in Australia. So there
• 16:50
  Speaker 1: was obviously income protection insurance, which in a very fortunate
• 16:54
  Speaker 1: fashion in your household saved the day. And even more
• 16:58
  Speaker 1: fortunate was actually paid for by the employer, which is rare.
• 17:03
  Speaker 1: Tell me in terms of more broadly, when you meet
• 17:05
  Speaker 1: people now as an advisor, a lot of advisors have
• 17:08
  Speaker 1: these rules about having cash for a rainy day and
• 17:13
  Speaker 1: how much you should have. Do you talk to people
• 17:18
  Speaker 1: about that and what do you say?
• 17:20
  Speaker 2: Yes, I do talk to people about that and everyone's
• 17:27
  Speaker 2: specific situation is different in terms of the amount and
• 17:32
  Speaker 2: what they're doing and what they should do. So, for example,
• 17:38
  Speaker 2: retirees who are living on their superannuation wealth that's been accumulated,
• 17:44
  Speaker 2: making sure that there is a a set bucket of
• 17:47
  Speaker 2: money of cash that can be accessed if they need it.
• 17:52
  Speaker 2: Compared to someone who is starting out in their career
• 17:56
  Speaker 2: and working a lot, I was going to say working
• 18:03
  Speaker 2: really hard to try and establish themselves from a career,
• 18:08
  Speaker 2: you know, look at purchasing a house because that's the
• 18:13
  Speaker 2: Australian and New Zealand dream. but then also look at
• 18:17
  Speaker 2: raising a family, you know, making sure that people are
• 18:20
  Speaker 2: allocating at least X amount towards that buffer or that
• 18:26
  Speaker 2: emergency account because you don't actually know when it's going
• 18:29
  Speaker 2: to be needed. And so it's taking those two extremes
• 18:33
  Speaker 2: and seeing where people are at and making sure that
• 18:38
  Speaker 2: we're still getting that allocation to an emergency buffer because
• 18:44
  Speaker 2: it's You just don't know when something's going to happen.
• 18:47
  Speaker 1: Do you have a rule for the buffers, for the
• 18:51
  Speaker 1: pre-retiree and for the retiree? Some people say a year's
• 18:54
  Speaker 1: worth of money. Some people say three months. Have you
• 18:57
  Speaker 1: a rule?
• 18:59
  Speaker 2: Again, it depends. But for the retirees, pre-retirees, that year
• 19:06
  Speaker 2: at least is easily achievable. For someone that's starting out,
• 19:11
  Speaker 2: I think it's about not scaring them too much and
• 19:16
  Speaker 2: working towards a relatively easy and potentially achievable goal. So
• 19:22
  Speaker 2: three months, for example, sitting in cash.
• 19:25
  Speaker 1: Three months household expenses.
• 19:26
  Speaker 2: Correct.
• 19:27
  Speaker 1: That's what you're thinking, three months, yeah. Yeah, and once
• 19:30
  Speaker 1: you have that, if you can keep that. And what
• 19:32
  Speaker 1: would you keep it in, a cash account or what
• 19:34
  Speaker 1: would you keep it in?
• 19:35
  Speaker 2: Cash account, high interest savings account, term deposits. Well, term deposits, again,
• 19:40
  Speaker 2: question mark around liquidity there. But particularly now with the
• 19:45
  Speaker 2: interest rates being where they're at, you can make that
• 19:49
  Speaker 2: money back. work for you. But that gives you access.
• 19:55
  Speaker 2: It gives you the ability to go, that money's there
• 19:59
  Speaker 2: just in case.
• 20:01
  Speaker 1: Yes, exactly. A rhetorical question, why would a retiree need
• 20:06
  Speaker 1: Isn't the retiree going to get their pension or their
• 20:08
  Speaker 1: retirement or whatever? Why would the retiree need rainy day funds?
• 20:13
  Speaker 2: So it's, say, for example, someone comes in, they've got
• 20:20
  Speaker 2: money invested in superannuation. It's the similar kind of concept
• 20:26
  Speaker 2: with having a bucket of money that can be easily
• 20:29
  Speaker 2: accessible if an emergency happens within their superannuation fund. And
• 20:35
  Speaker 2: particularly because we know at that stage of life, people
• 20:38
  Speaker 2: are drawing on their account balances. Their core capital. Yeah.
• 20:46
  Speaker 1: They may be. Yeah.
• 20:47
  Speaker 2: And the last thing we want people to do is
• 20:52
  Speaker 2: have to sell an investment before sellers of an investment
• 20:58
  Speaker 2: at a particular point in time.
• 20:59
  Speaker 1: Right. If there was a crash.
• 21:02
  Speaker 2: Correct.
• 21:02
  Speaker 1: Is that what you're thinking? And there's always going to
• 21:05
  Speaker 1: be a crash. We don't know when the next one is, unfortunately,
• 21:08
  Speaker 1: but they come round.
• 21:09
  Speaker 2: Yes.
• 21:09
  Speaker 1: Yeah, yeah. And so what you're saying is that the
• 21:12
  Speaker 1: disaster is they're selling their com bank shares and the
• 21:18
  Speaker 1: price has halved and it's the stupidest thing in the
• 21:20
  Speaker 1: world because that bank is going to come back roaring
• 21:23
  Speaker 1: back to higher than it used to be in any event.
• 21:27
  Speaker 1: Entirely hypothetical here, folks, but I hope I'm making the
• 21:30
  Speaker 1: point clear. Right, okay. So in terms of that, in
• 21:33
  Speaker 1: terms of the... So I expect you are unusual in
• 21:37
  Speaker 1: an advisor in that many advisors, their whole thing is
• 21:42
  Speaker 1: to grow wealth. I'm sure you have that too. But
• 21:47
  Speaker 1: also your advice, I expect, is informed by this particular
• 21:52
  Speaker 1: trauma with your dad, which was where... that he, A,
• 21:58
  Speaker 1: couldn't make the money he was going to make, and B,
• 22:00
  Speaker 1: it was going to cost an awful lot. His life
• 22:02
  Speaker 1: was going to cost an awful lot more than you
• 22:05
  Speaker 1: thought it was going to as the years went by.
• 22:09
  Speaker 1: I think what we might do actually here, because you've
• 22:13
  Speaker 1: designed something over and beyond. You have a side hustle,
• 22:18
  Speaker 1: except it's a positive side hustle, unlike a lot of
• 22:22
  Speaker 1: side hustles. And Nicola has an organisation I want to
• 22:27
  Speaker 1: tell you all about. We'll take a short break and
• 22:29
  Speaker 1: we'll be back. Hello, welcome back to the Australian's Money
• 22:33
  Speaker 1: Puzzle podcast. I'm James Kirby, the wealth editor at The Australian.
• 22:37
  Speaker 1: I'm talking to Nicola Beswick, who is an advisor at
• 22:41
  Speaker 1: FMD Financial Advisors. And you've been hearing her story, a
• 22:46
  Speaker 1: particular story about how she became an advisor. I made
• 22:48
  Speaker 1: the point that a lot of the advisors, very good
• 22:51
  Speaker 1: advisors that I know, did something entirely different before they
• 22:57
  Speaker 1: became advisors. And I think it does widen their worldview. Now,
• 23:00
  Speaker 1: in Nicola's case, she has, from that time and the
• 23:06
  Speaker 1: experience with her dad and the shock of all that,
• 23:09
  Speaker 1: and basically the shock which pushed her into thinking about
• 23:13
  Speaker 1: money and ultimately becoming a financial advisor when she was
• 23:16
  Speaker 1: a patent lawyer. she has created an organisation which is
• 23:22
  Speaker 1: called the Pro Bono Financial Advice Network. Now, Nicola, there
• 23:28
  Speaker 1: is out there the very, very admirable Financial Counselling Association, counsellors,
• 23:35
  Speaker 1: big organisation. I've had financial counsellor on the show and
• 23:39
  Speaker 1: they're very, they're great. And what they do is terrific.
• 23:44
  Speaker 1: And I'm delighted to see they got some more money
• 23:46
  Speaker 1: in the budget, federal budget recently. But their work, if
• 23:52
  Speaker 1: I may say, is very much focused on people who
• 23:56
  Speaker 1: are in terrible straits financially in conventional fashions. They've let
• 24:03
  Speaker 1: the bills run up. Everything went wrong. Gambling is a
• 24:08
  Speaker 1: particular problem and comes up again and again in that area.
• 24:12
  Speaker 1: So you've got something different. Just tell me what you've
• 24:14
  Speaker 1: got and what its ambitions are.
• 24:19
  Speaker 2: So the Pro Bono Financial Advice Network is an organization
• 24:24
  Speaker 2: that essentially connects people with a health crisis. And we
• 24:30
  Speaker 2: work with specific charities with advisors that are willing to
• 24:35
  Speaker 2: give pro bono financial advice. Now, Currently we work with
• 24:41
  Speaker 2: the multiple sclerosis community, the MND, so motor neurone disease
• 24:47
  Speaker 2: community here in Victoria, and Pankia. So they specialize in
• 24:52
  Speaker 2: pancreatic cancer and upper GI cancers, and particularly clients of
• 25:01
  Speaker 2: theirs that can't ordinarily afford financial advice. Yes.
• 25:06
  Speaker 1: Right, which we know is 4,000 a year. I mean, basically,
• 25:11
  Speaker 1: that's the going rate, it would seem, per annum.
• 25:13
  Speaker 2: That's right.
• 25:14
  Speaker 1: That's right.
• 25:16
  Speaker 2: And what we've done is built and continuing to build
• 25:22
  Speaker 2: a network of advisors and these are accredited advisors who
• 25:31
  Speaker 2: are employees or run their own business, who have put
• 25:35
  Speaker 2: their hand up to help someone once a year who
• 25:38
  Speaker 2: fit that criteria that we've got. Now, we know that
• 25:43
  Speaker 2: there's a lot more people in Australia outside of those
• 25:48
  Speaker 2: specific charities that need advice and are going through a
• 25:54
  Speaker 2: a hardship, particularly because of illness and injury, that would
• 25:57
  Speaker 2: fit that criteria. So our plans are to ever grow
• 26:04
  Speaker 2: the number of people we can help. That is also
• 26:09
  Speaker 2: acutely linked to the number of financial advisors that exist
• 26:12
  Speaker 2: in Australia as well. Right.
• 26:14
  Speaker 1: I mean, so there's 15,000 of them. Yep. Shrinking, 15,000
• 26:15
  Speaker 1: and dropping. Yes.
• 26:16
  Speaker 2: Ironically, not.
• 26:24
  Speaker 1: for a whole bunch of reasons which we'll deal with
• 26:26
  Speaker 1: another time. So the idea, the concept is that the advisor,
• 26:34
  Speaker 1: the qualified licensed advisor, gives how much of their time
• 26:37
  Speaker 1: per year for you?
• 26:40
  Speaker 2: It all depends on the client case.
• 26:42
  Speaker 1: Yeah, I see. Yes, yes.
• 26:43
  Speaker 2: So it could be some clients, they need a conversation
• 26:48
  Speaker 2: for an hour just to sit down and get a
• 26:51
  Speaker 2: little bit of direction. Some clients who come to us
• 26:58
  Speaker 2: need a lot more help than that. So an advisor
• 27:01
  Speaker 2: would sit through with them and go through the process
• 27:07
  Speaker 2: of providing financial advice. So the outcome would be assisting
• 27:14
  Speaker 2: effectively that client with, say, insurance applications and or dealing
• 27:19
  Speaker 2: with Centrelink, things like that, depending on their need.
• 27:26
  Speaker 1: Do your guys have to go through the whole rigmarole
• 27:29
  Speaker 1: of statements of advice and all that formality?
• 27:33
  Speaker 2: Unfortunately, yes, if personal advice, and again, this comes to
• 27:40
  Speaker 2: that specific requirement around legislative side of things. Right, right.
• 27:46
  Speaker 2: And we're really fortunate where a lot of advisors do
• 27:51
  Speaker 2: provide that service free of charge to a client that
• 27:54
  Speaker 2: comes through us through the network. That's life-changing for people
• 28:00
  Speaker 2: when they get that guidance. We've had people that didn't
• 28:06
  Speaker 2: know that they had insurances within their superannuation and advisors
• 28:14
  Speaker 2: help the client get that insurance paid out, but then
• 28:19
  Speaker 2: also make sure that things are structured right as well.
• 28:25
  Speaker 1: Okay, okay. Yeah. Well, that's a good side. That's the upside,
• 28:30
  Speaker 1: isn't it, of the giant super funds being so dominant
• 28:33
  Speaker 1: now and the fact that there's compulsory super. There is
• 28:36
  Speaker 1: a sort of de facto compulsory insurance built in there invariably.
• 28:40
  Speaker 1: Not comprehensive, of course, but life in TPD. normally to
• 28:46
  Speaker 1: total and permanent disability, as they call that. So if
• 28:49
  Speaker 1: I said to you, I know you've got going on this.
• 28:51
  Speaker 1: I know you have a panel of advisors. I know
• 28:54
  Speaker 1: you don't have core funding.
• 28:55
  Speaker 2: Correct.
• 28:56
  Speaker 1: And you don't have government funding. If I said to you,
• 28:58
  Speaker 1: what's the best thing that could possibly happen to the foundation?
• 29:01
  Speaker 1: What would it be?
• 29:03
  Speaker 2: To get money to be able to fund a panel
• 29:10
  Speaker 2: of advisors full time to be able to look after
• 29:13
  Speaker 2: these clients.
• 29:16
  Speaker 1: Oh, I see. To actually have your own advisors on
• 29:19
  Speaker 1: the books, is that your ultimate ambition? Aha. Yes, I see. Very,
• 29:23
  Speaker 1: very good. OK. And also, just on the broader issue
• 29:27
  Speaker 1: that has become the theme of the show because of
• 29:30
  Speaker 1: the nature of your particular story, for someone who is thinking,
• 29:34
  Speaker 1: most people have got things rolling, they've got investments, they
• 29:39
  Speaker 1: might have mortgage They do their best on building that.
• 29:44
  Speaker 1: They might also give some money to charity once a year.
• 29:47
  Speaker 1: Around now, folks, you've got a few weeks left. It's
• 29:49
  Speaker 1: tax deductible. You should do it. But in terms of
• 29:53
  Speaker 1: protecting themselves, We'll put income protection insurance on the table
• 29:59
  Speaker 1: and we'll say so many people will do that and
• 30:02
  Speaker 1: so many won't. And a lot of people will look
• 30:05
  Speaker 1: at it and go, boy, that's just one I'm not
• 30:07
  Speaker 1: going to pay. And they have to make their own minds.
• 30:10
  Speaker 1: But apart from income protection insurance, what are the other
• 30:14
  Speaker 1: core conclusions you would like to give to our listeners
• 30:18
  Speaker 1: about that idea of having the emergency fund that everyone
• 30:22
  Speaker 1: should have them?
• 30:24
  Speaker 2: I know it's really, really boring, but saving that cash
• 30:28
  Speaker 2: for a particular point in time can be life-changing. We're
• 30:35
  Speaker 2: talking about illness here, and if you think about the
• 30:39
  Speaker 2: expenses that go with even trying to get to the
• 30:43
  Speaker 2: bottom of being diagnosed, that can be quite quickly accrued.
• 30:48
  Speaker 1: So MRIs, Yeah, that's terrible, isn't it? Because once you are, ironically,
• 30:56
  Speaker 1: once you are diagnosed and you know what you have
• 30:58
  Speaker 1: and then you can work on it, and I presume
• 31:00
  Speaker 1: financially you can work on it, but it's a terrible
• 31:02
  Speaker 1: period where you don't know what you've got and you're
• 31:05
  Speaker 1: getting very expensive what are theoretically optional examinations from different specialists.
• 31:14
  Speaker 1: That's when I imagine you really rack up the bills.
• 31:16
  Speaker 2: Correct. And I think those are the things that we
• 31:20
  Speaker 2: forget about. But then it's the everyday things, like if
• 31:24
  Speaker 2: you're a homeowner and your hot water cylinder bursts, you know,
• 31:28
  Speaker 2: just being able to access money for that is, you know,
• 31:32
  Speaker 2: it means you don't have to question it and getting
• 31:36
  Speaker 2: someone in. But then also building on that next level
• 31:41
  Speaker 2: of if we're going to protect ourselves, being across... where
• 31:47
  Speaker 2: our money is, what it is doing, and do you
• 31:52
  Speaker 2: have the right checks and balances in place? That's the biggest,
• 31:57
  Speaker 2: the next part of the whole conversation around people protecting themselves.
• 32:01
  Speaker 1: Okay, terrific. And also, I think even from the most
• 32:04
  Speaker 1: pragmatic investor point of view, you don't ever want to
• 32:07
  Speaker 1: be selling, you don't want to be a forced seller.
• 32:10
  Speaker 2: Correct.
• 32:11
  Speaker 1: As Nicola pointed out. And it mightn't just be shares either.
• 32:13
  Speaker 1: I mean, you might have put everything into an investment
• 32:15
  Speaker 1: property and you might have built that over the years
• 32:17
  Speaker 1: and years and then things go wrong. And for no
• 32:20
  Speaker 1: other reason that you couldn't pay the mortgage for three months,
• 32:23
  Speaker 1: you've got to sell it. And someone basically, basically someone's
• 32:26
  Speaker 1: going to win and you're going to lose on that. OK,
• 32:29
  Speaker 1: we'll take a short break. We'll be back with some questions.
• 32:34
  Speaker 1: Hello and welcome. to the Australian's Money Puzzle podcast. James
• 32:38
  Speaker 1: Kirby here. I'm talking to Nicola Beswick from FMD Financial Advisors. Nicola,
• 32:45
  Speaker 1: apart from being a patent lawyer, apart from being a
• 32:48
  Speaker 1: financial advisor, apart from running the Pro Bono Financial Advice Network,
• 32:53
  Speaker 1: is of course a qualified advisor so she can answer
• 32:55
  Speaker 1: the questions that come in. And I have just collated,
• 32:59
  Speaker 1: is that the word? A few choice questions for her. Okay, Scott. Sorry,
• 33:04
  Speaker 1: not Scott. Sorry, folks. We read Scott out last week. Brad,
• 33:10
  Speaker 1: thank you for concise market commentary. You're welcome, Brad. I
• 33:14
  Speaker 1: plan to hold some shares and sell after the 30th
• 33:18
  Speaker 1: of June in order to realise capital gains in 2024-25
• 33:24
  Speaker 1: at a lower tax rate because of the stage three
• 33:27
  Speaker 1: tax cuts. Do you believe others will do the same
• 33:29
  Speaker 1: and will there be any significant impact? on markets in
• 33:32
  Speaker 1: the next year as a result of Stage 3 tax cuts.
• 33:37
  Speaker 1: Big question. Why don't we just put the macro part
• 33:39
  Speaker 1: to one side on what Stage 3 tax cuts will do?
• 33:43
  Speaker 1: Maybe they'll be inflationary, maybe they won't. Of course they'll
• 33:46
  Speaker 1: be inflationary, but they'll be offset by other things perhaps.
• 33:49
  Speaker 1: But what have you been telling clients about Stage 3
• 33:52
  Speaker 1: and what to do? Everyone's getting a tax cut basically
• 33:55
  Speaker 1: at every level.
• 33:55
  Speaker 2: That's right. But it all depends on what the motivation
• 33:59
  Speaker 2: is behind it. the reason why you're selling something is,
• 34:04
  Speaker 2: and your specific situation. I think that is the most
• 34:09
  Speaker 2: important piece of the puzzle, particularly if you're selling something
• 34:14
  Speaker 2: to realize again, uh, it's, it's taking your specific reasons
• 34:26
  Speaker 2: and going, yes, this is a good time to do it. Yes.
• 34:30
  Speaker 2: It's basically the tax implications will be better next financial year,
• 34:37
  Speaker 2: but what we've also got to do is look at
• 34:40
  Speaker 2: why are you selling, what's the motivation behind that, and
• 34:45
  Speaker 2: are there any other things that you can do to
• 34:48
  Speaker 2: minimise the capital gains tax that you'll incur? Those things
• 34:56
  Speaker 2: are really, really important when making a decision to invest
• 35:00
  Speaker 2: to sell something in someone's personal name. One of the
• 35:06
  Speaker 2: things that is really quite useful at the moment that
• 35:09
  Speaker 2: the government brought in quite a number of years ago
• 35:13
  Speaker 2: now was the catch-up concessional contributions. That has been really,
• 35:20
  Speaker 2: really beneficial for a lot of people wanting to liquidate
• 35:24
  Speaker 2: an asset like an investment property, for example, minimise the gains.
• 35:30
  Speaker 1: I get the money into super on a tax concessional
• 35:34
  Speaker 1: basis because they can do five years under most circumstances.
• 35:39
  Speaker 1: You can add five years together and put it all
• 35:42
  Speaker 1: in in one hit. Yeah, okay. That's a good point.
• 35:45
  Speaker 1: We'll keep that in mind, folks. Remember, this is not advice.
• 35:48
  Speaker 1: This is always information on the show. It is not advice.
• 35:52
  Speaker 1: One other thing, I suppose, on the tax cuts is
• 35:54
  Speaker 1: what people are really saying is my tax returns My
• 35:57
  Speaker 1: tax write-off will, by definition, be bigger this year than
• 36:01
  Speaker 1: next year because next year I'll be paying less tax.
• 36:04
  Speaker 1: Isn't that really how it works? But I would think, Nicola,
• 36:06
  Speaker 1: really for a lot of people on salaries, especially at
• 36:08
  Speaker 1: the upper end, especially, the tax cut is pretty teeny.
• 36:15
  Speaker 1: It's important in middle income, but over 100 and is
• 36:18
  Speaker 1: it over 190? I think they're about, you're talking, you
• 36:22
  Speaker 1: get a couple of grand more a year. post-tax. And
• 36:25
  Speaker 1: that's great. Look at you, three or four grand, but
• 36:28
  Speaker 1: it's not exactly worth reconstituting your investment portfolio. Is that
• 36:33
  Speaker 1: the point you're making?
• 36:34
  Speaker 2: That's exactly it. I think that's the exact point is
• 36:40
  Speaker 2: have a broader look at why you're doing this first
• 36:45
  Speaker 2: and then correct.
• 36:47
  Speaker 1: Bigger picture. Don't get too micro, folks. All right, David.
• 36:52
  Speaker 1: David says, this is one of these, we get a
• 36:54
  Speaker 1: lot of these questions. They are what I call creative questions.
• 36:58
  Speaker 1: Why not limit the home own exemption counted towards eligibility
• 37:02
  Speaker 1: for age persons to the average value of the Australian home?
• 37:07
  Speaker 1: It seems grossly unfair that other taxpayers are currently funding
• 37:11
  Speaker 1: the retirement of some very asset rich people. David, I
• 37:14
  Speaker 1: have no problem with your statement that it's grossly unfair.
• 37:19
  Speaker 1: that you can have a $ 10 million house on Sydney
• 37:22
  Speaker 1: Harbour and get the pension, because you can. But how
• 37:26
  Speaker 1: you would do it more precisely, I don't know. But
• 37:32
  Speaker 1: certainly it's as good an idea as any other, the
• 37:35
  Speaker 1: average value of the Australian home. People would say, oh,
• 37:40
  Speaker 1: hang on a second, that gives a huge advantage to
• 37:43
  Speaker 1: the people Obviously, some houses are way below average and
• 37:47
  Speaker 1: some are way above average, but it's an idea we're
• 37:50
  Speaker 1: taking on board and thank you very much for sending
• 37:52
  Speaker 1: it in. Was there something you were going to say there, Nicola?
• 37:56
  Speaker 2: I think the one thing that a lot of people
• 37:59
  Speaker 2: miss when we talk about people who are on the
• 38:01
  Speaker 2: age pension is the level of income and assets that
• 38:06
  Speaker 2: people have to have to be able to get the
• 38:07
  Speaker 2: full age pension. That is something that... there is this
• 38:16
  Speaker 2: cohort out there that are precisely fit into that camp
• 38:21
  Speaker 2: in terms of having a home in Sydney Harbour and
• 38:26
  Speaker 2: not having anything else. But the majority of people that
• 38:30
  Speaker 2: are on the full-age pension don't really have a lot.
• 38:35
  Speaker 1: Yes.
• 38:36
  Speaker 2: And sometimes the only thing that they do have is
• 38:39
  Speaker 2: their home. So to be able to count that as
• 38:43
  Speaker 2: could be detrimentally impact those people. So bringing it in
• 38:49
  Speaker 2: could be quite a challenge for any government.
• 38:54
  Speaker 1: Yeah. Okay. But I suppose at the heart of this
• 38:58
  Speaker 1: is the issue that the home, the family home is
• 39:01
  Speaker 1: de facto exempt from pension access estimations. And that creates
• 39:09
  Speaker 1: all sorts of problems, all sorts of problems. One of
• 39:13
  Speaker 1: the big problems is about the whole thing about using
• 39:16
  Speaker 1: your super for buying a family home. Well, unfortunately, the
• 39:23
  Speaker 1: person with the home wins. The person who owns their
• 39:25
  Speaker 1: home wins at all ages in our tax system.
• 39:28
  Speaker 2: Okay.
• 39:28
  Speaker 1: Hey, final question. which isn't really a question that you're
• 39:31
  Speaker 1: going to be able to answer, Nicola, but it's from Jessie, J-E-S-S-E.
• 39:36
  Speaker 1: She says, I'm looking for a trusted financial advisor. I'm
• 39:38
  Speaker 1: a regular listener. Are you able to share a list
• 39:41
  Speaker 1: of advisors you've had on the show? No, I'm not, Jessie. However, however,
• 39:47
  Speaker 1: I will say this, look, Two things. We have a
• 39:50
  Speaker 1: list published in The Australian's Top 100 Financial Advisors list.
• 39:54
  Speaker 1: That's there every year. And separately, anyone who is an
• 39:58
  Speaker 1: advisor who's been on this show, well, obviously, by definition,
• 40:03
  Speaker 1: I endorse them. And all you have to do is
• 40:06
  Speaker 1: go back through your app and have a look at
• 40:08
  Speaker 1: all the names that were advisors on the show. And
• 40:11
  Speaker 1: there are dozens and dozens of them. hopefully that's useful
• 40:15
  Speaker 1: to you. OK, very good. Hey, thank you very much, Nicola.
• 40:18
  Speaker 1: Really interesting, interesting story. And best of luck with your
• 40:22
  Speaker 1: practice and particularly best of luck. I love the idea,
• 40:25
  Speaker 1: the Pro Bono Financial Advice Network. I think it's really good.
• 40:29
  Speaker 1: And I hope someone's listening out there that you'll get
• 40:32
  Speaker 1: some volunteers, hopefully, but also someone with deep pockets, perhaps,
• 40:37
  Speaker 1: might come and knock on your door. OK, thank you.
• 40:41
  Speaker 1: Thank you. OK, folks, keep the questions rolling and the
• 40:45
  Speaker 1: statements and the observations and the complaints. They're all equally welcome.
• 40:52
  Speaker 1: themoneypuzzle at theaustralian.com.au. Talk to you soon.