Latest / The Money Puzzle / Time to consider an SMSF?

Transcript

Time to consider an SMSF? · The Money Puzzle

0:09
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirkby. Welcome aboard everybody. Whoa what a week? So
0:17
Speaker 1: here we go. Trump's Liberation Day has arrived. Ten tariffs
0:22
Speaker 1: right across the board for everything coming into the US. Now,
0:26
Speaker 1: just so you know the general tariff rate, you know
0:29
Speaker 1: at the moment it's about two and a half percent,
0:31
Speaker 1: so it's a quadrupling of tariffs going into the US.
0:34
Speaker 1: It's a change to the world order as we know it.
0:38
Speaker 1: And Australia got no exemptions whatsoever. That's worth pointing out too.
0:43
Speaker 1: That was announced. We don't know what's going to happen
0:45
Speaker 1: to markets, right, but it was announced after the Wall
0:47
Speaker 1: Street in this says closed. But now Jones futures as
0:52
Speaker 1: we speak to you middle of Thursday are down three percent.
0:56
Speaker 1: And I want to put forward a show to you
0:59
Speaker 1: to which hopefully you might listen to in conjunction with
1:02
Speaker 1: Tuesday's show, because every now and again there is a
1:07
Speaker 1: theme that dominates markets and we zone in on it
1:12
Speaker 1: and it's worth bearing with us when we do this.
1:14
Speaker 1: If you recall about a year ago we covered artificial intelligence,
1:19
Speaker 1: I think a fair bit before it became a very
1:22
Speaker 1: generally covered issue. It was probably more like a year
1:24
Speaker 1: and a half ago. And this again is one of
1:26
Speaker 1: those themes that's going to change how your super operates,
1:30
Speaker 1: how your investments operate. It is crucial. So listen to
1:34
Speaker 1: Cameron if you can. From Tuesday's show. You know one
1:37
Speaker 1: of the things you think about how tuned in he is.
1:40
Speaker 1: And if you listen to the show, you know that
1:42
Speaker 1: he literally knows Trump. He has been in the Oval Office,
1:45
Speaker 1: He's been at all the rallies. He met the point
1:47
Speaker 1: that Adon Musk wouldn't last a year. And here we
1:50
Speaker 1: are forty eight hours later, and there are reports this
1:52
Speaker 1: morning that Mosk is, in the delightful phrase of Anthony Scaramucci,
1:56
Speaker 1: heading for the wood chipper. So what does it all
1:59
Speaker 1: mean for you, the active investor? I have a top
2:01
Speaker 1: financial advisor this morning. He's on the top the Barons
2:05
Speaker 1: one hundred and fifty list. It's Hugh Robertson of Centaur.
2:08
Speaker 2: How are you, Hugh, I'm good, James, how are you going?
2:12
Speaker 2: Interesting times?
2:14
Speaker 1: You pick your moment, You pick your moment to come
2:16
Speaker 1: on the show, or tell you that. I want to
2:19
Speaker 1: just look for the listeners now, have in some ways
2:22
Speaker 1: kind of cover the big picture about Trump on what's
2:24
Speaker 1: going on, and it's all come to pass, and I
2:27
Speaker 1: think it's you know, I think it's safe to say
2:29
Speaker 1: it was worse and more severe than people might have
2:32
Speaker 1: hoped in terms of what he's doing in terms of
2:35
Speaker 1: closing the doors basically to free trade around the world.
2:38
Speaker 1: And I want to look in two ways. It's simply
2:40
Speaker 1: I mean, obviously anybody can do and make what they
2:43
Speaker 1: wish of it for their investing. But let's just have
2:45
Speaker 1: a look at super and let's split it into two parts.
2:48
Speaker 1: Your super if you have big Super, and anyway, what
2:51
Speaker 1: big super is doing is always interesting, even if you
2:53
Speaker 1: don't participate in Big Super. And then we'll also look
2:56
Speaker 1: at smsfs and their reaction. But I suppose the immediate question, Hugh,
3:01
Speaker 1: which I certainly would be worried that our major super
3:08
Speaker 1: funds in Australia have gone big basically on the US,
3:13
Speaker 1: have lifted their bets on the US and you can
3:17
Speaker 1: see the proportion of stocks that they hold there has
3:20
Speaker 1: risen and they have dropped their cash levels as well
3:23
Speaker 1: at the very same time just as this is happening.
3:26
Speaker 1: It's just one of those times where I think the
3:28
Speaker 1: power of the independent investor is at its best because
3:31
Speaker 1: you can move. But what's your impression of big super
3:35
Speaker 1: major super funds and their approach to these historic days
3:40
Speaker 1: so far?
3:42
Speaker 3: When you get times of great volatility, you want to
3:45
Speaker 3: probably be invested a little bit closer to home, where
3:48
Speaker 3: you feel you have.
3:48
Speaker 2: A little bit more control.
3:50
Speaker 3: When you look at the big super funds, I think,
3:53
Speaker 3: as an example, Australian Souper now sins about seventy percent
3:57
Speaker 3: of its inflows overseas, so that will be impacted by
4:00
Speaker 3: the tariffs at a pretty grand scale. And I think
4:03
Speaker 3: as we see more of this industry consolidation of the megafunds,
4:08
Speaker 3: the big industry funds, they're going to dwarf. They're going
4:11
Speaker 3: to be so big in size that they're going to
4:13
Speaker 3: dwarf the ASX itself. So it's going to be a
4:16
Speaker 3: continual thing that they're going to have to allocate money
4:19
Speaker 3: overseas just so that they don't move markets with one
4:22
Speaker 3: single investment. So I think you'll see more global exposure
4:27
Speaker 3: and you're going to see more in the unlisted space.
4:30
Speaker 3: So probably two areas that scare most investors right now.
4:34
Speaker 1: I might suggest yeah, well, we know for a variety
4:38
Speaker 1: of reasons. It's all come through in various ways. The
4:40
Speaker 1: Morgan Standing, for instance, as sell that thirty percent of
4:42
Speaker 1: the AX is held by Big Super. So okay, fair enough,
4:46
Speaker 1: you know, they a hit saturation point and they must
4:48
Speaker 1: move abroad. But the thing I'm a bit concerned about
4:51
Speaker 1: is the nature of their exposure to the share market
4:55
Speaker 1: and the nature of our Big Super choices for people,
4:58
Speaker 1: the classifications, you know, we're balanced where what people think
5:01
Speaker 1: is balanced has actually got a fair spin skew towards growth,
5:05
Speaker 1: a fair skew towards the share market. And the share
5:07
Speaker 1: market was good for Big Super for years and years.
5:10
Speaker 1: But here's the thing. They've lifted their exposure to the US.
5:14
Speaker 1: The US is the worst performing market in the world
5:16
Speaker 1: so far this year. It's down about five five and
5:19
Speaker 1: a half percent so far. Our market's down about four
5:22
Speaker 1: four and a half. The European markets are actually up
5:24
Speaker 1: about six percent. Point I'm making is is there something
5:29
Speaker 1: of a reckoning perhaps coming for not so much for
5:33
Speaker 1: Big Super, but for people who thought they're super funds
5:37
Speaker 1: sort of knew something no one else did. They were
5:39
Speaker 1: doing so well for so many.
5:40
Speaker 3: Years yes, it needs to be because now earnings are
5:46
Speaker 3: going to be.
5:46
Speaker 2: Impacted by tariffs.
5:49
Speaker 3: You've got price expansion that's happened over the past few
5:52
Speaker 3: years that hasn't necessarily kept up with the earnings growth.
5:55
Speaker 2: So you're globally, you know.
5:58
Speaker 3: Especially the US market is expensive on you know, the
6:01
Speaker 3: fundamental metrics, and where you where might your opportunities be,
6:06
Speaker 3: maybe in Europe or in Asia. You're probably not getting
6:09
Speaker 3: much of an allocation into.
6:11
Speaker 2: Those asset classes.
6:13
Speaker 3: So it's going to be in it's going to be
6:15
Speaker 3: a difficult uphill road for investors in big super funds
6:19
Speaker 3: over the next sort of three to five years, you'd imagine,
6:22
Speaker 3: especially with the volatility that a Trump presidency usually brings.
6:27
Speaker 1: What do you think people should do? Obviously we're going
6:30
Speaker 1: to get people asking, as we always do times of
6:34
Speaker 1: severe stress, whether they're in an appropriate setting in their
6:38
Speaker 1: big super fund. And this issue of definitions, and you
6:42
Speaker 1: think it's obscure, folks, it's not. This is so important.
6:46
Speaker 1: There's no legal definition on these super funds allocation. So
6:51
Speaker 1: you go into your big super fund number one and
6:53
Speaker 1: you have your choices and one's conservative and one's balanced,
6:55
Speaker 1: and one's growth. But the fact is, you know that
6:59
Speaker 1: growth is really spins towards shares and balanced is a
7:03
Speaker 1: lot more turned towards shares and a lot less balanced
7:05
Speaker 1: than you might think in the classical sense of the world.
7:07
Speaker 1: And I can prove this to you because the ratings
7:10
Speaker 1: agencies they actually ignore, often ignore the classification the bonds
7:15
Speaker 1: have calling them balanced, and they define them as grilled.
7:18
Speaker 1: And they're right to do so. Am I on the right? Check?
7:21
Speaker 2: Here?
7:21
Speaker 1: Am I making? Am I over the top on this one?
7:23
Speaker 2: Here? No, you're right.
7:25
Speaker 3: There was a big industry fund a while ago that
7:28
Speaker 3: used to call it self balance that had ninety two
7:30
Speaker 3: percent in growth assets. There's no one in this world
7:32
Speaker 3: that would think that's balanced, you know so. And that's
7:37
Speaker 3: part of the regulatory regime where they need to hold
7:40
Speaker 3: these big funds to account a bit more.
7:43
Speaker 2: Which we're starting to see. We're starting to see that
7:46
Speaker 2: there's you know, they've lost a bit of shine.
7:49
Speaker 3: But I think from the investor point of view, going
7:51
Speaker 3: through a market like now, you've really.
7:53
Speaker 2: Got to focus on your cash flows.
7:55
Speaker 3: If growth has been great for the past few years,
7:58
Speaker 3: and what I mean by then in your shares you
8:00
Speaker 3: had the capital appreciation, what you're seeing now is how
8:03
Speaker 3: are we going to get that income from shares? How
8:05
Speaker 3: are we going to get cash flows? So probably more
8:07
Speaker 3: important than ever in times of uncertainty is that we're
8:10
Speaker 3: going to go and get paid those dividends, whether Australian
8:13
Speaker 3: or global, And that's probably one things where when you're
8:16
Speaker 3: in those big megafunds or industry funds, they don't pay
8:20
Speaker 3: out the dividends. That just keeps getting reinvested back into
8:23
Speaker 3: the unit price. So I think there's a really big
8:25
Speaker 3: difference there for people to appreciate that it's pretty valuable
8:30
Speaker 3: now to be able to extrapolate that income out of
8:32
Speaker 3: your investments. Both your growth assets shares and property and
8:36
Speaker 3: your defensive assets are fixed interest in cash.
8:40
Speaker 1: So what should people should they We're not telling people
8:42
Speaker 1: what to do, it's not advice information only, but I
8:45
Speaker 1: expect people should review at least whether they are comfortable
8:50
Speaker 1: with the positions that they have taken, and they might
8:53
Speaker 1: go an extra yard and find out exactly what their
8:57
Speaker 1: allocation means. What does balance actually mean because it can
9:00
Speaker 1: mean different things. I mean, our super's definition of balance
9:04
Speaker 1: could be different than hestes, which could be different than holsplus.
9:08
Speaker 3: And I think clients and investors would just assume that they're.
9:14
Speaker 2: It's the same for all of them.
9:16
Speaker 3: So I think that's a really good point, James, that
9:18
Speaker 3: you've got to really look behind, you know, look behind
9:21
Speaker 3: the label and actually spend a little bit of time
9:23
Speaker 3: investigating it because there might be something that you're not
9:26
Speaker 3: comfortable with as your risk tolerance or even your capacity
9:30
Speaker 3: to take risks right now if you're nearing into retirement.
9:32
Speaker 1: Yes, are they all? Can I paint them more of
9:35
Speaker 1: the same brush By that, I mean, are the big
9:37
Speaker 1: private ones than none, the retailed ones as we call them,
9:41
Speaker 1: the whatever, the amps of this world, other colonial et cetera.
9:48
Speaker 1: Is the issue similar with them.
9:51
Speaker 2: You've usually got a little bit more choice there.
9:54
Speaker 3: To be fair to them, you've got a bit more choice,
9:56
Speaker 3: So you can break it down. They usually don't have,
10:00
Speaker 3: you know, a set standard fund that you're in nowadays,
10:04
Speaker 3: so usually you'll get options there. You know, you might
10:06
Speaker 3: have over one hundred different investment options there that you
10:09
Speaker 3: get to choose from, and you can kind of choose
10:12
Speaker 3: your asset allocation a.
10:13
Speaker 2: Little in a little bit more of a bespoke manner.
10:16
Speaker 3: So again, though for any single person, you know, outside
10:20
Speaker 3: we all know that outside of your house, your super
10:23
Speaker 3: is your biggest asset. So you've really got to spend
10:25
Speaker 3: the you know, spend an hour on it, looking for
10:28
Speaker 3: looking through and understanding it and not to you know,
10:32
Speaker 3: or talk to someone that can give you that advice
10:34
Speaker 3: as you know that education might save you, you know,
10:38
Speaker 3: possibly tens or hundreds of thousands of dollars.
10:41
Speaker 1: Okay, really valuable folks. So I mean, we've had this
10:44
Speaker 1: point on the shore before, but there's times for it.
10:46
Speaker 1: It's really matters. Don't assume you understand what the definition
10:50
Speaker 1: is of growth or balance. Have a look, have a look.
10:53
Speaker 1: It's not that complicated, all right, It's really not that
10:56
Speaker 1: complicated that that your fond it could be a lot
10:59
Speaker 1: more exposed to shares than you realize if you just
11:03
Speaker 1: assume that balance means balanced in the sense that you
11:06
Speaker 1: and I understand balance to be. And as Hughes pointed out,
11:10
Speaker 1: there is a major fund that had ninety percent of
11:12
Speaker 1: their holding some shares and they were classified as balanced.
11:17
Speaker 1: And by the way, can I just say, every time
11:19
Speaker 1: I bring this up in print, I get a you
11:21
Speaker 1: know that they're on like in two minutes complaining about
11:23
Speaker 1: this and that it's all fine. Well, I don't think
11:26
Speaker 1: it is all right now. Also, Hugh, while we're talking
11:30
Speaker 1: about this, one of the big issues of late in
11:34
Speaker 1: super and in Big Super. And when I say Big Super,
11:36
Speaker 1: I mean all those big industry funds and all those
11:38
Speaker 1: big retail funds that many people have their life savings in.
11:44
Speaker 1: There's all sorts of scandals and letdowns going on at
11:47
Speaker 1: the moment in terms of standards. Right Joe Longo, head
11:52
Speaker 1: of ASIK, has said they're the poster child of poor
11:55
Speaker 1: corporate governance. That's a spectacular line. I don't forget that
11:58
Speaker 1: pretty fast. And we had all this stuff with death
12:01
Speaker 1: benefits and disappointments and court actions Australian Super aera in
12:05
Speaker 1: their SeaBus are in there. There's a blockout in Hester
12:08
Speaker 1: where you can't even get at you through the site
12:11
Speaker 1: for fifty days because they're doing a technology change over.
12:14
Speaker 1: But here's what I want to point I'm leading to.
12:18
Speaker 1: There used to be an enormous amount of funds. There's
12:22
Speaker 1: mergers happening all the time. Art For instance, the second
12:25
Speaker 1: biggest fund is the second biggest fund because it's a merger,
12:28
Speaker 1: a recent merger of Sun Super around the old Queensland
12:31
Speaker 1: super Now. Mercer says that there's still about ninety significant
12:37
Speaker 1: super funds that's going to shrink to about twenty. And
12:45
Speaker 1: the issue I want to bring up you is when
12:47
Speaker 1: you're in one of these funds that's a target, you
12:50
Speaker 1: can have a lot of headaches and complications and bureaucracy
12:54
Speaker 1: drive you completely nuts. If you happen to be unfortunate
12:57
Speaker 1: enough to be in a small fund that's taken over.
13:00
Speaker 1: Find out a giant fund but at one hundred billion
13:02
Speaker 1: in assets, just buys your fund that had sixty billion
13:05
Speaker 1: in assets, and it gets two lines in a newspaper
13:07
Speaker 1: one day, and that's about it. You might even miss it.
13:10
Speaker 1: But all sorts of things happen afterwards as that consolidation happens,
13:14
Speaker 1: and it will happen. It has to happen because they
13:17
Speaker 1: need the scale and they need the technology investment to
13:21
Speaker 1: stay at the level they're at. What's the sort of
13:23
Speaker 1: upsides and downsides of that consolidation where the world we
13:27
Speaker 1: know of big super funds is going to shrink fast,
13:29
Speaker 1: is shrinking fast into a handful of key players.
13:34
Speaker 3: I think you definitely lose innovation, there is competition around you,
13:39
Speaker 3: You lose innovation and if you think, you know, we've
13:41
Speaker 3: got an aging population, we should be spending more money
13:45
Speaker 3: on designing better retirement outcomes for our clients. And how
13:50
Speaker 3: the investors and the members of these super funds. I
13:52
Speaker 3: think that's one that everyone will feel at the individual level,
13:56
Speaker 3: it is a race of the bottom with costs. So
13:58
Speaker 3: we're just trying to reduce fees, and then you get
14:01
Speaker 3: these substandard service levels.
14:03
Speaker 2: You get these issues.
14:04
Speaker 3: Around death payments and pension payments. So you know they've
14:09
Speaker 3: done a really good, you know, run on ad saying
14:12
Speaker 3: that it's all about cost, but you know, clients, do
14:15
Speaker 3: you know, do value good service?
14:17
Speaker 2: Still?
14:18
Speaker 3: People do value service, and I think that's something that
14:20
Speaker 3: needs to lift within those funds. And I think you're
14:25
Speaker 3: also going to see that they're going to become a
14:28
Speaker 3: victim of their own success in the fact that they're
14:30
Speaker 3: going to be so large that the way they invest
14:33
Speaker 3: you lock yourself into very average returns.
14:36
Speaker 1: Very interesting. We really flushed out out another day that point, Q,
14:40
Speaker 1: but it's very interesting, and because as you see, if
14:44
Speaker 1: you become it's like the old thing about the issue,
14:47
Speaker 1: if some company or factor dominates and it's then it
14:50
Speaker 1: becomes the average if you know what I mean, very
14:52
Speaker 1: hard to be better than average if you represent the
14:53
Speaker 1: average as those handful of funds will do sooner or later. Okay, look,
14:57
Speaker 1: well take a short break. I want to bring up
14:59
Speaker 1: a really interesting point now about Trump, about this sort
15:02
Speaker 1: of inflection point we have in market. So where we
15:05
Speaker 1: sit markets down five percent for the year or so
15:07
Speaker 1: after a whole polygod years when you could just close
15:10
Speaker 1: your eyes your fond are bringing in double digits every year.
15:14
Speaker 1: Maybe it's time to take a look at self managed
15:17
Speaker 1: super funds and who they might shoot back in a moment. Hello,
15:27
Speaker 1: Welcome back to the Australian's Money Post little podcast. James
15:30
Speaker 1: Kirby here talking to Hugh Robertson of Centaur Financial Services,
15:34
Speaker 1: operates up in the Gold Coast. There with the beautiful
15:38
Speaker 1: Gold Coast hinterland outside his window. Now, Q, you would think,
15:43
Speaker 1: damn good time for the self managed super fun sector
15:46
Speaker 1: to parade their wares. I mean I have a self
15:50
Speaker 1: managed super fund. I don't. There are times when there
15:53
Speaker 1: were times in the when the super funds were big.
15:56
Speaker 1: Super funds were knocking it out of the park, you know,
15:58
Speaker 1: ten eleven, twelve percent, and you were saying like, gee,
16:01
Speaker 1: you know, we get ten or eleven twenty percent and
16:03
Speaker 1: you don't have to think or do anything. You know,
16:06
Speaker 1: why am I doing it now? This year? I feel
16:09
Speaker 1: so much better, you know this feeler this year I have.
16:12
Speaker 1: I am nimble, may I say? And I was able
16:15
Speaker 1: to move in and I bought gold DTF for instance,
16:17
Speaker 1: you know, relatively significantly for the size of my fund,
16:20
Speaker 1: for instance, a few months ago. And I'm so glad
16:22
Speaker 1: I did. I'm so glad I did because I couldn't
16:24
Speaker 1: think of anything else worth buying at the time. Now
16:26
Speaker 1: I'm not saying they're perfect, but the point I'm making is,
16:31
Speaker 1: is this a climate where the attractions of a self
16:37
Speaker 1: managed super fund, knowing their limitations and their difficulties and
16:40
Speaker 1: the work involved in them, they may they may look
16:45
Speaker 1: more attractive.
16:46
Speaker 2: Yes, one hundred percent.
16:49
Speaker 3: And we've done the same chimes within our business where
16:52
Speaker 3: we've not always been.
16:56
Speaker 2: It's not being necessary to have an SMSF.
16:58
Speaker 3: We've been able to kind of get that those good
17:00
Speaker 3: investment outcomes without having a self manation shuper fund.
17:04
Speaker 2: But I think now control.
17:06
Speaker 3: We've got this geopolitical uncertainty both within Australia and abroad.
17:10
Speaker 3: So I think without having control over you know what
17:15
Speaker 3: we said before, the second biggest asset you own is important.
17:19
Speaker 3: The administration isn't what it used to be. Technology is
17:22
Speaker 3: taken care of a lot of that, the costs aren't
17:25
Speaker 3: as expensive as you may think, and just that element
17:29
Speaker 3: of control, and it probably coincides with the rise of
17:33
Speaker 3: ETFs and.
17:34
Speaker 2: In particular thematic ETFs.
17:36
Speaker 3: But now you can really tailor the portfolio to something
17:39
Speaker 3: that you know, you're comfortable with. You're not relying on
17:42
Speaker 3: a manager to allocate to gold, you know. If you
17:45
Speaker 3: want that for that peace of mind of that inflation protection.
17:48
Speaker 1: You just buy and good. Yeah, And I mean, really
17:51
Speaker 1: one's as good as the other. They're just reproduced the price,
17:55
Speaker 1: assuming that they're they're the same setting it that they're
17:57
Speaker 1: all on hedged or whatever, and they're not playing any
18:00
Speaker 1: games around leverage.
18:02
Speaker 3: So I think that's I think it's a very valid
18:05
Speaker 3: statement to consider looking at them at them now.
18:08
Speaker 1: The other point I wanted to make was that the
18:10
Speaker 1: big supper fonts had been dropping their cash levels going
18:13
Speaker 1: into what was clearly and obviously a very difficult time.
18:17
Speaker 1: Have we only notion about cash and smsfs and whether
18:20
Speaker 1: they were being more defensive.
18:23
Speaker 3: Yes, we're from our perspective, are the clients of ours.
18:27
Speaker 3: We took profits the end of last year. Markets were good.
18:30
Speaker 3: You know, you always harvest some of those returns and
18:33
Speaker 3: you wait for winter. There was the uncertainty. Remember when
18:36
Speaker 3: Trump got in, the markets were pretty bullish to begin
18:39
Speaker 3: with around the tax cuts and very much pro business agenda.
18:43
Speaker 3: But as we've now sort of got through a little
18:46
Speaker 3: bit of that and we've seen you know, the impact
18:48
Speaker 3: of tariffs, there's this little bit of uncertainty. So for us,
18:51
Speaker 3: we've had the correction of ten percent. You know, now
18:55
Speaker 3: we're actually waiting for today to be a time to
18:58
Speaker 3: actually start looking back in markets via a dollar cost average.
19:01
Speaker 3: So remembering when you're in an SMSF, you don't need
19:04
Speaker 3: to if you wanted to take an allocation, let's say,
19:07
Speaker 3: for example, NASDAK and you wanted a five percent allocation,
19:11
Speaker 3: you don't need to take five percent today. You can
19:13
Speaker 3: do one percent today, one percent next week and slowly
19:16
Speaker 3: build up.
19:16
Speaker 2: Your positions and deploying that capital as per.
19:20
Speaker 3: Something that you're comfortable with is really intelligent in volatile markets.
19:26
Speaker 1: One or two things I want to I'm bouncing around,
19:28
Speaker 1: but I'm at the same time it's very interesting. I
19:31
Speaker 1: hope for listeners too. There's big picture and a small
19:33
Speaker 1: picture here in terms of SMSF as an option and
19:37
Speaker 1: then options within smsfs. But just to go back to itself,
19:42
Speaker 1: what's the working number you have? I come into you
19:45
Speaker 1: and I said, off to start in an SMSF and
19:48
Speaker 1: you see, well, listen, you really can't start it without X.
19:52
Speaker 1: What's your number? As logan Roy says.
19:55
Speaker 2: It would always be a number of names.
19:57
Speaker 3: I think when you look at it, it used to
20:00
Speaker 3: be seen as around five hundred thousand, but over the
20:02
Speaker 3: last couple of years that's come down to two hundred thousand.
20:05
Speaker 3: And that again coincides with the rise of ETFs technology
20:09
Speaker 3: lowering the costs. And it's also this you talked about
20:13
Speaker 3: it previously, around things around administration. If you want to
20:18
Speaker 3: get contributions into super before end of financial year, you know,
20:21
Speaker 3: with the big funds, it can be quite difficult to
20:24
Speaker 3: meet their timelines, whereas in a self managed super fund
20:28
Speaker 3: you can do it the day before in June twenty nine.
20:31
Speaker 3: So there's things around that where there's a bit more
20:33
Speaker 3: flexibility around the self managed super fund that I think,
20:37
Speaker 3: and it's been interest too. The research is shown that
20:40
Speaker 3: younger people are opening them as well, So it's not
20:42
Speaker 3: just someone with a really big balance, it's someone that
20:44
Speaker 3: actually wants to take control of it. Which makes a
20:47
Speaker 3: lot of sense to me because it's you know, it
20:49
Speaker 3: is going to be such a big investment for you
20:51
Speaker 3: with your mandated SGC and the caps that you've got
20:54
Speaker 3: to put money in that.
20:55
Speaker 2: Why wouldn't you want to have more control over that?
20:57
Speaker 1: Well? Yeah, twelve percent of the year money by low
21:01
Speaker 1: having to go into super when you say two hundred thousand,
21:04
Speaker 1: that sounds very low to me. Is that imagining an
21:07
Speaker 1: ETF heavy SMSF Basically.
21:11
Speaker 3: Yes, you'd be able to keep your costs down via that,
21:14
Speaker 3: and it's also then you can use your software nowadays
21:18
Speaker 3: that does a lot of the heavy lifting from the
21:20
Speaker 3: reporting requirements, and even the accountants and the audits now
21:24
Speaker 3: are quite well priced, so that that tends to be
21:27
Speaker 3: as around between two hundred and two fifty was your
21:30
Speaker 3: break even cost of having an SMSF versus the industry ones?
21:35
Speaker 1: Well, I'll just say to listeners, I mean, as I said,
21:37
Speaker 1: I'm skeptical on that one folk, So I think it
21:40
Speaker 1: would be much higher than that myself. However, I'm talking
21:43
Speaker 1: about a fully diversified SMSF where you're doing all sorts
21:47
Speaker 1: of things. It's not just ETFs. It could be sharedes,
21:51
Speaker 1: it could be young securitized model just it could be
21:54
Speaker 1: property direct.
21:55
Speaker 2: Yeah, yeah, you're going up there.
21:57
Speaker 3: Back to that the notion that was and that was
22:00
Speaker 3: more what portfolios looked like when around the early twenty
22:05
Speaker 3: twenty to twenty one twenty two, and that number then
22:08
Speaker 3: was closer to five hundred thousand.
22:10
Speaker 1: Yeah, okay, thank you, Hugh. All right, now, one thing
22:13
Speaker 1: I wanted to zone in on on the SMSFS, which
22:15
Speaker 1: is relevant to all listeners, but if also on SMSFS,
22:20
Speaker 1: you know, and Hugh mentioned at the start about income
22:23
Speaker 1: we need income. Income will become more important defensive assets.
22:27
Speaker 1: Have you noticed you that the big banks are now
22:29
Speaker 1: paying eight percent franked except Comebank, Well, the top three
22:35
Speaker 1: A and Z, West, BAK and now are between seven
22:38
Speaker 1: and eight percent fully franked dividend yield as we speak.
22:41
Speaker 1: If you bought them today, Comebank is less than four percent.
22:45
Speaker 3: And if I was invested in those, I wouldn't really
22:47
Speaker 3: be worried about the capital volatility because the eight percent
22:51
Speaker 3: is going to meet my income needs.
22:53
Speaker 2: Yes, especially from a retiree.
22:55
Speaker 1: That's right. If you're a retiring and you're getting the
22:57
Speaker 1: absolute maximum bank for your you grossed up to Frankie,
23:01
Speaker 1: I'll be even higher than seven or eight.
23:03
Speaker 3: Wuld it And yeah, and if you're an accumulator, it's
23:05
Speaker 3: not bad to be reinvesting those and really getting that
23:09
Speaker 3: snowball of compound growth working for you either.
23:11
Speaker 1: Okay, very good. All right, now there's a lot there
23:15
Speaker 1: to digest. I hope that was all useful to you.
23:18
Speaker 1: I want to go to questions because we've got great
23:20
Speaker 1: questions back in a moment. Hello, welcome back to the
23:32
Speaker 1: Australian's Money Puzzle on Deliberation Day. Deliberation Day broadcast Liberation Day.
23:40
Speaker 1: By the way, as if you don't know, is what
23:42
Speaker 1: Trump is calling, He's Tariff's Day. All right, question, Luke,
23:48
Speaker 1: what are your thoughts in education bonds, particularly their tax advantages.
23:53
Speaker 1: I am seeing claims of a thirty percent bonus. This
23:56
Speaker 1: works great if my six year old and four year
23:58
Speaker 1: old can be beneficiaries. I'm sure of how it may
24:00
Speaker 1: change under tax loan. A long time out of five
24:03
Speaker 1: financial advisers don't like these when they're on the show.
24:06
Speaker 1: What do you think of them?
24:07
Speaker 2: Here?
24:08
Speaker 1: I've just given you context, right, just.
24:10
Speaker 2: In fairly fair, I'm in the eighty percent. Okay, look
24:15
Speaker 2: they I see how it works.
24:18
Speaker 3: But the fees, you've got a factor in the fees,
24:21
Speaker 3: You've got a factor in the inflexibility of it. And
24:24
Speaker 3: a thought that I've had around that is would you
24:29
Speaker 3: not be better off and the kids are better off
24:31
Speaker 3: getting the money when they're eighteen in the adult tax rates.
24:35
Speaker 3: So given the ages of the children, you might be
24:39
Speaker 3: better off salary sacrificing into super. And when the kids
24:43
Speaker 3: go on to university or whatnot and get that debt,
24:47
Speaker 3: you could probably compound the return better through putting the
24:50
Speaker 3: money into Super taxed at fifteen percent on earnings, and
24:54
Speaker 3: then upon retirement there might be a few years later
24:57
Speaker 3: until your age sixteen can access it.
24:59
Speaker 2: You could then pay that off for them.
25:01
Speaker 1: What about the argument that if you're topped out, if
25:03
Speaker 1: you're lucky enough to have topped.
25:05
Speaker 2: Up, and I would probably then use my non concessionals.
25:08
Speaker 1: You wouldn't over education bonds.
25:11
Speaker 3: Yes, I've never we've never really been a big user
25:14
Speaker 3: of them. The range of investment options was never great.
25:18
Speaker 3: The tax you know, the examples there that you can
25:21
Speaker 3: find online look good. But at eighteen, you know, I
25:24
Speaker 3: think of myself with four children, ten, eight, six, and four,
25:28
Speaker 3: and even though I've got what sixteen years until I'm sixty,
25:32
Speaker 3: I still and my kids go to private school. I
25:35
Speaker 3: still haven't thought about there hasn't been enough benefit there.
25:38
Speaker 1: But you so like someone who would have thought it through,
25:42
Speaker 1: both as a professional and privately. Okay, very interesting, all right,
25:46
Speaker 1: I hope that's useful to you, Luke. We're not dismissing
25:51
Speaker 1: them out of hand, but I just find, Luke, every
25:53
Speaker 1: time I put this in front of an advisor on
25:56
Speaker 1: the show, they are not supportive of them. Okay, that
26:00
Speaker 1: is they are they believe there's better value to be
26:02
Speaker 1: had elsewhere with your money. All right, Andy, And the
26:06
Speaker 1: context of Andy question interesting because you know, in the election,
26:11
Speaker 1: which we are in the middle of an election campaign,
26:14
Speaker 1: people a sort of struggling to find differences between the
26:16
Speaker 1: two parties. I don't mean we know they're different big government,
26:19
Speaker 1: small government and all that, but precisely on financial measures
26:23
Speaker 1: or investment measures and in housing. The big ticket from
26:27
Speaker 1: the Albanasa administration is the Shared Home Ownership scheme, which
26:32
Speaker 1: whereby the government will put up thirty percent for an
26:35
Speaker 1: existing house forty for a new and you share ownership
26:38
Speaker 1: with them. You know, that's their one and the Coalition's
26:42
Speaker 1: one is Super for Home Deposit, where you can get
26:45
Speaker 1: up to fifty thousand out of your SUPER to buy
26:49
Speaker 1: a house which you of course own entirely yourself. Now
26:54
Speaker 1: Andy's question, is the First Home Super saving scheme worth
26:58
Speaker 1: the effort? I believe it is quite come plex, But
27:00
Speaker 1: more recently I came across someone who had used it
27:02
Speaker 1: and had no complaints at all. The First Home Super
27:07
Speaker 1: Saber scheme, by the way, about thirty five thousand people
27:09
Speaker 1: have used it. It's the lowest participation of the various
27:13
Speaker 1: first home schemes, like the Guarantee scheme, but it is
27:17
Speaker 1: a scheme where Super one way or another was being used,
27:21
Speaker 1: or a super money that might have gone into Super
27:23
Speaker 1: has been used. Have you used it, Hugh, have you
27:27
Speaker 1: come across it?
27:28
Speaker 2: Do you know?
27:29
Speaker 1: Is it worth the effort to tunnel through the bureaucracy
27:33
Speaker 1: to make it work.
27:34
Speaker 3: In its current format. I'm not a big advocate for it.
27:39
Speaker 3: I didn't mind what the Coalition put forward, though, I
27:44
Speaker 3: thought that there was an element there that you know,
27:46
Speaker 3: part of the gains would have to go back into
27:48
Speaker 3: the super as well.
27:49
Speaker 1: Yeah, to be fair, Yeah, to be fair, just to
27:51
Speaker 1: finish off on that coalition. Think about the fifty thousands
27:53
Speaker 1: you can take off to buy your house. When you
27:56
Speaker 1: sell the house, if they distick, the fifty thousand must
28:01
Speaker 1: be replaced back into your super isn't that right? Yeah,
28:04
Speaker 1: which is the point people forget?
28:05
Speaker 3: Yeah, And I think that that method people are still
28:09
Speaker 3: you don't want to just rob your super fund, you know,
28:11
Speaker 3: you don't want to take it out of there in
28:13
Speaker 3: it not go back. I'm not a fan of the
28:15
Speaker 3: co ownership model, and you know, we still want people
28:19
Speaker 3: to be able to afford houses, but I think that's
28:22
Speaker 3: more on that.
28:23
Speaker 2: We just need to be able to build more.
28:24
Speaker 1: Houses, yes, supply to yeah, taking out super. Okay, So
28:29
Speaker 1: there you are, and the first home super skate Saber
28:32
Speaker 1: scheme it's there. People do make it work for them.
28:35
Speaker 1: I think they make it work for them because people
28:36
Speaker 1: will try anything that's available on this and I think
28:40
Speaker 1: the shared home equity scheme will be popular by the way,
28:44
Speaker 1: I do, so will super from you from so will
28:47
Speaker 1: housing deposits from your super They'll both fly because people
28:50
Speaker 1: will try anything, even the FHSS. All right, final questions
28:54
Speaker 1: from Rowan. There is usually quite a delay between the
28:56
Speaker 1: RBA cutting the official indust rate and banks passing those
28:59
Speaker 1: cuts through. Yes, does the RBA take into account banks
29:03
Speaker 1: usual delays when deciding when to cut rates. I wouldn't
29:07
Speaker 1: think so, Rowan. For what it's worth, there's no law
29:10
Speaker 1: that says they must. In fact, the RBA has no particular, written,
29:14
Speaker 1: explicit power to tell the banks to follow the official rate.
29:19
Speaker 1: It's a guideline and the banks are pretty fast and
29:23
Speaker 1: putting up the deposit rates. It's got to give them
29:25
Speaker 1: full credence for that, don't you So they wouldn't. Basically
29:30
Speaker 1: they wouldn't. I don't think so. I mean maybe if
29:32
Speaker 1: they were thinking about it really finally, and maybe there
29:34
Speaker 1: was atrocious behavior, they might.
29:36
Speaker 4: But what do you think you I went and had
29:40
Speaker 4: a quick research for this and it was an Z
29:44
Speaker 4: and NAB have typically taken ten days to cut to cut, and.
29:49
Speaker 2: Westpac has taken typically fourteen.
29:52
Speaker 3: And again there's no it's a commercial reason for them,
29:57
Speaker 3: you know, they don't have to. RBA's kind of meant
30:00
Speaker 3: to be you know, somewhat an independent, but they take
30:03
Speaker 3: it into account. And I think even when you compare it,
30:09
Speaker 3: you know, a thirteen day delay on a five hundred
30:13
Speaker 3: thousand dollars loan cost forty five dollars.
30:16
Speaker 1: More assuming they cut. There's two things there isn't there.
30:21
Speaker 1: There's the fourteen days, but then there's do they give
30:23
Speaker 1: the whole cut? Which they don't always And again they
30:25
Speaker 1: don't have to. A short answer roman is they don't
30:28
Speaker 1: have to, and it wouldn't be it wouldn't be a
30:32
Speaker 1: top factor for them in their deliberations, that is, if
30:36
Speaker 1: they ever cut again. Oh yes, so the economists tell
30:42
Speaker 1: us they're going to cut again, And I know I'm
30:44
Speaker 1: terribly cynical about it. I hope, so I'll tell you, well,
30:48
Speaker 1: but I wouldn't be. I wouldn't be building it into
30:50
Speaker 1: my plans. Would you be building a recut into your plan?
30:52
Speaker 2: To you?
30:52
Speaker 1: No, right, there you go question without notice. I should
30:56
Speaker 1: have warned you. I was going to hit you with
30:57
Speaker 1: that one, but then I should have warned you. But
30:58
Speaker 1: all the questions I hit you that I didn't line
31:00
Speaker 1: you up for. And that's because you're very good to
31:03
Speaker 1: talk on the show and We know you can handle
31:06
Speaker 1: them all and you did very well as usual. Thanks
31:08
Speaker 1: very much, Hugh Robertson of Centaur Financial.
31:10
Speaker 2: Services, Thank you very much for having me, James.
31:14
Speaker 1: Great to have Hugh on the show again. Okay, folks,
31:17
Speaker 1: keep those questions, comments, observations, complaints. Happy to see them
31:23
Speaker 1: all the money puzzle at the Australian dot com dot
31:27
Speaker 1: u send them in, record them if you like, on
31:29
Speaker 1: a voice memo and send them in as an email.
31:31
Speaker 1: We'd love to hear them. We're collecting them. Talk to
31:34
Speaker 1: you soon.