Latest / The Money Puzzle / Summer series: Is your home the worst investment you’ll ever make?

Transcript

Summer series: Is your home the worst investment you’ll ever make? · The Money Puzzle

0:01
Speaker 1: Hello, James Kirby. Here just a quick note before we begin.
0:05
Speaker 1: We're taking a short break over the holiday period and
0:08
Speaker 1: we'll be back with the first new episode of the
0:10
Speaker 1: Money Puzzle for the new year on Wednesday, January fourtheenth.
0:16
Speaker 1: In the meantime, here's Jack Tossl He's one of the
0:19
Speaker 1: younger advisors making a name for themselves and he's with
0:23
Speaker 1: the Partners Wealth Group. He's a provocative commentator, especially in
0:27
Speaker 1: this episode on the question of whether your home is
0:32
Speaker 1: actually the worst investment you'll ever make. He brings up
0:35
Speaker 1: some pretty powerful points. I'm sure you'll enjoy it on
0:38
Speaker 1: behalf of the Money Puzzle team, especially my producer Liah Sammaglu,
0:43
Speaker 1: who's been so good this year. I'd like to wish
0:46
Speaker 1: you all and merry Christmas and a happy new Year.
1:00
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
1:03
Speaker 1: James Kerbly. Welcome aboard everybody. Now here's the thought your
1:06
Speaker 1: home is the worst investment that you're going to make.
1:10
Speaker 1: About that your million dollar house, your mortgage will cost
1:15
Speaker 1: you up to three million in the course of your
1:21
Speaker 1: lifetime before you pay it off. So you haven't been
1:24
Speaker 1: investing really you've been taken for a ride. That's a
1:28
Speaker 1: provocative notion and it challenges a lot of what we've
1:33
Speaker 1: been told makes good sense, like paying off the mortgage
1:36
Speaker 1: as fast as you can. I didn't get the idea
1:39
Speaker 1: from nowhere. It comes from Jack Tossl of Partners Wealth Group.
1:43
Speaker 1: He's an advisor. He's been on the show before. He's
1:46
Speaker 1: got some very distinct ideas. How are you, Jack?
1:49
Speaker 2: Thanks you for having me on again.
1:51
Speaker 1: Jacks, great to have you on again. It's a very
1:54
Speaker 1: fresh thought in property and property investing. But lay it
1:59
Speaker 1: out for all, because if I say to you, I
2:01
Speaker 1: don't know about that, Jack. I like my house. It's
2:04
Speaker 1: very comfortable. Apparently, I've been told that it's a tax
2:07
Speaker 1: shelter forever under any government. So what am I doing wrong?
2:13
Speaker 3: Look, I just preface this and say that there's absolutely
2:16
Speaker 3: nothing wrong with owning your home. There are so many
2:19
Speaker 3: benefits to it. It can provide emotional security, there's lifestyle
2:23
Speaker 3: benefits to it. What I'm saying is when you look
2:25
Speaker 3: at it purely through the lens of an investment, that's
2:29
Speaker 3: when the numbers don't stack up so much. And there's
2:31
Speaker 3: a number of reasons for that. Number one is that
2:34
Speaker 3: nothing is taxed it up or you're paying for it
2:36
Speaker 3: with your after tax income. Traditionally speaking, you're a bit
2:40
Speaker 3: emotional when you buy your home, so you overpay for it. Arguably,
2:44
Speaker 3: you're going to live in an area you want to
2:46
Speaker 3: live in, not where you're going to get the best
2:47
Speaker 3: investment return.
2:48
Speaker 2: And look, you touched on it before.
2:50
Speaker 3: Over the duration of a thirty year loan, you're probably
2:53
Speaker 3: going to pay two x to three x what the
2:57
Speaker 3: actual headline value of it is.
3:00
Speaker 1: And you're going to pay that after tax. You're going
3:02
Speaker 1: to pay that out of your pocket. Basically, there's no
3:05
Speaker 1: there's no advantage, there's no incentives. Okay, So this is
3:09
Speaker 1: what I suppose goes without saying that we have an
3:12
Speaker 1: exceptionally expensive property market, and so this point is probably is.
3:17
Speaker 1: I have no problem with saying that this point you're
3:20
Speaker 1: making is more true than it would have been ten
3:23
Speaker 1: twenty years ago, because in real terms of our property,
3:26
Speaker 1: our homes have become so so expensive on every measure.
3:30
Speaker 1: So tell me, if you're looking at the price of
3:33
Speaker 1: a house then and someone so let's say someone takes
3:36
Speaker 1: what you have to say there and you make that
3:39
Speaker 1: point that your home is a very poor investment, probably
3:41
Speaker 1: the worst investment you'll make, because you don't normally sign
3:44
Speaker 1: up for a million dollar loan in the course of
3:46
Speaker 1: your life, and you don't normally actually pay it out
3:49
Speaker 1: of post tax. Before we get into how you could
3:52
Speaker 1: actually deal with that, just explain a little bit about
3:55
Speaker 1: explain what you meant by that, how it's a poor investment,
4:00
Speaker 1: and how are there better investments.
4:02
Speaker 3: Well, again, generally speaking, when people get those homes, you
4:05
Speaker 3: want the flashy swan possible, you overpay for it, you
4:08
Speaker 3: get a lot more room that you need, and arguably
4:12
Speaker 3: you've got a hell of a lot of leverage there
4:14
Speaker 3: in paying it with your after tax dollars, so effectively,
4:17
Speaker 3: for really ten to fifteen years, all of your personal
4:21
Speaker 3: cash flows, pretty much your excess is going strictly to
4:24
Speaker 3: paying that off. There's no investing outside of that, whether
4:28
Speaker 3: it's topping up your super looking at shares that traditionally
4:31
Speaker 3: is primarily where all of it's going into that one
4:34
Speaker 3: singular asset.
4:36
Speaker 1: And this is the patch. I'm sure if you saw
4:38
Speaker 1: a demographic study, you'd see that people are active investors
4:40
Speaker 1: until they're thirty ish they buy their home. They're not
4:44
Speaker 1: investors anymore, they peep up in their late forties maybe fifties,
4:49
Speaker 1: and they start investing again. I'm only guessing about this
4:51
Speaker 1: very imagine it's a pattern, is it?
4:54
Speaker 3: Yeah?
4:54
Speaker 2: Exactly.
4:55
Speaker 3: And that's what we say across the board very commonly,
4:58
Speaker 3: is that once you get them more, you put all
5:01
Speaker 3: your excess cash flows into that and you don't look
5:03
Speaker 3: at any investments really until you pay that off. And
5:06
Speaker 3: you think, look, if you get your homeline at twenty
5:09
Speaker 3: five or thirty thirty years, you're not looking at getting
5:11
Speaker 3: back into the market really until you're fifty, and then
5:14
Speaker 3: not knock retirements on the doorsteps.
5:16
Speaker 1: That's right, the compounding, compounding opportunities have passed. But okay,
5:20
Speaker 1: so then natural next question for you would be, if
5:23
Speaker 1: what you see is the case, then paying down the
5:27
Speaker 1: mortgage being that sort of all chestnut for in terms
5:30
Speaker 1: of present of finance, you must by definition be challenging that.
5:34
Speaker 3: Yeah, challenging that. You got to look at the numbers.
5:38
Speaker 3: I don't know everyone's situation specifically, but you should be
5:41
Speaker 3: looking at the opportunity cost of deploying that capital elsewhere.
5:45
Speaker 3: And that's what I'm saying. There's absolutely nothing wrong with
5:48
Speaker 3: paying down your home line owning your home as a
5:51
Speaker 3: consumption atset, a lifestyle asset, but you do need to
5:53
Speaker 3: look at it objectively and go, well, if I put
5:55
Speaker 3: my money elsewhere, what returns could I be getting and
5:58
Speaker 3: what would the long term impacts of that be.
6:00
Speaker 1: So give us an example. I'm presuming you're alluding to
6:03
Speaker 1: the fact that, for instance, you can make ten eleven,
6:05
Speaker 1: thirteen percent on share markets, and if you did with
6:09
Speaker 1: one hundred dollars, then you could be paying down your
6:13
Speaker 1: mortgage and still be ahead.
6:15
Speaker 2: Well exactly. You know.
6:16
Speaker 3: One of the other areas that often gets spoken about
6:19
Speaker 3: is rent vesting, and a big part of that is
6:21
Speaker 3: because for the same house, it costs you a lot
6:24
Speaker 3: less to rent it than what your mortgage expenses would be. Now,
6:28
Speaker 3: a lot of people out there say, oh, rent money
6:30
Speaker 3: is dead money, but interest money is also dead money.
6:33
Speaker 3: So it's what are you doing with that excess capital?
6:35
Speaker 3: And if you run the numbers on it, if you
6:37
Speaker 3: saving a significant amount of those mortgages, and you're directed
6:40
Speaker 3: to say, to investment properties which are fully taxed to
6:42
Speaker 3: uctile not anti property. Property is a great investment where
6:45
Speaker 3: you can leverage returns for optimizing it for tax reasons
6:49
Speaker 3: and getting the best value for where you invest.
6:51
Speaker 2: Now, if you straple.
6:52
Speaker 3: Out that over ten twenty thirty years, the actual growth
6:56
Speaker 3: ends up being far more than if you were to
6:58
Speaker 3: just live in your own home and pay them all off.
7:00
Speaker 3: And there's a lot of individuals out there with property
7:06
Speaker 3: portfolios worth tens of millions dollars, hundreds of millions, and
7:09
Speaker 3: the one thing I found in common listening to them
7:11
Speaker 3: in podcasts, it's a YouTube channels on the radio. Most
7:14
Speaker 3: of them don't actually own their own homes. They all
7:17
Speaker 3: rent invest They've got a twenty million plus property portfolio
7:22
Speaker 3: and they don't even know their own home.
7:23
Speaker 1: Do you worry at all that it turns heavily on
7:25
Speaker 1: negative gearing, and negative gearing might someday not be as
7:29
Speaker 1: good as it is now.
7:31
Speaker 3: Yes, potentially, you know that could have an impact as well.
7:35
Speaker 3: I don't think you should just look at it through.
7:37
Speaker 3: Negative gearing can be a good aspect to property investment,
7:42
Speaker 3: but you shouldn't just look at getting into a property
7:44
Speaker 3: purely for negative gearing to make the tax loss, because
7:47
Speaker 3: otherwise than you just buy the worst property possible.
7:49
Speaker 2: If you could make the biggest loss available.
7:52
Speaker 1: You're zoning in on the tax deductibility of the death
7:55
Speaker 1: that this is basically the attractive part, that simple delineation
7:59
Speaker 1: between you have. If you're paying off your home, the
8:01
Speaker 1: mortgage bill comes in, you paid out of your salary
8:03
Speaker 1: basically post tax. But if you have an investment property
8:06
Speaker 1: you can pay and get you're actually getting the expenses deductible.
8:11
Speaker 3: Yeah, you upset what the income is the rent you're paying,
8:14
Speaker 3: so naturally it's not going to impact your cash flows
8:17
Speaker 3: as hard.
8:17
Speaker 1: And if you invest it sounds like you are a
8:20
Speaker 1: keen supporter of it re investing.
8:22
Speaker 2: I don't know everyone's options.
8:23
Speaker 3: Again, I'm not going to recommend properly specifically for the individuals,
8:27
Speaker 3: but it can be a great strategy and you should
8:29
Speaker 3: look into it and assess whether it's best for you
8:31
Speaker 3: or speak to an advice with it.
8:34
Speaker 1: More generally, would you give it when we think about
8:36
Speaker 1: for ever one hundred dollars that you don't pay down
8:38
Speaker 1: the mortgage with and you use elsewhere? Are you thinking
8:42
Speaker 1: diversified portfolio? Are you thinking of growth? Are you thinking
8:45
Speaker 1: of growth in listed equities? What are you thinking of
8:48
Speaker 1: when someone when you're putting that forward to someone as
8:50
Speaker 1: a concept.
8:51
Speaker 3: There's a number of different options. For example, you think
8:54
Speaker 3: you could put it in the superannuation where it's highly
8:56
Speaker 3: tax effective, gain tax if when you work in a
9:00
Speaker 3: top one right at fifteen percent, compared to you in
9:03
Speaker 3: your own personal name where it could be up to
9:04
Speaker 3: forty seven percent. And again you look at share markets
9:08
Speaker 3: which line ball figure average ten percent of you or
9:12
Speaker 3: slightly under that. Conversely as well, you know if you
9:15
Speaker 3: directed it to a property in a growth sign where
9:20
Speaker 3: it's where you're going to get more bank for BAK
9:21
Speaker 3: rather than say just investment strictly where you want to
9:24
Speaker 3: live in, which may not have the same growth opportunities.
9:27
Speaker 1: Right. And then on the wider picture, you've met the
9:29
Speaker 1: point that this sort of thinking, which is paid down
9:32
Speaker 1: the mortgage, give everything to the mortgage, get your home,
9:36
Speaker 1: focus on that when it's when you've got to paid
9:38
Speaker 1: off to other things. You've been pointing out, that's actually
9:41
Speaker 1: given us an economy where property, this sort of property
9:46
Speaker 1: has become the dominant asset. It's become what the economy
9:49
Speaker 1: is substantially about. And that's not a good thing, really,
9:52
Speaker 1: is it.
9:54
Speaker 3: Yeah, I'm very much against that, mainly for what it
9:58
Speaker 3: does the country in the long term. It's very just
10:00
Speaker 3: in My partner comes from Palo Alto in the US,
10:03
Speaker 3: which is also known as Silicon Valley, very.
10:05
Speaker 2: Entrepreneurial part of the world, and.
10:07
Speaker 3: Every time I go over there, expect everyone they're in
10:09
Speaker 3: a startup, you know, they're involved in business growing. They're
10:12
Speaker 3: all entrepreneurs, innovators, and it's really amazing to see. And
10:16
Speaker 3: then I look at the Australian landscape and every time
10:18
Speaker 3: I spect to someone about getting wealthy or getting rich,
10:22
Speaker 3: no one's talking about investing in the business, creating a
10:25
Speaker 3: company which employs people, adds high paying wages for the
10:28
Speaker 3: individuals out there. It's all how can I put as
10:31
Speaker 3: much money possible into property? You know, very tunnel vision
10:35
Speaker 3: waves saying that is the only way in this country
10:38
Speaker 3: you can get rich. And digging holes and building houses.
10:41
Speaker 2: Is that all we do.
10:42
Speaker 1: It's pretty helpless for a productivity you'd imagine in releation
10:46
Speaker 1: to this economic summit that's coming up. But just on
10:48
Speaker 1: that then, in terms of going back to your corenaltion
10:53
Speaker 1: that the home is a poor investment because it's now
10:58
Speaker 1: tax deductible, it's an inert asset compared to an innovative
11:02
Speaker 1: asset so that you might do predictably okay, but you're
11:07
Speaker 1: never going to shoot out the lights like someone in
11:08
Speaker 1: Palo Alto who gets into the right start up. Are
11:11
Speaker 1: you also concerned, as part of what you're saying involved
11:16
Speaker 1: that maybe property is not as good going forward as
11:19
Speaker 1: it has been. This whole thing that used to double
11:20
Speaker 1: every ten years, I think that has faded to some degree.
11:25
Speaker 3: If you can generally speaking right, you'll get the law
11:27
Speaker 3: of averages. And realistically, I can't tell you what's going
11:30
Speaker 3: to happen next year, in the next ten years to
11:31
Speaker 3: twenty years, but if you look back at the last
11:33
Speaker 3: twenty years, we've had above average returns, far above what
11:38
Speaker 3: you'd expect.
11:38
Speaker 2: For the last one hundred years.
11:40
Speaker 3: You've got to ask the question, really, if it does
11:42
Speaker 3: increase at the same rate which it has the last
11:46
Speaker 3: ten years, last twenty years, who'll be able to afford it?
11:48
Speaker 3: I think I did some numbers right. If Sidney were
11:50
Speaker 3: to continue growing at the same growth right which it
11:54
Speaker 3: has the last twenty five years, and something like twenty
11:56
Speaker 3: forty five twenty fifty, the average price behinme, we'll be
11:59
Speaker 3: about four million dollars when we've seen also no real
12:03
Speaker 3: material changing incomes as well.
12:06
Speaker 1: Okay, just to challenge the re investing idea, which are
12:10
Speaker 1: I can see the merit of because it sidesteps that
12:13
Speaker 1: issue of you are still in property or in fact
12:16
Speaker 1: you have loose cash to do anything you like with
12:18
Speaker 1: diversified investing and you are renting. The only thing Jack,
12:22
Speaker 1: is that sooner or later you probably do have to
12:24
Speaker 1: buy a home. And unless that strategy is very successful,
12:28
Speaker 1: is there a risk that the homes fly up faster
12:30
Speaker 1: basically than the investments investments that you were preoccupied with.
12:36
Speaker 3: Yeah, potentially, you know that is always a risk, are
12:40
Speaker 3: they that's attaching? It really depends on what you're doing,
12:43
Speaker 3: if your excess capital as well.
12:45
Speaker 1: If people are leveraging. You mentioned that the very star
12:47
Speaker 1: people leaverage, right, so they take no risks, right, they don't.
12:50
Speaker 1: They're very slow to start startup or to invest in
12:54
Speaker 1: alternative assets or to try something different. But they'll take
12:57
Speaker 1: a million dollar loan. They've never taken a loan in
12:59
Speaker 1: their life. If they take a million dollar long to
13:01
Speaker 1: buy residential property, as you say, it may not be
13:04
Speaker 1: optimal and its future price trajectory is unclear, may not
13:09
Speaker 1: be as good as it was in the past, So
13:12
Speaker 1: people are willing to do that, but they're not willing
13:14
Speaker 1: to do it in any other area. When you say
13:17
Speaker 1: that you should think about investing outside the home, does
13:20
Speaker 1: it include leverage investing? Does it include gearing up potentially?
13:25
Speaker 2: Again, this is a hard one.
13:27
Speaker 3: Don't know an individual situation, what their risk apitite is
13:30
Speaker 3: like and what their capacity for growth is, so it's
13:33
Speaker 3: a bit hard to answer that.
13:35
Speaker 1: Yeah, but if someone gears up to buy a home,
13:39
Speaker 1: I mean they're gearing up three, four or five times
13:41
Speaker 1: the air soundary to buy a home, then it wouldn't
13:43
Speaker 1: be unreasonable to do some element of gearing in the
13:46
Speaker 1: investing outside the home.
13:49
Speaker 3: Yes, No, the thing with the homies is well traditionally speaking,
13:53
Speaker 3: it has been good in the way that consistent returns
13:57
Speaker 3: and strong value if you did leverage up four other
14:00
Speaker 3: areas for example, shares for example, and number one, no
14:03
Speaker 3: one's gonna let you take out a million dollar margin
14:07
Speaker 3: loan on shares really to do that. Look over the
14:12
Speaker 3: long run, yes, the numbers absolutely do stack up. Shares
14:15
Speaker 3: over the last one hundred years have performed better than property.
14:19
Speaker 3: But the issue with that strategy, right is it shares
14:21
Speaker 3: are also a lot more volatile. That's why you get
14:24
Speaker 3: the greater returns. So what happens if you have a
14:27
Speaker 3: JFC like event or Trump tariffs and you have a
14:30
Speaker 3: margin call and you don't have the assets outside to
14:34
Speaker 3: be able to pay for that.
14:35
Speaker 1: Okay, well dig a break. I think that's a very
14:37
Speaker 1: interesting point about the tax folks. It's something that you know,
14:40
Speaker 1: maybe we're a little bit preoccupied with the alleged tax
14:43
Speaker 1: benefits of home ownership, capital gains, tax exemption, other exemptions
14:48
Speaker 1: down the track, but we never think about the opportunity
14:50
Speaker 1: cost if you like, of that, which is what I
14:52
Speaker 1: think was really interesting that Jack has brought up with
14:55
Speaker 1: this notion that your home is a very poor investment.
14:58
Speaker 1: In fact, he said it was the worst investment you'd
14:59
Speaker 1: make and most likely undercurrent conditions. We'll be back in
15:03
Speaker 1: a moment. Hello, Welcome back to the Australians Money Puzzle podcast.
15:15
Speaker 1: I'm James Kirby and we're talking to Jack Tussl of
15:17
Speaker 1: the Partners Wealth Group, which is a very large financial
15:20
Speaker 1: advisory operation which is a nationwide Now, Jack, one of
15:26
Speaker 1: the things also, I know that you are something of
15:28
Speaker 1: an influencer and I use it in the best possible way,
15:31
Speaker 1: because it's got a mixed reputation, this notion of influencer.
15:35
Speaker 1: But I actually have no problem with finn influencers as
15:37
Speaker 1: long as they're influencing, as long as it's convincing and
15:40
Speaker 1: it's well researched and documented, et cetera. But of course
15:43
Speaker 1: there's basically no gatekeepers or editors in that field, and
15:47
Speaker 1: so you know, some absolute rubbish gets through. You've had
15:51
Speaker 1: a look at that area as well, And I just
15:53
Speaker 1: want to concentrate on property because I know, even on
15:56
Speaker 1: the show people say social media and even on really basics,
15:59
Speaker 1: I can selling a property these days you should have
16:01
Speaker 1: a social media campaign. Property investors are very tuned into
16:05
Speaker 1: social media in terms of trends and data, which is
16:08
Speaker 1: all fine. What have you seen in terms of the
16:11
Speaker 1: influencers in the property investment market residential property investment market
16:16
Speaker 1: sort of what's cut your eye?
16:19
Speaker 3: It's interesting. I don't know if this is just my
16:22
Speaker 3: algorithm specifically, but recently of the last twelve months, I
16:25
Speaker 3: have seen an explosion of the amount of property gurus,
16:31
Speaker 3: property investment and analy analysis, the buyers agents out there,
16:35
Speaker 3: and interesting, like a lot of them probably don't look
16:38
Speaker 3: old enough to shave.
16:39
Speaker 2: They're twenty one and twenty.
16:40
Speaker 3: Thus I have some queries about, you know, that sphere,
16:45
Speaker 3: what the qualifications are behind them, whether they actually do
16:48
Speaker 3: have any backing or not. I'm not actually sure how
16:50
Speaker 3: ACID regulates proper advisors in the same way they do
16:53
Speaker 3: financial advisors like myself, But there has been an explosion
16:58
Speaker 3: in social media of those types of indias, and.
17:00
Speaker 1: What do you think of the quality of what's the
17:02
Speaker 1: quality of information and for one of a better word,
17:06
Speaker 1: advice that's going through those that with that big lift
17:09
Speaker 1: in activity.
17:10
Speaker 2: I'm very skeptical of this.
17:13
Speaker 3: It's a bit of a canary in the coal mine
17:15
Speaker 3: sort of situation for me, especially talking with other advisors
17:19
Speaker 3: as a touch and I've seen a lot of these
17:20
Speaker 3: properly gurus so to speak to look very young and
17:23
Speaker 3: don't look like they've got any qualifications, often talking about
17:27
Speaker 3: all these new builds and the opportunities. I'm a bit skeptical.
17:30
Speaker 3: I'd like to know, are you actually getting any kickbacks
17:32
Speaker 3: from that? Do you have a vested interest from the
17:35
Speaker 3: developers regarding that? And then just some information as well,
17:38
Speaker 3: which is just unreally sick. So the other day I
17:41
Speaker 3: saw one talking about how could easily get one of
17:44
Speaker 3: their clients to purchase a home for six hundred thousand
17:47
Speaker 3: dollars and then make a one hundred grand return in
17:50
Speaker 3: twelve months. Yes, that's absolutely possible. But the way to
17:53
Speaker 3: sprook it is guaranteed. You know, it's a very decent return, right.
17:59
Speaker 1: It's a exceptional return. Yeah, and this is put forward
18:04
Speaker 1: as probable exactly.
18:07
Speaker 2: Well, the way I saw it was put forward is
18:10
Speaker 2: more than probable.
18:11
Speaker 3: Is expected to be honest, and if you didn't get that,
18:14
Speaker 3: well that's the unexpected return. So that's I find it
18:18
Speaker 3: quite an army to be honest again working in that space.
18:22
Speaker 1: Yes, because you've gone and done all the exams and
18:24
Speaker 1: you've gone through everything to become an advisor.
18:27
Speaker 3: Yeah, exactly. I don't know if the property industries are
18:30
Speaker 3: always gone through that. That's soul searching and looking for
18:33
Speaker 3: professionalism that the financial advice industries had to go through.
18:37
Speaker 1: Yes, went through in fairly brutal fashion, didn't it. And literally,
18:41
Speaker 1: quite literally every second advisor left the scene. There was
18:44
Speaker 1: thirty ten years ago and now there's fifteen.
18:47
Speaker 3: Yeah, about forty to fifty percent decline in advisor numbers
18:50
Speaker 3: since the Royal commission.
18:52
Speaker 1: So to our listeners who would listen, you know, one
18:56
Speaker 1: podcast is as good as the other basically when it's
18:58
Speaker 1: put in front of you, onto you give it a try.
19:01
Speaker 1: We don't know what the selection mechanism that puts a
19:04
Speaker 1: podcast in front of you or a YouTube video in
19:06
Speaker 1: front of you. As you say, there are algorithms, But
19:08
Speaker 1: what do you think our listeners should What should they
19:11
Speaker 1: watch out for? This is an area that we just
19:13
Speaker 1: don't look at enough, We don't get advice enough on
19:16
Speaker 1: because properly it's strange in some ways, it's sort of
19:19
Speaker 1: falls slightly outside the jurisdiction, if you like, traditional jurisdiction
19:24
Speaker 1: of financial advice. And mortgage brokeles, for instance, are in
19:26
Speaker 1: a world of their own to some degree from a
19:28
Speaker 1: regulatory point of view. So what should people look out for?
19:31
Speaker 1: What should they watch out for from social media? Education
19:34
Speaker 1: and advice?
19:37
Speaker 3: Well, this is the hardest thing, and I've raised this
19:40
Speaker 3: a number of times. The issue with social media is
19:43
Speaker 3: generally speaking, those who are the best of it and
19:46
Speaker 3: highly engaging and putting content in front of you which
19:49
Speaker 3: you want to watch. Traditionally speaking, aren't the ones who
19:52
Speaker 3: have the best level of knowledge. The education you can
19:55
Speaker 3: actually get it out there, and that's a significant issue
19:58
Speaker 3: with the industries are doing within Partly I'm helping a
20:01
Speaker 3: bridge as well.
20:02
Speaker 1: Yes, and I take your point that the ability to
20:06
Speaker 1: catch surprise provolk have a dazzling knee effective video is
20:12
Speaker 1: not actually the same as offering good advice.
20:16
Speaker 3: But the way the algorithms work is it's all about
20:18
Speaker 3: keeping attention. So have you say something engaging and people
20:21
Speaker 3: watching it, it's going to push to more and more people.
20:24
Speaker 3: The algorithm could not care less whether what you're saying
20:27
Speaker 3: is right or wrong or downright dangerous.
20:31
Speaker 1: Right, it's alarming, It is alarming. Often it's the investments
20:35
Speaker 1: with at least knowledge and experience that.
20:37
Speaker 2: I was just going to touch on it.
20:39
Speaker 3: I think, looking at from a financial advisors perspective, the
20:43
Speaker 3: average financial advisors adds fifty two in a male. Now,
20:46
Speaker 3: I don't imagine many of those guys are posting the
20:50
Speaker 3: TikTok Instagram reels or even writing engaging content on LinkedIn.
20:56
Speaker 1: Yes, but you are, so you're aware of the world.
20:59
Speaker 1: That's a different milieu you're in, and you're aware of that,
21:01
Speaker 1: and then you see then you see the gaps. Basically
21:04
Speaker 1: in terms of qualifications that perhaps others don't see. Okay,
21:08
Speaker 1: we'll be back at the moment. Hello, Welcome back to
21:22
Speaker 1: The Australian's Money Puzzle podcast. I'm James Kirby and I'm
21:25
Speaker 1: talking to Jack Tussl from the Partner's Wealth Group and
21:27
Speaker 1: we've been covering some very interesting material. Jack's point that
21:30
Speaker 1: you're you know, the investment that you're home is probably
21:33
Speaker 1: one of the worst investments you will make is really interesting.
21:36
Speaker 1: It sounds unconvincing at first glance what he's saying is
21:39
Speaker 1: compared to other investments from a tax perspective. Then you
21:43
Speaker 1: start to see the weakness this year, the distinct weakness
21:46
Speaker 1: in home ownership against successful investing that is tax deductible,
21:52
Speaker 1: something we should look more at. Also, the social media influencers.
21:57
Speaker 1: I was asked to speak at an ACT conference on
22:00
Speaker 1: where there was a segment on fin influencers recently, and
22:03
Speaker 1: I think the regulators are at sea really about what
22:06
Speaker 1: to do about that. Because you can have someone who's
22:09
Speaker 1: highly qualified on social media, like you, Jack, and then
22:13
Speaker 1: you can have someone who has zilsh qualifications and the
22:17
Speaker 1: algorithm will trade both of you the same. So it's
22:21
Speaker 1: a very tricky area to regulate. That's not to say
22:23
Speaker 1: that it shouldn't be regulated, because it's going to cause
22:26
Speaker 1: problems very soon, if not already. Okay, if you questions, David,
22:31
Speaker 1: your recent episode on the Retirement sweet Spot was great,
22:33
Speaker 1: but did have one misleading statement. Your guest said, you
22:36
Speaker 1: need about a million of your own money to gain
22:38
Speaker 1: an equivalent income to the pension. This is wrong since
22:41
Speaker 1: the starting bands would leave you with about a million
22:43
Speaker 1: in the bank when you die, but the pension doesn't
22:46
Speaker 1: leave you anything. Yeah. Absolutely, David, you're correct. The point
22:50
Speaker 1: I suppose that Hugh Robertson was making is that you
22:53
Speaker 1: can have someone who has a government pension getting say
22:57
Speaker 1: a couple getting forty something thousand a year in income.
23:01
Speaker 1: Another couple who doesn't have a government pension has to
23:04
Speaker 1: have a million dollars to bank roll an income of
23:07
Speaker 1: forty something thousand a year, and if they both live
23:10
Speaker 1: for forty more years, they both have that same dynamic.
23:14
Speaker 1: That's the issue. Nathan a question. I understand the logic
23:18
Speaker 1: of not including the value of the home in pension calculations.
23:22
Speaker 1: No one wants to see Betty kicked out of her
23:23
Speaker 1: family at ninety, But when Betty passes away with a
23:27
Speaker 1: five million dollar home, should the taxpayer not get some
23:30
Speaker 1: of that pension back from the sale of her house.
23:32
Speaker 1: I wonder Jack, going back to the original thoughts at
23:35
Speaker 1: the start of the show about how the home is
23:37
Speaker 1: such a poor investment. There's a lot of things in
23:41
Speaker 1: the tax system that help it along, isn't there. Yeah,
23:43
Speaker 1: the home isn't included in pension asset test. The home
23:46
Speaker 1: isn't included in capital gains. Do you think if we
23:48
Speaker 1: flattened out those taxes what you're saying would become much
23:50
Speaker 1: more obvious.
23:52
Speaker 3: Yeah, And it's interesting you look at that, the ability
23:54
Speaker 3: to have a five million dollar house and still I
23:57
Speaker 3: would get a full government pension. The millennials say, at
23:59
Speaker 3: there be seen in at the minute it would, Yes.
24:04
Speaker 1: They would, And you can make that a ten million
24:05
Speaker 1: dollar house if you want. It is really quite a
24:07
Speaker 1: remarkable that it's come to that. I don't think when
24:10
Speaker 1: they excluded the value of the family home they weren't
24:13
Speaker 1: thinking of fourteen million dollar houses on Sydney Harbor being excluded. No.
24:18
Speaker 3: I think the smartest thing to do would be, sadly,
24:20
Speaker 3: just capture two million dollars or three million, which is
24:23
Speaker 3: going to be probably eighty percent of the population really,
24:26
Speaker 3: and then you're going to pay tax on the level above.
24:28
Speaker 2: That would be a more equable thing.
24:31
Speaker 3: You just got to ask the question, right, given how
24:35
Speaker 3: much debt is expanding, right, can younger generation, say millennials, example,
24:40
Speaker 3: we were paying forty seven percent tax on income about
24:44
Speaker 3: one hundred and ninety thousand dollars. How long can they
24:46
Speaker 3: subsidize someone who's living in a five million dollar property
24:49
Speaker 3: to get paid a full government pension.
24:51
Speaker 2: And do we see that as equitable in the long run.
24:53
Speaker 1: Yeah, yeah, I think that's something that would come up
24:55
Speaker 1: in the economics so much. Actually next week, which we
24:57
Speaker 1: will have special on this're starting on the name tenth
25:00
Speaker 1: the Economic Summits, which has quickly been repackaged in some
25:04
Speaker 1: parts as the Tax Summit or even the Wealth Tax
25:06
Speaker 1: Summit perhaps. Okay, final question from Peter. It's very specific.
25:11
Speaker 1: We'd have a go this has never advised information only.
25:14
Speaker 1: He says. He gets a question regarding the cost space
25:17
Speaker 1: of his ETF distributions. He gets his cash distributions during
25:20
Speaker 1: the year from his Vanguard ETF. At the end of
25:24
Speaker 1: the tax year, I get the tax profile with the
25:26
Speaker 1: breakdown of the components of the distribution. One particular line
25:30
Speaker 1: has him puzzled. A mighty cost base net amount dash
25:33
Speaker 1: shortfall increase in the cost space, which for twenty twenty
25:37
Speaker 1: five tax year Peter says, was two hundred and fifty dollars,
25:40
Speaker 1: and he wants to know does this mean he should
25:43
Speaker 1: go through in a portion the amount across each of
25:45
Speaker 1: his shares and ETFs and increase the cost space for
25:48
Speaker 1: each parcels so at the time I sell, I will
25:52
Speaker 1: decrease my capital gain feeling it kind of gets automated
25:56
Speaker 1: and he doesn't have to do all that. Have you
25:58
Speaker 1: any observation on that one I blame?
26:01
Speaker 3: Isn't that because he's technically paid more income tax now
26:05
Speaker 3: than what he should. So affectively, what it's doing is
26:08
Speaker 3: increasing the cost basis so that when it does get
26:11
Speaker 3: solved and he doesn't pay as much tax, which offsets
26:15
Speaker 3: that initial and.
26:16
Speaker 2: That in terms of applying, that's a sort of accountant job.
26:19
Speaker 2: I think I would just yes.
26:21
Speaker 1: Okay, and I tend to let the accountants do all that.
26:23
Speaker 1: I mean sometimes I do sit back and I say,
26:25
Speaker 1: when you get your annual returns, you say okay. So
26:27
Speaker 1: let's say you bought some more shares in something you
26:30
Speaker 1: had already, Like, how exactly is that treated? If I
26:34
Speaker 1: went in and drilled down, I could, I suppose, spend
26:36
Speaker 1: days and days finding out whether the accountant did that right.
26:38
Speaker 1: At a certain point you have to trust the accountant
26:41
Speaker 1: and the order did is right. But you could drill
26:43
Speaker 1: down forever, I suppose, if you had the time. And
26:45
Speaker 1: that don't mean to be flippant. I just mean that
26:47
Speaker 1: it's probably extremely difficult to track each individual item sometimes
26:51
Speaker 1: that when they are routine, these sort of covered by
26:54
Speaker 1: accountants and orders. But you could always ask your accountant
26:58
Speaker 1: or orders or how did they deal with that last
27:00
Speaker 1: year for instance? That might be useful. All right, terrific, Jack,
27:04
Speaker 1: Tossil Partners, Wealth Group, thanks for coming on the show.
27:06
Speaker 3: Thanks for having me again. Jan It's been absolute pleasure.
27:09
Speaker 1: Great to have you, Jack, and great to hear your
27:11
Speaker 1: very distinct views on the market. They're very distinct views,
27:14
Speaker 1: they're clear views, and they're often provocative. Okay, folks, let's
27:18
Speaker 1: have some more correspondence the Money Puzzle at the Australian
27:21
Speaker 1: dot com dot Au. Talk to you soon.