Latest / The Money Puzzle / Do I really need that much? The problem with superannuation calculators

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Do I really need that much? The problem with superannuation calculators · The Money Puzzle

0:10
Speaker 1: Hello and welcome to the Australians Money Puzzle podcast. I'm
0:14
Speaker 1: James Kirby. Welcome aboard everybody. Am I imagining this or
0:18
Speaker 1: is there suddenly again a lot of bad behavior, bad
0:23
Speaker 1: actors as they call them, sweeping through the investment markets,
0:28
Speaker 1: not just share markets, but property markets as well. We
0:31
Speaker 1: mentioned on the show just on Tuesday we had Sam
0:34
Speaker 1: Price and he was telling this extraordinary story about how
0:38
Speaker 1: influencers social media financial I don't want to say the
0:42
Speaker 1: word advisors, but financial operators who assume the mantle of
0:47
Speaker 1: advisors on social media had been luring investors into single
0:53
Speaker 1: districts basically within certain cities Brisbane and Melbourne, and of
0:57
Speaker 1: what Sam described as pump and dumb, basically that they
1:01
Speaker 1: lie them all into the one suburbs, the suburb goes up,
1:03
Speaker 1: and then of course it's all over and reality hits
1:06
Speaker 1: and these suburbs don't actually turn out to be good investments.
1:09
Speaker 1: I had always thought of influencers and advice issues around
1:14
Speaker 1: share market, but it can be property as well. We
1:17
Speaker 1: also have, of course, the emerging scandal ever growing scandal
1:20
Speaker 1: around the trust Gargent Group and issues around SMSF commencements.
1:24
Speaker 1: We're big SMSF fans on the show, but we always
1:28
Speaker 1: say they're not suitable for everybody. My guest today is
1:32
Speaker 1: someone who's right across all this. He is not only
1:36
Speaker 1: across it, but he has the power i'd like to
1:38
Speaker 1: think sometimes at least to change what's going on. It's
1:42
Speaker 1: Alan Kirkland, and he is the ACIC Commissioner with particular
1:47
Speaker 1: oversight on consumer affairs. How are you Allen?
1:51
Speaker 2: Excellent, James, Really great to be here with you today.
1:54
Speaker 1: Very nice to have you on the show, and good
1:55
Speaker 1: to have someone like you on the show. As I've
1:58
Speaker 1: mentioned to you earlier, we offer mention money smart as
2:01
Speaker 1: a place to start for investors and to get a
2:04
Speaker 1: grips on the basics. Our listeners probably would think that
2:08
Speaker 1: they're sort of step up from that level, but often
2:12
Speaker 1: that's for dangerized as you'll probably tell us pretty soon.
2:16
Speaker 1: Just quickly on that, just on that first point I
2:18
Speaker 1: was talking about, and I know, folks, the reason Alan
2:21
Speaker 1: is on the show is he wants to tell us
2:22
Speaker 1: a few things about what's going on at ACIC and
2:24
Speaker 1: what they're doing and some of the areas that they
2:27
Speaker 1: want to warn us about. But on that whole thing
2:30
Speaker 1: about finfluencers. It seems like it never goes away. Is
2:35
Speaker 1: how do you guys actually move in on that. It
2:38
Speaker 1: seems like a perennial problem. This is an old problem
2:41
Speaker 1: dressed up in a new fashion on social media.
2:43
Speaker 3: I think, oh, it is a key concern for us.
2:47
Speaker 3: I mean we, of course, I only have the power
2:49
Speaker 3: to interven if they're actually if people are actually giving
2:52
Speaker 3: advice in relation to financial products or services. So there
2:56
Speaker 3: are lots of forms of property investment that don't fall
2:58
Speaker 3: into that category. Can't necessarily take action if people are
3:02
Speaker 3: giving advice about property investment, but with what they're doing
3:05
Speaker 3: is recommending that people invest in a financial product or service,
3:09
Speaker 3: then it's quite likely that they're providing financial advice and
3:13
Speaker 3: that requires a license.
3:14
Speaker 2: And we've been really active against influencers.
3:17
Speaker 3: Earlier this year we took action coordinated action with a
3:20
Speaker 3: range of regulators around the world as part of a
3:22
Speaker 3: global week of action against influencers that involved search warrants
3:27
Speaker 3: and arrests and some other jurisdictions. In Australia, we identified
3:30
Speaker 3: a range of influencers who we felt were giving financial
3:34
Speaker 3: advice and we've reached out to them and thus the
3:37
Speaker 3: second time we've done that, and we have actually seen
3:39
Speaker 3: a number of them changed their practices after being contacted
3:42
Speaker 3: by ACIC because I think for them it came as
3:44
Speaker 3: a I hope it came as a bit of a
3:46
Speaker 3: shock and really made them think about the fact they
3:49
Speaker 3: might be breaching the law. So we'll have a bit
3:51
Speaker 3: more to say about that, I think earlier in the
3:53
Speaker 3: new year, because we're just sort of wrapping up that
3:55
Speaker 3: latest round of action. But I can assure your listeners
3:57
Speaker 3: that it's a key concern for us because to give
4:01
Speaker 3: financial advice in Australia you need to be appropriately qualified,
4:04
Speaker 3: and you need to have a license or be authorized
4:07
Speaker 3: by a licensee, and we will take action where we
4:10
Speaker 3: find people who aren't complying with those requirements.
4:13
Speaker 1: Oh the sure we make a socially when we have
4:15
Speaker 1: a question and answer session, I make it very clear
4:17
Speaker 1: that it's not advice. I say this all the time,
4:19
Speaker 1: it's information. But how does the average intelligent, every day
4:24
Speaker 1: investor de called what's advice and what isn't advice? And
4:30
Speaker 1: has it become more difficult with now media or social media?
4:35
Speaker 3: Actually, the test in the law around what's financial advice
4:38
Speaker 3: is pretty simple.
4:39
Speaker 2: When you strip it back.
4:40
Speaker 3: It really comes down to whether somebody is making a
4:43
Speaker 3: recommendation about a particular financial product. So if somebody is
4:47
Speaker 3: suggesting that you invest in something, that's effectively advised, so
4:52
Speaker 3: you should always have it your I guess your senses up.
4:55
Speaker 3: If somebody's talking up a particular investment option, and if
5:00
Speaker 3: they're encouraging you to invest in it, you should be
5:03
Speaker 3: checking out whether they've actually got a license or whether
5:05
Speaker 3: they're somehow authorized by an existing licensee. And that's important
5:09
Speaker 3: because if you get financial advice from somebody who's appropriately licensed,
5:14
Speaker 3: there are important consumer protections that come with that. So
5:16
Speaker 3: they've got to be a member of Africa the Dispute
5:19
Speaker 3: Resolution Body, they've got to have appropriate arrangements for dealing
5:23
Speaker 3: with complaints you make to them and for providing compensation
5:26
Speaker 3: if something goes wrong. So you do get some important
5:30
Speaker 3: protections by engaging with somebody who's appropriately licensed. So you
5:33
Speaker 3: should always ask that question if they're suggesting you make
5:36
Speaker 3: an investment. Obviously there are some exemptions for genuine media
5:40
Speaker 3: organizations or which I think is part of what you
5:43
Speaker 3: were referring to in those earlier comments, James, but outside
5:46
Speaker 3: programs like this, if somebody on social media or somewhere
5:49
Speaker 3: else is telling you to invest.
5:50
Speaker 2: You should always be.
5:51
Speaker 1: Wary and how would I check? So somebody's quite convincing,
5:56
Speaker 1: how would I actually check that they are licensed?
6:00
Speaker 3: Yeah, so there is a register that we published. We've
6:03
Speaker 3: got registers of licensees and particularly of financial advisors who
6:06
Speaker 3: are authorized to give financial advice. And the easiest way
6:10
Speaker 3: into them is in fact via the money smart website
6:12
Speaker 3: that you mentioned. So if you go to money smart
6:14
Speaker 3: dot gov dot au look at the financial advice section,
6:17
Speaker 3: you'll be able to find access to the register there
6:19
Speaker 3: and you can enter the name of an individual and
6:22
Speaker 3: you'll be able to find out whether they're authorized to
6:24
Speaker 3: give financial advice.
6:25
Speaker 1: Okay, Now, a lot of our listeners maybe is very
6:30
Speaker 1: roughly coming up on half of them have an SMSA
6:33
Speaker 1: for self managed super fund or aspire to have one.
6:36
Speaker 1: And there is issues again yet again, and something of
6:42
Speaker 1: a flashpoint, I suppose in this area in the first
6:45
Speaker 1: guaragean scandal which is emerging just now where there's many
6:50
Speaker 1: investors caught with their super in scheme, shall we see,
6:55
Speaker 1: which is it's unfolding as we speak. But what's really
7:00
Speaker 1: surprising is there's an estimated billionaire, so that could be
7:04
Speaker 1: lost here. And it's got a lot of big names
7:09
Speaker 1: in it, right, So a lot of big names were
7:12
Speaker 1: in one way or another entangled in this and people
7:16
Speaker 1: were very poorly advised. But what strikes me Alan is
7:21
Speaker 1: is that it seems that's at the heart of the
7:23
Speaker 1: financial system. Is there what can you do to protect
7:31
Speaker 1: people from getting losing money or risking losing money when
7:39
Speaker 1: an affair emerges where it ostensibly looks feasible or reasonable
7:46
Speaker 1: because well known household names are mentioned in passing by
7:49
Speaker 1: these operators.
7:53
Speaker 3: It is one of the questions that is probably our
7:55
Speaker 3: biggest priority in ethic at the moment, I mean across
7:57
Speaker 3: the Shield and First Guardian Color, which had some really
8:01
Speaker 3: similar elements. I mean, we've got a whole bunch of
8:04
Speaker 3: investigations underway. We've already launched a range of litigation. We've
8:08
Speaker 3: i think been in court around forty five times in
8:11
Speaker 3: the past year or so, and we've got about forty
8:14
Speaker 3: people working on these. So it's one of our biggest
8:16
Speaker 3: priorities as a regulator, and one of the ways that
8:20
Speaker 3: one of the key things we've done is an immediate
8:22
Speaker 3: priority is to try and protect investor funds. So when
8:25
Speaker 3: we were alerted to the fact that there might have
8:28
Speaker 3: been I guess some inappropriate behavior going on in the
8:31
Speaker 3: management of those funds that people invested in by their
8:35
Speaker 3: super one of the first things we did once we
8:37
Speaker 3: had sufficient evidence was to go to court to get
8:40
Speaker 3: asset freezing orders to stop any more money disappearing. We
8:43
Speaker 3: eventually got receivers and liquid ators appointed who can secure
8:47
Speaker 3: whatever assets are there and try to make sure they're
8:49
Speaker 3: appropriately distributed, and ideally there's many of those funds as
8:53
Speaker 3: possible to go back to investors, so that's an important
8:56
Speaker 3: part of it. One of the challenges is sometimes these
8:58
Speaker 3: things come to our attention a bit too late for
9:01
Speaker 3: us to save all of the assets, so we're still
9:03
Speaker 3: working through the process to see how much can go
9:05
Speaker 3: back in relation to investors in those two schemes. But
9:08
Speaker 3: the other thing we've done is to try and find
9:10
Speaker 3: other methods to get compensation for investors, So, particularly in
9:13
Speaker 3: relation to the shield Master Fund, which is the other
9:16
Speaker 3: one I mentioned, we did get an important agreement recently
9:20
Speaker 3: from mcquarie, which is one of the big names I
9:22
Speaker 3: assume you're referring to. It is that they will make
9:24
Speaker 3: things right for the people who invested via the McQuary
9:27
Speaker 3: platform in the Shield master funds. So for those investors
9:32
Speaker 3: who did so via McQuary, they will be receiving effectively
9:35
Speaker 3: well kind of refunds. All that there will be payments
9:38
Speaker 3: made back into their super too make up for the
9:40
Speaker 3: loss of the veil of their original investment. So that's
9:44
Speaker 3: an important action that we pursued because this is people
9:47
Speaker 3: super and we know that it's very distressing for people
9:50
Speaker 3: who've based losing it.
9:52
Speaker 1: The Mcquarie payment promises such as three hundred million or so,
9:56
Speaker 1: and it would appear to be a very good development
10:00
Speaker 1: and it appears to be voluntary as such. Are you
10:04
Speaker 1: hopeful that other key players will follow in their footsteps?
10:11
Speaker 2: We would like to see them do. So.
10:13
Speaker 3: There's one other superannuation trustee that we've taken action against
10:17
Speaker 3: in relation to Shield at this stage, and that is
10:19
Speaker 3: Equity Trustees, the superannuation entity run by Equity Trustees, and
10:25
Speaker 3: in that case we are seeking court orders that they
10:29
Speaker 3: provide remediation to the customers affected. So I'll have to
10:31
Speaker 3: see how that works through the courts, but it demonstrates
10:34
Speaker 3: that's one of the key things we're pursuing and then
10:36
Speaker 3: in the bigger picture, James, we want to do everything
10:39
Speaker 3: we can to stop this happening again, and that involves includes,
10:43
Speaker 3: I guess holding the individuals and the entities to account.
10:46
Speaker 3: So I mentioned we've started litigation against those two super trustees.
10:51
Speaker 3: We've taken started action against several advice firms. We've started
10:55
Speaker 3: action against one of the lead generation firms and a
10:59
Speaker 3: research us that gave positive ratings to the shield Master Fund,
11:03
Speaker 3: as well as already taking a ministry of action to
11:06
Speaker 3: ban a number of advisors. So all of that is
11:09
Speaker 3: part of the bigger picture in terms of trying to
11:11
Speaker 3: stop this sort of thing happening again, by with the
11:14
Speaker 3: bannings taking some people out of the industry who in
11:17
Speaker 3: our view of caused harm, and with the other action,
11:20
Speaker 3: trying to send a really powerful message to others that
11:22
Speaker 3: might be considering engaging in this sort of conduct that
11:25
Speaker 3: there are consequences and they can be really serious.
11:29
Speaker 1: I don't want to be fatalistic, but it strikes me
11:31
Speaker 1: that no matter how hard you try as a regular leader,
11:36
Speaker 1: it's a conversion of this one born every minute, right,
11:39
Speaker 1: it never stops. There is always people who will infiltrate
11:43
Speaker 1: the system and not act appropriately, and that way, the
11:48
Speaker 1: conventional systems can never stop that until it's revealed. Do
11:51
Speaker 1: you think you have a reasonable that this is a
11:55
Speaker 1: landmark case that may change things or not.
12:01
Speaker 3: I think this has the potential to change things by
12:05
Speaker 3: if we're successful in our litigation. And on top of
12:09
Speaker 3: the litigation I've already mentioned, we've got the option if
12:12
Speaker 3: we think it's appropriate to refer some matters to the
12:15
Speaker 3: Director of Public Prosecutions to consider criminal action. We're not
12:18
Speaker 3: there yet, but if that were to happen, that's an
12:21
Speaker 3: even stronger message to people about the consequences of engaging
12:24
Speaker 3: in this sort of conduct. And then the other part
12:27
Speaker 3: of it is, we do think there is a question
12:29
Speaker 3: about whether there are some regulatory gaps, like whether the
12:32
Speaker 3: law could actually be tightened in a key few areas
12:35
Speaker 3: to better protect people. And I think as we work
12:38
Speaker 3: through everything we've seen and complete these investigations our thinking
12:42
Speaker 3: we'll get clearer on that. And the Assistant Treasurer has
12:44
Speaker 3: said the government is very much looking at that issue
12:47
Speaker 3: of whether there could be some law reforms to better
12:49
Speaker 3: protect people in the future from this sort of harm.
12:52
Speaker 1: Okay, very good, and very good to get your view
12:55
Speaker 1: on that issue, which, of course, as I say, is
12:57
Speaker 1: unfolding still before our eyes. Now, folks, there is some
13:01
Speaker 1: very interesting developments happening at ACID which I think would
13:05
Speaker 1: be very good for you to hear about. We're going
13:06
Speaker 1: to catch up with that in a moment with Alan.
13:09
Speaker 1: Talk to you soon. Hello, Welcome back to The Australian's
13:26
Speaker 1: Money Puzzle podcast. James Kirby here with Alan Kirkland ACCIK
13:30
Speaker 1: commissioner and the commissioner certainly, I think for many people
13:35
Speaker 1: with the most interesting part in ACCIC, which is in
13:38
Speaker 1: the consumer area, which is immense of course, and most
13:42
Speaker 1: of the stories that you read we'll come across his
13:45
Speaker 1: desk sooner or later because he's the police. Now. I
13:49
Speaker 1: mentioned at the start that we often mentioned money Smart,
13:52
Speaker 1: the website which is a very good resource, a free resource,
13:56
Speaker 1: a government resource, and to that extent, has exceptionally in
13:59
Speaker 1: the tendance and that is that's in your realm, and
14:04
Speaker 1: you've done a study of who's been using it, and
14:08
Speaker 1: you've discovered a few things, What did you find out.
14:12
Speaker 2: We've done a really big piece of research here.
14:14
Speaker 3: I mean there's been a range of quality of research
14:16
Speaker 3: talking to people in focus groups. We also did a
14:19
Speaker 3: really large survey with around three thousand respondents, which is
14:22
Speaker 3: a pretty big sample for that sort of research. I
14:25
Speaker 3: guess some of the high levels of findings that stood
14:27
Speaker 3: out to us were that only about a quarter of
14:31
Speaker 3: Australians over eighteen consider themselves to be very knowledgeable in
14:35
Speaker 3: relation to financial matters, and I guess on the flip side,
14:38
Speaker 3: around three quarters would actually like to be more knowledgeable.
14:42
Speaker 3: So that says two key things to me. One is
14:45
Speaker 3: there is a big gap that we can help to
14:46
Speaker 3: bridge in terms of helping be able to understand financial
14:50
Speaker 3: products and services and how to negotiate the system. But
14:53
Speaker 3: also that people are really open to that, like that
14:56
Speaker 3: there is a thirst to know more, and so that
14:59
Speaker 3: just says there's a big opportunity for money smart. We're
15:02
Speaker 3: already feeling that in many ways, but there's a big
15:04
Speaker 3: opportunity for us to do a lot more to help
15:07
Speaker 3: Australians who both need and want that sort of help.
15:10
Speaker 1: I imagine part of this is due to the fact
15:12
Speaker 1: that and we have this is measured and it is audited,
15:16
Speaker 1: and it is beyond doubt that Australia was better and
15:21
Speaker 1: more more financially literate ten years ago and we have
15:25
Speaker 1: actually dropped through the OECD tables and we seem to
15:29
Speaker 1: be it's almost stagnant really. In the UK this month
15:33
Speaker 1: they introduced financial literacy as a mandatory subject. Do you
15:38
Speaker 1: think that to that extent those issues are reflected in
15:43
Speaker 1: what you're service showed?
15:46
Speaker 2: Look, it's a bit hard to say, really, I think it.
15:49
Speaker 2: I said.
15:50
Speaker 3: Our reflection has been that Money Smart in some senses
15:52
Speaker 3: has been a bit of a victim of its own
15:54
Speaker 3: success in that it has been really effective I guess,
15:58
Speaker 3: attracting the attention of lots of Australia. It has over
16:00
Speaker 3: eleven point seven million visitors per year.
16:04
Speaker 2: That's a lot.
16:05
Speaker 3: We probably haven't really been thinking on an ongoing basis
16:09
Speaker 3: about how do we just constantly improve and make sure
16:12
Speaker 3: we're addressing the right topics that people are thinking about,
16:14
Speaker 3: that we're talking about them in ways that resonate with
16:17
Speaker 3: the different groups of consumers that are thinking about those topics,
16:20
Speaker 3: and also going to consumers where they are, whether that's
16:23
Speaker 3: you know, on social media, talking to people like I'm
16:26
Speaker 3: doing with your listeners today. So I think for us
16:30
Speaker 3: as a reflection, we actually need to be investing a
16:32
Speaker 3: lot more in keeping money Smart fresh and just constantly evolving.
16:38
Speaker 1: That you mentioned you've found some particular revelations as such
16:42
Speaker 1: an on the pre retiree area, Can you tell us
16:45
Speaker 1: a little about that. What did you find out? What
16:47
Speaker 1: do our listeners need to know?
16:49
Speaker 3: Yeah, that's a big focus for us, So I think
16:51
Speaker 3: your listeners will hopefully start to see a lot more,
16:54
Speaker 3: including some advertising in media to really try and lift
16:57
Speaker 3: the awareness of money Smart as a place you can
16:59
Speaker 3: go in if you're approaching retirement or in retirement. So
17:03
Speaker 3: we're planning on doing a lot more in that area.
17:05
Speaker 3: But I think one of the key things that we
17:07
Speaker 3: got from the research about pre retirees was some real
17:10
Speaker 3: clarity around the key questions that are on their mind.
17:13
Speaker 2: So I yes, what are they all of Across all.
17:16
Speaker 3: The groups that we research there, we are five key
17:18
Speaker 3: things that came up. They were how much will I
17:21
Speaker 3: need to retire? Will I have enough? How do I
17:24
Speaker 3: make it last? Am I on the right track? And
17:28
Speaker 3: what can I do to improve now? They're all really
17:31
Speaker 3: kind of sensible questions, but there are also questions that
17:35
Speaker 3: we can really provide practical help with both in terms
17:38
Speaker 3: of I guess information we can publish to help people
17:40
Speaker 3: to understand some of the key issues and products available,
17:44
Speaker 3: but also things like tools and calculators, which have always
17:47
Speaker 3: been at the heart of money smart as well. So
17:49
Speaker 3: it's not just sort of, you know, publishing web pages
17:51
Speaker 3: where people can read stuff. It's also always been about
17:54
Speaker 3: giving people tools that they can play with and help
17:56
Speaker 3: to understand how it applies to them.
17:58
Speaker 1: I guess this question every week, everydear year. How much
18:01
Speaker 1: should I have in super? And I don't want to
18:03
Speaker 1: be facetious about it, but I see as much as
18:06
Speaker 1: you possibly can, there's a lot of estimates around. I
18:10
Speaker 1: don't know how you guys dealt with this, but I
18:12
Speaker 1: could show you a spectrum of estimates of what people
18:15
Speaker 1: see that the average Australian or the everyday Australian investors
18:20
Speaker 1: should have in super to have a comfortable retirement or whatever.
18:24
Speaker 1: And there's a big spectrum. Why is there a big spectrum?
18:28
Speaker 1: And are some people on that spectrum not being honest?
18:34
Speaker 3: I think it's a really interesting question. I mean, some
18:37
Speaker 3: of those estimates come from bodies in the superannuation industry.
18:43
Speaker 3: There are others that come from I guess, groups outside
18:46
Speaker 3: the industry such as superannuation consumers Australia, and we draw
18:49
Speaker 3: on a range of them in our tools and really
18:52
Speaker 3: at Money Smart because we are independent, we don't have
18:56
Speaker 3: an agenda, so we're not trying to say we don't
18:59
Speaker 3: go into helping people saying this is what's right for you.
19:02
Speaker 3: What we're trying to do is put the power into
19:04
Speaker 3: individual consumers and investors' hands, so to help them to
19:07
Speaker 3: understand the issue, give them tools, and the tool might
19:10
Speaker 3: sort of itself give a range of options, but it
19:13
Speaker 3: helps people to understand, you know, the implications of each
19:16
Speaker 3: option and to match it to their circumstances so they
19:19
Speaker 3: can work out what's the right answer for them and
19:21
Speaker 3: what they want to be aiming to have upon retirement,
19:24
Speaker 3: and then move on to think, well, how do I
19:26
Speaker 3: actually get there? What decisions can I make now that
19:28
Speaker 3: will put me in a better position.
19:30
Speaker 2: When I read retirement age.
19:32
Speaker 1: The biggest single criticism I have of all those, and
19:35
Speaker 1: I only sort of figured it out in recent times,
19:38
Speaker 1: is that in general they do an actual areial assumption
19:44
Speaker 1: of some description and they say, okay, you're going to
19:46
Speaker 1: retire with sixty five and you've got X, and this
19:49
Speaker 1: is how you have this is how we're to work.
19:51
Speaker 1: But they assume that at a certain point that these
19:55
Speaker 1: assumptions about how much you'll have each year at the
19:57
Speaker 1: calculators they tell you they assume it runs down to zero,
20:01
Speaker 1: and then you flip over to the pension when you
20:03
Speaker 1: are how will I describe this politely advanced old age
20:07
Speaker 1: on thirty grand a year or whatever it will be
20:09
Speaker 1: by then do you think that's is that the way
20:14
Speaker 1: you guys do it or is that the best way
20:16
Speaker 1: to do it?
20:18
Speaker 3: I think it really depends on someone's individual circumstances, and
20:21
Speaker 3: we're trying to help people to understand that. So the
20:23
Speaker 3: answer is very different depending on what sort of income
20:26
Speaker 3: you've been on as you approach to retirement, and what
20:29
Speaker 3: sort of lifestyle you're accustomed to and you expect to maintain.
20:33
Speaker 3: Makes a big difference. What your housing situation is, so do.
20:36
Speaker 2: You own your own home or not? It's probably one
20:38
Speaker 2: of the biggest factors.
20:40
Speaker 3: And also, you know, are there any other sort of
20:43
Speaker 3: particularly important types of expenditure that you're going to have
20:47
Speaker 3: to face in retirement. So we try to help people
20:50
Speaker 3: to work through some of those factors and work out
20:52
Speaker 3: what's right for them, and for some people indeed planning
20:56
Speaker 3: to spend some of retirement on the pension, maybe the
20:58
Speaker 3: right decision, But for lots of people that it's not
21:01
Speaker 3: going to be reality, to be honest, because in fact,
21:03
Speaker 3: the other thing we know is for people with significant
21:06
Speaker 3: superbalances on the whole, they tend not to use all
21:09
Speaker 3: of their super in retirement. Many people die with still
21:13
Speaker 3: money left in their super. So the idea that if
21:15
Speaker 3: you've got a decent balance, you're going to get down
21:17
Speaker 3: to the level where you'd be eligible for a significant
21:19
Speaker 3: pension isn't a reality for lots of people based on
21:21
Speaker 3: how they use their super now.
21:23
Speaker 1: Based on what we know about how much they need behind. Okay,
21:26
Speaker 1: just one last thing on that issue, we'd go to
21:27
Speaker 1: a break. The estimates about how much you should have
21:30
Speaker 1: in super. Are they, in your opinion, generally too high
21:35
Speaker 1: or too low?
21:37
Speaker 2: Look, I think there's a range, I would say, question.
21:44
Speaker 3: I think some of them are too high for some
21:46
Speaker 3: people's individual circumstances and the reality of what we know,
21:49
Speaker 3: because the other thing about we know about retirement is,
21:51
Speaker 3: in general, depending on the answer to that housing question,
21:55
Speaker 3: lots of people actually spend less in retirement there's a
21:57
Speaker 3: lot of expenditure that you incur when you're in of
22:00
Speaker 3: working age that just falls away once you retire. And
22:03
Speaker 3: I think that some of the calculators don't adequately or
22:06
Speaker 3: some of the assumptions don't adequately factor that in, so.
22:09
Speaker 2: Some of them do come up with relatively high figures.
22:12
Speaker 2: And I guess that worries.
22:14
Speaker 3: If that worries is if it makes people unnecessarily distressed
22:17
Speaker 3: around their current superbalance, which is why we're really trying
22:20
Speaker 3: to give people tools that they can trust to help
22:23
Speaker 3: them work out what's an appropriate figure for them.
22:25
Speaker 1: Okay, very good, All right now, folks, we're going to
22:28
Speaker 1: tackle out on a random bunch of questions which I
22:31
Speaker 1: think you'll find very interesting. In the last segment back
22:33
Speaker 1: in a moment, Hello, Welcome back to The Australian's Money
22:41
Speaker 1: Puzzled podcast. James Kirby here with Alan Kirkland, the AC commissioner. Now, Alan,
22:47
Speaker 1: no rhyme or reason to these questions. They are random,
22:51
Speaker 1: but I think our listeners will find them find them
22:55
Speaker 1: very appropriate. And folks, I didn't actually take questions from
22:59
Speaker 1: the audience. These are my own questions. Normally this part
23:01
Speaker 1: of the show and their listener questions. But this is
23:04
Speaker 1: someone I've been looking and reading over over recent times. Crypto.
23:07
Speaker 1: I imagine crypto is something that you're alert to. The
23:13
Speaker 1: great breakthrough for the sort of listeners that I have
23:16
Speaker 1: on the show. We've always been a debate about crypto,
23:20
Speaker 1: but many listeners were greatly reassured by the arrival of
23:26
Speaker 1: exchange traded fans ETFs for crypto for the simple reason
23:30
Speaker 1: that you no longer had to explain to your auditor
23:33
Speaker 1: if you had an SMS if that you know, you
23:35
Speaker 1: were dealing with some exchange they never heard of. They
23:37
Speaker 1: don't ask any questions. Basically, it's an ETF file. If
23:40
Speaker 1: you had crypto, they would be asking all sorts of questions.
23:43
Speaker 1: From a regulatory point of view, the institutionalization wing of crypto,
23:50
Speaker 1: has it made it easier for you?
23:54
Speaker 3: It's a really good question. I mean, it gives us
23:56
Speaker 3: some clarity. So if I talk about the non ATF
23:59
Speaker 3: world of crypto, when we're applying the law, we're applying
24:03
Speaker 3: the law.
24:04
Speaker 2: That's been in place for decades.
24:05
Speaker 3: It says what's a financial product and what isn't in
24:07
Speaker 3: Australia and what that means in reality is some crypto
24:10
Speaker 3: type products are financial products, some are not, and to
24:14
Speaker 3: some extent we're still working through that question as we
24:17
Speaker 3: take selective court action and we've got one that's before
24:20
Speaker 3: the High Court at the moment to really get the
24:22
Speaker 3: courts to help us to clarify how those long standing
24:26
Speaker 3: definitions apply to crypto. So there's in some areas of
24:29
Speaker 3: crypto less clarity what the ETFs do. I mean, the
24:32
Speaker 3: ETFs themselves are very clearly financial products that we regulate,
24:36
Speaker 3: so that just falls really clearly within the existing framework
24:40
Speaker 3: for managed investment schemes and we apply our usual approach
24:44
Speaker 3: to regulation to those.
24:47
Speaker 1: The listener can know that they are squarely in your camp.
24:49
Speaker 1: Then if they have chess and crypto, crypto from some
24:52
Speaker 1: exchange may not be is.
24:53
Speaker 2: That it, Yeah, yeah, that's right, that's right.
24:56
Speaker 3: Although they're actually just this week some reforms introduced to
25:00
Speaker 3: Parliament that will regulate digital asset platforms, so many of
25:03
Speaker 3: those exchanges will then if those laws go through, need
25:07
Speaker 3: to have a license with the ASSE, so they will
25:09
Speaker 3: be drawn into the regime. But still the underlying crypto
25:13
Speaker 3: assets on those platforms may or may not be financial products,
25:16
Speaker 3: and that sort of way in which the current law
25:19
Speaker 3: applies will still be the case in relation to the assets,
25:23
Speaker 3: and maybe trade it on those platforms.
25:25
Speaker 1: Can I ask you a private credit It's funny, you know,
25:28
Speaker 1: I've had a financial advisor on the show maybe three
25:31
Speaker 1: weeks ago who literally said there is no place for
25:34
Speaker 1: the private investor in private credit. Extreme view, but you
25:38
Speaker 1: could see why they were saying that. I had a
25:40
Speaker 1: financial advisor last week on the show very supportive of
25:45
Speaker 1: private credit, explaining why it's good for the retail investor,
25:49
Speaker 1: explaining why this notional democratization of private credit is a
25:52
Speaker 1: good thing. He did, of course, say as long as
25:55
Speaker 1: its top tier, first class and you're guided by the
25:58
Speaker 1: best advisors. I think have just one major effort on
26:02
Speaker 1: private credit. We can't go into too deeply. But what
26:04
Speaker 1: to the people who don't know anything about it and
26:07
Speaker 1: it's put in front of them, What would you need
26:09
Speaker 1: to tell them.
26:12
Speaker 2: I would say, ask lots of questions.
26:13
Speaker 3: I mean, we've just done a surveillance of over twenty
26:16
Speaker 3: private credit funds where some of them retail, some of
26:18
Speaker 3: them wholesome, where we went in and had a deep
26:20
Speaker 3: look at their practices and just a few examples of
26:22
Speaker 3: the issues that we found were some real gaps in
26:25
Speaker 3: transparency around what they are really, who they were lending to,
26:29
Speaker 3: and what the levels of risk were. Lack of transparency
26:33
Speaker 3: around the fees that were being paid and where that's
26:36
Speaker 3: important was it kind of masked the level of risk.
26:39
Speaker 3: So if they're telling you what the interest rate is,
26:42
Speaker 3: you can form a view or how that compares to
26:44
Speaker 3: other interest rates, what that means about risk. But if
26:46
Speaker 3: they're then charging the borrower a whole bunch of extra
26:50
Speaker 3: fees they're not telling the investor about that actually signals
26:53
Speaker 3: the risk is probably higher than what you think.
26:55
Speaker 2: So a range of.
26:57
Speaker 3: Issues like that, and also different methodology you used across
27:00
Speaker 3: different different sorry terminology used across different funds, so the
27:04
Speaker 3: same time might mean quite different things in different funds.
27:07
Speaker 3: So best piece of advice is to ask lots of
27:10
Speaker 3: questions and maybe approach with a degree of skepticism and
27:14
Speaker 3: if in doubt, maybe see several forms of advice before
27:16
Speaker 3: putting too much money into private credit. I think it's
27:19
Speaker 3: got an important role to play in the economy, but
27:21
Speaker 3: there are some risks for investors at the moment due
27:24
Speaker 3: to the range of practices that we've seen.
27:26
Speaker 1: It's funny it reminds me maybe two decades ago when
27:30
Speaker 1: in the early days of funds management in Australia active
27:34
Speaker 1: funds management. Obviously, there was a boom period, as there
27:36
Speaker 1: always is when something is new, and the whole thing
27:39
Speaker 1: about fees was a big fuzzy area, and then slowly
27:42
Speaker 1: but surely this management expense ratio that was standardized emerged
27:47
Speaker 1: and then at last people could see not just what
27:50
Speaker 1: the fund was returning, but what they were paying in fees.
27:52
Speaker 1: Is there something that you might aspire to somebody in
27:55
Speaker 1: that private credit area.
27:57
Speaker 3: Yeah, absolutely, So we've called for the industry to lift
27:59
Speaker 3: it standards and it's been great to see a lot
28:02
Speaker 3: of people in the industry respond to that, and the
28:04
Speaker 3: Financial Services Council is leading a piece of work that
28:07
Speaker 3: will hopefully take on a lot of the issues that
28:09
Speaker 3: we've raised, but that's going to take a little while
28:11
Speaker 3: to play out. So in the meantime, as I said,
28:14
Speaker 3: wise to ask lots of questions, because look, we saw
28:17
Speaker 3: some funds that probably raise less concerns for us, but
28:20
Speaker 3: some that raise some fairly serious concerns and it's a
28:23
Speaker 3: little bit hard for investors to navigate through that system
28:27
Speaker 3: and understand what they're dealing with until we see that
28:30
Speaker 3: lifting standards across the industry.
28:32
Speaker 1: Okay, very good. One last question, which we touched off
28:36
Speaker 1: at the start, about self managed super funds. It seems
28:38
Speaker 1: to me they're in the news again in terms of
28:42
Speaker 1: the standards for want of a better word, in that
28:46
Speaker 1: entire area across the regulation of them, the advice to them,
28:51
Speaker 1: the auditing of them. But when I look more closely
28:54
Speaker 1: at it, it seemed to me that the vast bulk
28:57
Speaker 1: of the issues that you had were in the area
29:01
Speaker 1: of commencement. In these issues as they apply to people
29:06
Speaker 1: who are starting self managed super funds as opposed to
29:10
Speaker 1: the ongoing maintenance of a self managed super fund, which
29:14
Speaker 1: there's a million about one point two million or so people,
29:17
Speaker 1: Is that the hotspot as such for you as a regulator,
29:20
Speaker 1: the commencement part, or am I missing it? And it's
29:23
Speaker 1: an issue that the issue is more broad.
29:27
Speaker 3: Look, it's probably where we've got the biggest role. So
29:29
Speaker 3: in general, smsfs are probably more regulated by the ATO
29:33
Speaker 3: than they are by ASSEX. So we don't specifically regulate
29:36
Speaker 3: smsfs themselves, but what we do regulate is financial advice,
29:40
Speaker 3: and obviously one of the most significant moments in terms
29:43
Speaker 3: of providing financial advice or receiving it as an investor
29:46
Speaker 3: is around that decision to set up an SMSF. Now,
29:49
Speaker 3: if there's advice that's provided along the way, we might
29:51
Speaker 3: also be interested in that. But what we've recently done
29:54
Speaker 3: is have a look at advice to establish an SMSF
29:57
Speaker 3: because that is a high stakes decision. Acknowledge this mss
30:01
Speaker 3: can be rightful lots of people, but they're not right
30:03
Speaker 3: for everybody.
30:04
Speaker 2: So we really wanted to be to understand how.
30:06
Speaker 3: All that advice is operating at the moment, and we
30:08
Speaker 3: flagged a few issues that we think the industry needs
30:11
Speaker 3: to focus on to make sure that people are getting
30:13
Speaker 3: appropriate advice.
30:15
Speaker 1: And we do say that on the show all the time.
30:16
Speaker 1: They're great as long as you understand what you're doing,
30:19
Speaker 1: as long as you're prepared to do the work and
30:21
Speaker 1: have your eyes wide open. And they certainly aren't for everybody,
30:25
Speaker 1: and the less you are experienced in financial matters, the
30:30
Speaker 1: less suitable they are to you. I would think, Alan Kirkland,
30:33
Speaker 1: marvelous to have you on the show. Thank you very
30:35
Speaker 1: much for coming on.
30:36
Speaker 2: It's been a real pleasure.
30:37
Speaker 1: Thanks James, that was Alan Kirkland. Folks the Act Commissioner
30:41
Speaker 1: and great to have him in the great spectrum of
30:43
Speaker 1: issues there. If you've any questions, aren't any of those issues?
30:46
Speaker 1: Let us know the money pots. They're at the Australian
30:49
Speaker 1: dot com dot au. Talk to you soon. Four