A pilot from Australia reaching Financial Independence by investing in Real Estate, Low Cost Index Funds and Super | Financial Independence Retire Early
On board the pod today is Andy Darroch who runs Independent Wealth Advice. Andy calls himself a self-loathing financial advisor and has some controversial views on the financial advice industry.
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Introduction – Andy Darroch
On board today is Andy Darroch. Andy runs Independent Wealth Advice, an independent financial advice firm that provides fixed upfront fees for a statement of financial advice. He has a degree in accounting and is a CFP. He’s also worked in wealth management for over a decade, including at Macquarie Bank and at one of Australia’s oldest stockbroking firms, Wilson’s Advisory and Stockbroking. Suffice to say he’s got a bit of experience. He also calls himself a self-loathing financial advisor, which I find funny. He has some fairly controversial views on the financial advice industry, not being afraid to call out shitty or unethical products when he sees them. Having said that, it’s Andy’s belief that you can still get good financial advice for a fair cost without conflicts of interest – That can have a phenomenal impact on your long-term financial success. Listen in for all the details..
Episode 40: Andy Darroch – Independent Financial Advisor
Andy also suggests checking out the website of the super fund you use, as there’s usually heaps of helpful info.
Transcript
Episode 40: Andy Darroch – Independent Financial Advisor
Captain Fi: [00:00:00] Ladies and gentlemen, this is your Captain speaking. Welcome aboard the Financial Independence Podcast,
and welcome to another episode of Captain Fire, the Financial Independence Podcast, where I open the cockpit to some of the best and brightest in personal finance, as well as those who have reached or are on their way to financial independence. Before we get started, remember nothing said here is financial advice, and you should always do your own independent research before making any financial choices.
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On board today is Andy, Derek. Andy runs Independent Wealth Advice, an [00:02:00] independent financial advice firm that provides fixed upfront fees for a statement of financial advice. He has a degree in accounting and is a cfp. He’s also worked in wealth management for over a decade, including at Macquarie Bank and at one of Australia’s oldest stockbroking firms, Wilson’s Advisory and Stockbroking.
So suffice to say he’s got a bit of experience. He’s also a self-professed, self-loathing financial advisor, which I find funny. He has some fairly controversial views on the financial advice industry, not being afraid to call out shitty or unethical products when he sees them. He’s even written several exposes on how the industry at large doesn’t do right by its clients.
Having said that, it’s Andy’s belief that you can still get good financial advice for a fair cost without conflicts of interest. That can have a phenomenal impact on your long-term financial success. It even goes so far as to say that it’s incredibly easy to sort out your finances and set yourself [00:03:00] up for life, even without professional.
So if you wanna avoid getting stung by fees and some shitty financial products, and you’re looking to hear about some areas with low hanging fruit, you can get some easy wins to help set yourself up financially. This episode might just be for you.
Andy, welcome mate. Tell us a little bit about yourself. So where you’re from and I believe you’re currently in the big smoke of Sydney.
Andy: very glad to be here.
Yep. So my name’s Andy. I’m originally from Queensland, from Toowoomba, Australia’s second biggest inland city. I always love to tell people. And yeah I’ve been down here in Sydney for a number of years now and I’ve run my business outta Sydney.
Captain Fi: Ah, so Queensland boy. So you must be N r L or league?
Andy: Yep. Enjoy watching n r l Unfortunately for me, I go for the Newcastle Knights, which hasn’t been the most profitable investment, but deep, deep down I’m a true bogan. I adore motor sport. I’m a big fan of anything with two wheels, so I’m a bit of a tragic for motor GP particularly.
Captain Fi: Ah, there you go.
We’ve got that in common. So look you’ve obviously been in the [00:04:00] financial advice game for a while. Why and how did you get into financial advice? What’s your motivation?
Andy: I love listening to podcasts and just, looking at different financial planners websites and the dark hole of humanity that is linked in and always love it when people answer this question with, oh, I do this because I just love helping people.
Or just some, frankly bullshit tribe like that, that they wheel out. I come from a family of accountants, so I studied accounting at uni and I pretty quickly discovered that I had no interest in working as an accountant, and I of fell into wealth management as a result of that. I was really lucky and fortunate that I spent most of my career at some pretty decent institutions like Macquarie Private Bank, Wilson Htms was then known, which is one of the older stockbroking firms in the country.
And I feel like that gave me a pretty first class apprenticeship in, financial markets, advice, investments and that kind of stuff.
And I must say that I did fall into the industry by accident, but I, I absolutely love what I do.
I think it’s the [00:05:00] greatest job I could ever ever fall into. I love everything about financial markets and investments, and fundamentally, perhaps one of the things I like most of our financial advice is that it’s frankly not that difficult. If you’ve got the ability to just look at things objectively, the answers are relatively simple.
It’s not actually the massively complex or big brained exercise that perhaps some people represent it to be. It’s actually, when you get down to brass tacks, it’s quite a simple and logical industry.
Captain Fi: Yeah. It’s refreshing to hear that from an expert. I certainly know, I, when I got into the fire community, I probably tried to find ways to overcomplicate it myself because I was just like, there’s no way it could be this simple.
Like, when you distill it into a one sentence is just what live below your means and consistently invest. But anyway, we’ll get into that in a little bit. So you started out you’re working for, obviously Macquarie Bank, one of the larger investment banks and then at a stockbroking firm.
So how did you make the jump from working [00:06:00] for those larger companies to now doing financial advice at a personal level.
Andy: My timing was absolutely excellent. So I started my business on one July, 2021, which for anyone in Sydney was about four days after we went into quite a lengthy lockdown which actually wasn’t quite desirable.
But as I say after working what I consider to be, really high quality investment houses and institutions like that, you just couldn’t help but notice that the truly obscene levels of fees and just the layers and layers of fees and fundamentally as well just hopelessly conflicted position that advisors and, the companies that they work for and represent, find themselves in.
And, for all these purported, high octane strategies and cutting edge, solutions, et cetera, that whatever, ostensible benefit was given to the client was just thoroughly eroded by fees. And it sounds a little bit self preachy and high and mighty, but I genuinely believe that it does not have to be [00:07:00] like that that you really can give people advice without putting your own interests before, and that it’s actually not that difficult.
To give good financial advice. And I thought that genuinely is quite easy to do. But, there are many ways to do it a lot better. So yeah, that was the kind of rationale. So I started my business on just in mid 2021 and coming up on two years now. And it is been really enjoyable.
As you alluded to, I’ve got some pretty strong opinions on the industry at large. So I do enjoy being able to call out what I perceive to be bullshit, quite freely, which obviously is a lot harder to do when you’re, part of a business.
Captain Fi: Yeah. It’s interesting mate.
Like it’s refreshing to hear, people just saying it how it is. And it must have been difficult. As you say, being in those organizations, obviously you have to tow the company line. You’re not really allowed to be an individual. I certainly know that from my experience in the workforce.
I love being able to have my own voice and do what I want now post-fire. I actually just wanna touch on, so when you started your business it’s not gonna be super relevant to everyone, but how do you actually do that? So [00:08:00] what you go and obviously register a abn, but like, How do you start a financial advice business?
Surely that’s like super expensive to do.
Andy: It can be, it’s like anything, if you’re willing to do a good chunk of the work yourself it’s a lot easier. A lot of it’s just going through the kindness setting up of an accounting business. Like you say, there are added complexities with financial advice.
It’s a really intensely regulated um, industry for good reason. And as you mentioned as well, there, there is a register of financial advisors. There’s only two kinds of people that I’m aware of that are kept on registers, public registers, and one of them happens to be financial planners. But yeah, so it’s just a matter of going through.
There, there’s a lot of just administrative garbage and, backend of financial advice industry that a lot of people wouldn’t appreciate. So you’ve gotta be a representative of a Australian financial services license, which now I can say that my business I’m part of a AFSL that I’m part on with another financial advisor who shares my opinion on the industry.
[00:09:00] So I like to think that I’m about as independent as you could get in the sense that, my business and our A F S L has no relationship with any bank, any superfund, any insurer. We’ve got a completely open menu that we can choose from for people. And just as far removed from vested interests as.
Captain Fi: That’s actually a great segue cuz the next thing I wanted to ask was, having worked in the industry for over a decade, in these prestigious organizations, and now running into your third year of running your own business, what is your opinion on the advice industry at large?
Andy: Oh, I could sum it up pretty succinctly. I genuinely think it’s just a complete ru off factory. And that’s not just, one place or anything, it’s just the industry at large, in my opinion at least. And, fundamentally that’s just because it’s hopelessly conflicted.
Like in, in my personal opinion, I’d say that, 99% of the time when someone receives financial advice, it’s designed to benefit the advisor more than the client. And it sounds, awfully exaggerated. But, having done this for quite a long time that’s my [00:10:00] genuine opinion.
And there’s a fantastic line that I just love wheeling out all the time, and it’s by Charlie Munger, who’s the 99 year old right hand man of Warren Buffet. And it’s, show me the incentive and I’ll show you the outcome. , and again, like it, that’s just the root cause in, in my humble opinion, that financial advisors, by and large, and the, the financial services industry and the companies that comprise it are just hopelessly incentivized to put you in products that will pay them.
And again, as I alluded to earlier the industry is intensely regulated, but all that really does is create just layers of administration just to get to the exact same outcome. You can just look at, the outcomes of the Royal Commission or anything before that. And it’s not that hard to see that.
Yeah, just at large financial advise industry really prioritizes their own interests ahead of clients. And unfortunately just with, pouring legalese and financial jargon and terminology it’s not that difficult to just give [00:11:00] people paralysis by analysis. Like it’s a bit of a fast, but the productivity commission say that there’s over 40,000 different options for your super when factor in all the investment underlying investments, et cetera, which it’s not that hard to just see there’s this big, impossible task.
So you go and see someone and they’ll, it sounds and looks great until you actually get under the bonnet and you realize that it’s a bit of a fee gouge in many instances. .
Captain Fi: Yeah. Because it doesn’t necessarily need to be super complicated, does it? A couple of basic options a little bit of education about your risk tolerance and timeframe for investing.
Understanding a little bit about portfolio allocations, diversification shit, it’s probably a conversation you could have quite succinctly with one of your clients, right?
Andy: Oh, definitely. And as I said earlier, the advice industry is intensely regulated. So there is a lot of administration for someone to just say, look, this is what I think you should do when products are involved. And in my [00:12:00] opinion, it’s created this whole walked industry whereby. It’s just there for rent seeking behavior.
And by that I mean, if it is expensive and time consuming for someone to tell you where and what to invest in, they’re gonna try and recoup that cost. And I think my biggest issue with the financial advice industry, if you ask me what’s the number one thing that leads to poor outcomes for clients, it’s purely and simply ongoing fees.
In my business at least, I’d say it’s incredibly rare that I’d ever pitch someone an ongoing fee arrangement, because I think that you can really of put a target on it as a root cause of a significant amount of poor outcomes for clients. And the basis being that, if your advisor has two options, right?
And one of those is a auto managing product that’s top tier, it’s probably one of the best investment solutions on the planet, but they’re not gonna get an ongoing fee out of it. Or they can put you into some other mysterious, lobster pot portfolio of managed funds and they are gonna charge you an annual fee out of it.
There’s a [00:13:00] significant economic incentive and personal financial incentive for them to use the latter option and put you in that, which is, they’re gonna charge you an ongoing fee. And, a good medical analogy is a lot of advisors are seeking to treat the symptoms and not the cure.
If someone’s coming to you and saying, , tell me how to invest, tell me how to achieve this save tax, whatever it might be. And again, it’s just that the whole industry is geared towards this. Oh, we’ll definitely help you do it, but you’re gonna have to pay us a monthly retainer. And my philosophy is you should pay for financial advice the same way you pay for advice from an accountant, a doctor, a lawyer, or a plumber.
You pay them when you see them. Do you pay your mechanic a retainer if they’re not fixing your car? No. Do you pay, a real estate agent, a trail commission after they’ve sold you the house? No. So I think it’s a bit ridiculous that kind of the, advice industry does really get away with that.
And again, there’s plenty of explanations as to why. I can’t say I’ve ever heard a compelling one. But again, advisors will make you think that, you need to be [00:14:00] there seeing them once a month, once a year, whatever. They might, try and purport that they’ve got this magic portfolio of managed funds, which is gonna outperform everything else.
Which I just say is completely not the case in my experience. And, without sounding arrogant, I consider myself quite reasonably good at what I do. And so if I can’t, put together a portfolio that’s gonna be just a top flight industry fund, I think it’s quite ridiculous that my peers in the industry think they can.
Captain Fi: It is a very interesting observation. I really like something you just said there about do you pay your mechanic a trailing commission after they fix your car? And it’s no. But yeah, it’s almost feeling like that’s the way a lot of things are going these days, isn’t it?
With the subscription models.
Andy: A hundred percent. It’s everything from cars to, Netflix subscription to everything like and it is quite literally vehicles. They’re going to that and the reason being, it’s quite simple. It’s one of the world’s greatest business models.
Every self-made billionaire typically comes from one of two roads. They design a business that’s called SAS or software as a service, [00:15:00] or they’re a hedge fund manager. And the reason being that it’s infinitely scalable. If I’m a hedge fund manager or a financial advisor or what have you, and I’m managing a hundred million dollars, if I then ratchet that up to half a billion dollars, it’s not five times the cost.
There’s no marginal cost of production. Versus if I’m a pipe manufacturer and I sell five times as many pipes, yes, my counting costs won’t increase. And, my, my marketing costs won’t increase, but I’ve gotta buy more raw materials. I’m gonna use more power, I need more hands on the factory line, that kind of stuff.
And again that’s just, it’s why it’s so fabulously lucrative. Cuz again, if I’m charging ongoing fees, and I would argue that in nine outta 10 cases not doing any work, that just means that I can just keep adding, more and more revenue streams to this gravy train I’ve got. I find it entertaining.
There’s an independent. Media outlet that publishes a report every year called the Tax Heroes saying, whi which listed enterprises, get closest to that 30% [00:16:00] effective tax rate. And I find it quite amusing cuz often it’s fund managers and it’s not because, fund managers are dev devote TA and public interests at apart.
I’m not saying they’re not, but the reason that they pay an effective tax rate pretty close to the corporate rate is because you can only stuff so many corporate lunches in a circular key office and, a few Bloomberg terminals and a $2,000 office chair and you’re pretty quickly run out of expenses.
It’s just more indicative of how, lucrative this model is. And it’s bloody hard to divorce yourself from it. Like again if you do work in the industry, like it’s why people have these fabulous explanations for it all. Cause there’s such a fantastic apple waiting at the end of the road.
But yeah, if you just look at it objectively and you just think, is this actually good value for money? It. Yeah, my take from it is, no, it’s not.
Captain Fi: Yeah, it’s it’s definitely something, even like from the basic principle of s saving money or cutting your costs , on your path to financial independence and cutting costs a, is a big part of it.
I’m personally always on the lookout [00:17:00] for things that are charging me ongoing fees and, like you said Netflix, Spotify maybe some insurances that I don’t necessarily need anymore. So when you are not actually getting something, but you’re still paying for it, or even if you’re getting something but you’re not actually using it frequently enough, it’s very easy to just let it sit there in the background and siphon.
Money. And it’s quite funny that you sort mentioned like the similarities between hedge fund managers and like software as a service. Whilst, I don’t personally have experience with producing like software as a service. What I’ve dabbled with is affiliate marketing content websites.
And I guess I’m trying to create the opposite there where it’s something that just tick around in the background and tries to produce a small level of income from advertising revenue. And the funny thing is, what really struck me is when you mentioned that quote from Charlie, show me the incentive and I’ll show you the outcome.
The outcome, yeah. . Because even I’ve had this conflict where, as a, as putting a business owner hat on, okay, with some of the websites, I just wanna get the most [00:18:00] advertising revenue. Whereas when I look at passion project sites like Captain Fire, I’m constantly getting bombarded with requests to put like Forex ads or like CFDs and it’s I don’t really wanna put that shit to vandalize my website.
Because, what is it like 80% of people lose money , trading CFDs. So there’s always a huge ethical trade off when it comes to these kind of things.
Yeah, exactly. And there’s only one ethical Forex that you should advertise on your website, and that’s of course the beer at Fourex. The full flavored Australian lighter Forex Gold oh beer
from Queensland.
You’re pretty familiar with a few mega Cross Wayne
Andy: Cranberry, greatest country on Earth Queensland. Yeah.
Captain Fi: Oh, that’s another thing about websites is that pretty much anyone with a laptop or a PC even, you can do it on your phone these days can throw up a website and can be publishing, not necessarily correct information either.
Andy: Definitely. But again it just goes back to that point earlier. So for instance, you can have a roster of a hundred clients on your book or hire in some [00:19:00] cases and they pay you a fee. And all you do is leave them in a portfolio managed funds that rarely, if ever, changes.
It’s an amazingly lucrative business and it’s pretty hard to turn that down , when you’re going through the industry it’s,, there’s a lot of money to be made and, often you don’t have to do a lot of work for it. Not in my opinion anyway it is a really difficult thing to divorce yourself from just that whole, you know, personal financial gain.
But yeah the positive is for every, problem with the industry, there is some simple, incredibly easy ways to go about, riding the ship and just setting yourself up really well.
Captain Fi: So how did you divorce yourself from it then? Cuz it feels like you’ve given away the secret source here, and it sounds like, you could be making a shitload more money if you just start charging trailing commissions.
So why do you just give upfront fee for
Andy: service? Oh I don’t want to pretend I’m, Jesus of Nazareth or anything like that, but it’s just being completely honest. I just get no satisfaction from if you see a client and let’s just say [00:20:00] using the old rule thumb.
Now don’t charge percentage based fees, but it’s fairly standard in the industry. So if someone has, say for instance, half a million dollars or a million dollars investments, a pretty standard fee would be 1% for the management of that. And quite frankly, I just get no satisfaction from using, a million dollar client for instance.
That means they’re paying you 10,000 bucks a year. And again, if they’re just sitting in a managed account or, simple portfolio stocks and managed funds, that rarely if ever changes I just genuinely get no satisfaction from sitting in front of that person at the end of the year and saying, Hey, by the way, we did this and we probably underperformed the better super funds out there.
And you paid us 10 grand and we’re just gonna do the same thing for the next year and the year after that, and the year after that. And maybe, maybe there’s some tinkering around the edges, but. The other thing is that often, when you first see an advisor in many cases, they can add a lot of value.
You might have your super all over the place. It might not be structured correctly. Just sorting it out at the beginning can actually really help people. [00:21:00] And again, that’s just going through are you invested appropriately for your age and, you distance to retirement and just personal preferences.
Are we saving tax in the right fashions? Are we planning for the future in the right fashions? Are we establishing when and how and, you’re gonna retire in that kind of stuff. All of the stuff at the start is generally really good. It’s just almost always people going into the wrong product because again, it’s just paying that ongoing fee. So again, I thought the first bit’s fine and the rest of it’s a bit of a roar. I’d rather just, have a crack at doing it properly with client interests at heart rather than just, continuing the status quo.
Captain Fi: Yeah, that’s really positive man. It’s good to hear. And I think it’ll probably resonate with a lot of people in the fire community you know, because like to think probably are savvy consumers and that sounds like the way it should be.
So obviously you’ve talked a little bit about super and how setting it up correctly is important. It’s probably something that doesn’t get as much attention as it deserves in the fire community because we are our timeframes [00:22:00] probably a bit shorter than your typical Australian, planning for a 65 year old retirement.
So what is so special about super and why should people on the path to fire still be paying attention?
Andy: So think that superannuation is just the greatest wealth creation tool on the planet. , there is nothing else like it genuinely. And that’s for two reasons. A, the actual superannuation has a tax structure and, to put it succinctly, it’s a tax dodge on the way in.
It pays next to no taxwise, it’s in there and it’s tax free on the way out. Now the caveat for that naturally is that you and I can’t access it until we’re 60 years old. Which particularly for people like your listeners in the fire orientation and fire community is, can be a bit of an issue. But fortuitously, there’s been some law changes namely the treatment just generally speaking around concessional contributions, which can make a lot more useful for people on the fire path, in my opinion anyway.
, it can really work well. But the other fundamental thing that just makes [00:23:00] super totally on its own is generally speaking industry funds. So again, that’s something else that you hard pressed to find a single example of anything that even compares to it globally. . And fundamentally, the thing that I always say to people is that, there is no one perfect fund and anyone that sits in front of you and purports that there is either stupid or lying, or perhaps even both.
But , whilst there is no one perfect fund, you can pretty quickly narrow it down to, the good ones the average ones, the crap ones, and the great ones. And again, there’s not one great fund. There’s probably half a dozen or so. And all it really boils down to is, is the fund that you’re giving it to gonna get you a really high return for a really low fee?
And are they gonna be able to continue to do that for the next 10, 20, 30 years? There’s a million things that you can unpack with respect to that. But fundamentally when you just look at the net returns from funds industry funds are generally at the [00:24:00] top of the pops. And what’s often not very well discussed is the fact that whenever you see a fund return, it’s net of taxes and it’s net of fees.
So all the time I see these products getting whirled around or what have you, and. It might be for a single investment or someone’s claimed managed portfolio or some garbage like that and, they’ll purport to have this return. But A, it’s not net of tax. B, it’s not net of advisor fees. C it’s not net of administration costs that will typically be associated as well.
So it’s always important that comparing apples with apples in that regard. And again, going back to it like if I recommend someone going to an industry I’m not gonna charge them any ongoing fees because I’m not actually managing the money. And b there’s no economic interest for me to do that.
So astoundingly, I’d say the lion share of the advice industry doesn’t really have any interest in doing that. Cause there’s nothing in it for them. But again, when you just look returns and the way that they manage the money it’s second to none. I did [00:25:00] write a pretty critical article about one of the industry funds and, actually met with the CIO after, and he just had this, and it completely changed my opinion on the fund after that.
But he just had this great line. He said we let anyone invest like a billionaire. And quite frankly that’s what it does. If you do put your funds with, in, what I consider to be a top flight industry fund, you can genuinely rest assured that your money is managed as well as any billionaire on the planet.
You are getting the level of service and sophistication that someone like, Mohamed bin Salman or Bill Gates, or Mike Cannon Brooks, or anyone like that. You are really in the best of the best. And again, it comes back to one of the most, just important tenants is that for all intents and purposes, they are independent.
They’re not owned by a bank, they’re owned by the members. . And so because of that, if they want to invest your money, they don’t just default to using, a subsidiary to manage the bond portfolio because, that’s good news for shareholders. They’ll go out and find the best of the best to do it.
Or they’ll do it in-house at a [00:26:00] really low cost. And, something that I always find very interesting is that the notion that your local advisor or even let’s just say that they work for a big multinational in the cbd, if state capital, the notion that they’re gonna get a better investment than say 150 billion fund is just a joke.
Buying investments is no different to buying fruit. If you buy in wholesale, you get better prices. But in addition to that as well you just get tickets to different leagues if you’re in the large funds. If you are the world’s greatest currency trader, or you are the world’s greatest private equity manager or hedge fund manager or whatever
If I had say, a hundred, 150 clients and we pull 10% of all their money, go to Mr. Manager and say, hi, Mr. Man, would you please all Mrs. Woman, would you please manage our 15 million dollars? That’s a no thank you. Go away. But if you’re 150 billion head industry fund and you go to them and say, we’d like to allocate you 500 million, or whatever the number [00:27:00] might be, they will happily take it.
And the benefit as well being that, because for all intents and purposes, they’re independent. If that manager doesn’t perform, they’ll stack them. If the funk can figure out that they can do it in-house, much reduced cost, they’ll do it. But equally for the ones, cuz there, there are really fabulous, investment managers out there that are worth their fees.
The problem is that by the time it gets to, an average person, it’s just gone through so many layers that you’re not getting the best product. And there’s also just so many palms, degrees along the way that any benefit that you would’ve got from their out performance has just been um, eroded by fees.
And again the productivity commission did a really good investigation is super years ago, and that at the time of writing there was 40,000 different superannuation options. And again, a lot of those are underlying investments, but it’s just crazy.
Again, it sounds simple, but if you just go and get someone who’s gonna do it for you and if that person is a [00:28:00] big industry fund that’s not incentivized to, pay shareholders, put it in a bank manager you’ll get better results and you’ll save yourself a huge amount of money over the longer term.
Captain Fi: You said it before. I’ll say it again. Show me the incentive. I’ll show you the outcome.
Andy: Yeah. Every time. Yeah. And it’s a common, the vice industry is by and large pretty motivated to, to poo that idea. And some people might just say, oh, he is an idiot.
He doesn’t know what he’s talking about, whatever. But my social life is righteous enough that I’ve actually gone through. So with a lot of funds, I’ll tell you who manages the money and the end of the annual report. So they’ll have a list of the managers and one fund in particular, Sunsuper, which is now Australian Retirement Trust.
They go a step further and they actually publish their investment portfolio on their website. For instance, in their balanced option, you can go through and you can see every manager and every investment that they hold and. Typically when a financial advisor puts you in a portfolio, [00:29:00] they’ll do it through via something that’s called a wrap product, which is just an investment account.
So they’ll put you in that wrap and then they’ll go and select a bunch of managed funds. And again, so what I thought was let’s just have a look and this is just taking Sunsuper, whenever it was probably in 2021, I think I did this. And I went through and I found the most expansive wrap menu.
So the investment product that had the biggest menu to choose from, I think it was either 800 or something different funds that you could choose from. And then I compared that to um, Sunsuper and I thought, alright, let’s be fair. So often you’ll see in an industry fund or any fund for that matter, they might have someone like Goldman Sachs or Macquarie or Morgan Stanley or any number of managers that will also appear in the WRAP product.
And yet they’re doing it for an industry fund as well. And so it’s important to note that you are not gonna get the same price if you are just a itsy bitsy individual when you compared to, a hundred billion dollar gorilla, like [00:30:00] they’re gonna beat down the manager’s cost. But anyway, just in the interest, I thought.
Okay, so any manager that appears in the wrap menu, and the Sunsuper portfolio, I’ll just, I’ll just remove them. And of the 69 investment managers that um, Sunsuper had 61% of them, you couldn’t find the manager, not just the fund and the value for money, but you could not find the manager.
On the, what I found to be the broadest rap portfolio. So again, that’s all these incredibly big hitting, US, Japanese European Australian managers that you can’t even access through an advisor. Cuz again they’re just absolute gorillas, just go lights that have no interest in managing small fries money.
They just wanna go direct to the big funds. And again, the reason that they’re employed is because they do something really well. They might be exceptionally good at managing a bond portfolio. They might be exceptionally good at [00:31:00] managing a property portfolio. And there’s hypothetically, at least with industry funds, there’s no corporate interest there.
They’re not just defaulting to, oh, this is a subsidiary of the bank, or this is a related party. So we’ll give them that allocation. It’s either perform and you maintain your mandate or you get sacked. And secondly, if they if the fund can figure out that they can do it in-house, which is a serious trend going on, and it’s brilliant.
A lot of funds are now managing, up to sometimes more than half of the money in-house, which really brings down costs. Again, so for anyone that says, oh, it’s just a rubbish investment product. I say, all right, we will prove it to me because you and I can’t go and access 61% of the managers.
And then of. 39% that we can access. I’ll bet you my left hand that we are paying a higher fee than, 150 billion fund can negotiate cuz they’ve got, just a significantly high, higher bargaining power. So yeah, so for anyone that just defaults to [00:32:00] poopoo booming, oh no, the products are rubbish.
When you actually look into it and you do a bit of research, you find that it’s quite the contrary that they’re actually and that’s where I go back to that earlier point. It just helps everyone invest like a billionaire. And again, there’s plenty of examples of retirement sh tax structures globally here on abroad that, that are pretty, comparable with super, but it’s that industry fund model, which is, you really don’t find it anywhere else.
And it’s pretty goddamn simple. It’s just these funds are owned by the members and by virtue of that, they tend to historically get a lot better results for their members cuz they’re incentivized to do so.
so
Captain Fi: Knowing that, how do people go about actually starting to choose a fund?
So what are some of the different factors that might make a fund appropriate? For certain.
Yeah.
Andy: Great question. And again, there is no one perfect fund. So going back to that example, if I look at what I consider to be a first class A plus fund the notion that I could say with conviction that this fund is.
Better than that [00:33:00] fund when, again, we’re talking about maybe 70, maybe a hundred different underlying managers, just thousands of separate investments. It’s ridiculous. But what you can do is this, so first and foremost, you wanna make sure it’s a low fee or a good fee. You wanna make sure that you’re getting value for money.
Something that I just think personally that the fire community is o often just a little bit over focused on is the lowest fee. You don’t necessarily want the lowest fee, you just wanna get really good value, right? If you’re getting a Ferrari at the price of a Toyota Corolla, it’s a good deal.
It’s probably worth buying, if but again, so what might make, you figure out what fund is best for you is how old you are. Some funds are better at dealing with re retirees. They’ve got more comprehensive strategies in place to make sure that retirees are getting the absolute tax free earnings that they’re entitled to.
It, it can depend on how big your balance is in often cases. And that sounds like it’s a bit of a, dodgy argument, but and also how big your [00:34:00] partner’s balance is. And the reason for that is it’s not all that uncommon that I get, clients with pretty substantial amounts of money in super.
And what I’ll often say is, This is what I consider to be the absolute two best funds. And say for instance, you’re only allowed to have 1.7 million in your pension, in your retirement account, which theoretically should increase in 1.9 in one July. But, if you’ve got a significant amount of money outside of super, in addition to that, what I always say is if it’s not gonna make a difference to the fees, why don’t we choose two funds?
If you had a race, for instance, and you could back one horse, one or back two if it’s not gonna cost you anything. And often what you find there’s funds that are complimentary to each other as well. One fund might, for instance, do a lot of investing in, unlisted assets, infrastructure, property, private equity, private credit, et cetera.
And then you might have another fund that doesn’t do a lot of that. And again, it’s not one or the other, but if you’re fortunate enough to combine the two, it’s fabulous. And again, that, that ties into often, whereas partners super if you have one In addition to that there’s just some pretty [00:35:00] simple ones.
Do you need insurance? Some funds have cheaper insurances than others. That’s a pretty motivating factor. There’s a lot of industry considerations as well. If you work in particular industries, for example, the military, public service construction, some funds might appeal to you more.
They might invest in projects that theoretically continue, stimulate your industry. I’d argue that’s actually the complete reverse way to go about it. If you’ve got your retirement savings, the less correlated they are to your earning, the better. you work in the mines, if you hanging yourself out to drive, all you do is own mining stocks cuz you’re too exposed to one thing.
But, for a lot of people that’s a really important thing. Another thing is whether your employer has a, has negotiated a good deal. Like occasionally you’ll find that a retail fund, which I consider garbage, but your employer might have negotiated a really good deal.
So it actually turns out to be a really good option. So there’s a consideration there. Insurance is often the dictating factor there as well. If you do have really good insurers cause. You work for a business that’s negotiated that often, keeping that [00:36:00] account open is a real priority. And then the other most common one, which I just see so much advertising front, I find it so intriguing, is the more personal trait.
The obvious example being ethical investing, which is a real a real focus for a lot of people. And often that can be a dictator and that’s a pretty deep pool. When you actually drill into it, there are some pretty big discrepancies between the funds and, for some people it might be a gender equality thematic to it as well, or a faith-based or religious-based, preference.
But more often than not, it’s environmental. And again,, there’s different levels to, to attack that problem. For instance, some funds might not purport to be, there are a couple of funds out there that advertisers being focused on gender equality and females in particular.
And I would argue that why wouldn’t you just select one of the, better industry funds that does the same thing. And the way that they do that is that they’re quite rigorous in interrogating the actual underlying managers. If they’re their, mandates, they give out [00:37:00] about their own, how many females do you have in your firm and, what positions are they and that kind of stuff.
And they really. Deep prerogative to, advance that and in their own, c-suite and management and executive team, what’s the gender diversity like? And yeah, similarly with the environmental and, sri E s G environmental, social and governance, and then sri socially responsible investing when you actually drill into, what underpins that, it’s it can do a lot of interest.
I could talk for an hour just on that, but, and also fundamentally, what’s your own preference? Do you want a fund that invests in, that’s headquartered in your state? Like it really parochial about that? Is that a major focus for you? Or again, do you like the color of one? It’s, it’s not even a joke.
If there’s three funds and they’re all top flight and they’re all within, half percent or many of each other again you’re not gonna do yourself a disservice. One, one of the things that I really do focus on is particularly with the funds, is size. And the reason for, that’s pretty simple size matters.
[00:38:00] And the regulator’s been pretty active in saying, for years and years, the nurses union in Queensland , had their own super fund. The nurses union in Victoria had one. The electricians in WA had one. And the reality. If you’re a, if you’re an electrician in Western Australia, you’re an electrician in South Australia, your superannuation needs are not any different whatsoever.
So there’s a lot of consolidation in the super space and it’s fantastic. But one of the things that I always run an eye over is, the smaller the fund, the more likely it is to be swallowed up by one of the others, one of the big ones. And again, I do think that you can say that some certain funds are slightly better than others.
So I do try to make sure that I’m not gonna recommend this fund, which, in eight months time, is gonna get swallowed up by fund that, I’d give a grade of an A minus when I could have just gone to an a plus to begin with. So yeah it really is horses for courses, but fundamentally it just comes down to, I’d say the two biggest dictating factors are insurance and what stage of [00:39:00] life you’re in.
Cuz again, some are really good for young people, but they might not be as cutting edge when it comes to retirees. And again, particularly with insurance,
Captain Fi: yeah, there’s a lot to think about when you’re actually gonna select a fund. I mean, Everyone talks. Obviously, barefoot spoke a lot about the Host Plus, and I actually had a Host Plus account, and funnily enough, as a pilot, I couldn’t get uh, I.
through Host Plus, cuz it’s one of their, one of the exclusions. So it’s, yeah, it’s super important to go through all of those criteria. Cuz I hear all these stories about people just specifically with the Hostplus example that have switched to Host Plus and have lost their T P D yeah.
Income protection insurance
Andy: And naturally, whether they’re a good or bad fund, , no one will have really worn you on that. Unfortunately. It falls under the kind of personal accountability and, most people aren’t aware of it. And yeah, but also within these top fly funds, it’s just once you explain to someone, look, th this is the kind of tilt that these funds have.
might manage money in a slightly different fashion, [00:40:00] like they might do nothing internally and they just give everything to the best of the best and that’s why their fees are slightly higher than another fund. Or for instance, one fund might steer clear of unlisted assets altogether.
And again, it just depends on, personal circumstance. But again it’s not that hard. Like you, you can just look at what the top 10 are over a five 17 year basis and there’s a lot of similar names in there. It’s not all that difficult. But equally, if you do wanna understand why the particular fund that you’ve selected is the best for you it can help.
And again, what I always say to people as well I, I think school grades is also a really good way to, to communicate like ratings for funds, like just because of fund I give it an eight plus and another fund, an eight minus. Just cuz of, slight peculiarities about what they do or how they go about it.
Doesn’t mean that the A plus will outperform. They’re all really good products and it’s not the case. It’s not a zero sum game. It’s not, I picked the wrong one and now I’m destitute. It’s more just the case. You might find that one just slightly outperformance on a 10 year, but equally you’ve got a great return as [00:41:00] well.
So it’s also, I don’t want to, create the impression that, oh, if you don’t pick the right one, your life’s over you, you’re begging in the street and your seventies, it’s not the case at all. And again, it remains to be seen how a lot of these funds will adjust to being bigger and bigger.
Part of what makes industry funds so good is that they’ve been around for 30, 40 odd years. And so during that time they’ve built some phenomenal infrastructure and processes and people and staff and strategies and all the rest. But it’ll be interesting to see how some of these funds, managing 60 billion is no mean fee.
But when you look at just the wall of money that goes into super, it’ll be interesting to see how some of them acclimatize and adjust to. Managing 500 billion, which a lot of them will theoretically get to, particularly with, the regulators saying we wanna see less funds. I more consolidate.
So that’ll be quite interesting. I think that’s something to watch over the next 10 or 15 years is how these funds adjust from being big to really big. Cause I think some [00:42:00] are better
Captain Fi: prepared than others.
Yeah. It’ll have an interesting impact on the fees, cuz my understanding is that the larger the fund, theoretically they should be able to get better deals.
And it’s the same. You mentioned it before, it’s, you’re basically wholesaling, you’re buying in bulk and fees, like they’re pretty important. So I just, I want to quickly read something out from one of my f favorite blogs that I like to read and that’s Eli’s Blog Passive Investing Australia.
So he wrote an article which was called How 1% Fees Cost You a Third of Your Nest Egg. I’m sure you would’ve read it. But I just wanna read out a little excerpt from the article.
So Eli mentions an annual fee of 1% of your total assets. Is really 10% of your annual return due to inflation. A 1% asset based fee is over 16% of your average annual portfolio gains. In real terms, a real purchasing power lost earnings from these fees compound to vast amounts over time, much more than the actual [00:43:00] amount paid.
The result is that a 1% high fee results in a loss of about one third of your super balance. The 1% asset based fee reduction in retirement reduces your 4% drawdown rate to a 3% drawdown rate in terms of actual ability to spend. So once you combine the reduction of a third of your nest egg at the end of your accumulation, as well as the lost of a quarter of your income generated from that shrunken nest egg, your retirement income has fallen by half.
That’s pretty crazy, man. Like to me, that sounds like fees play a huge part in how you would select a fund. So from your opinion as a, as a qualified financial advisor, you do this every day, how important are fees and how can you make sure that you are getting good value?
Andy: Oh, fees are crucial.
So technically the most important thing, the biggest dictator of your return is how the money’s invested. If sit in cash versus a high [00:44:00] growth. But, as you can tell on my views on things, fees are just unbelievably important. And again, it’s one of the symptoms of just a vice as a whole, the amount of jargon and layers are astonishing.
So fees are super duper important. And again, it’s not about the lowest fee, just because one fund might charge you half a percent and the other fund charges you 0.6%, doesn’t mean that the half a percent fund is immediately gonna do 0.1% better. But again, you have to be in that good value window, which again, I’d say most of the top performing funds, 100% are.
and not more just important than I, I’d say more important than just the fee of your fund or your investment or whatever is what other fees are you getting stripped out. So again if you go and see an advisor and they put you in a portfolio of managed funds, which I’ll argue are probably pretty mundane and not gonna do a great job it’s not just the cost of those funds, which again, let’s just reiterate, if [00:45:00] you’re a 200 billion fund, you’re getting cheaper fees than it just any person off the street.
But secondly, you’re gonna have to pay an administration fee to access those funds via what’s called a wrap or an investment product or something of that nature, or a retail super fund, whatever it might be. You’re gonna more than likely pay advisor fees, which again, I’d argue at the start, you might get some benefit from.
going forward. I struggle to imagine how they’re justifying the costs. You might be paying other fees as well. Statement of advice fee, implementation fee, brokerage fee. There’s new ones being invented every day. It’s it’s aggravating to say the least. Yeah, so fees are crucial 100%.
And again, in every financial product gives you a, what’s called a product disclosure statement. And the regulator, which is like the terms and conditions on your iPhone are, dare to read it. It’s incredibly boring. But there’s a big box that’s in every single one and it’s from the regulator and it says, a 1% difference in fees can make a x I believe it’s a 20% difference to your end balance.
Cuz that’s the thing, 1% [00:46:00] doesn’t sound big, but small percentages make incredible differences in dollars. And again, it’s why. The advice industry as a whole really likes charging clients percentage based fees. It’s twofold. A, it’s, a infinitely scalable model. It’s extremely attractive from that perspective.
But it’s also, if you say to someone who’s got 2 million bucks or half a million bucks, or even $250,000, Hey, you gonna pay us 1% and we’re gonna manage your money? You think, oh, okay, yeah, that’s all right. That’s fair. But if they act, if they actually said to you, by the way, we’re gonna take two and a half thousand dollars from you, or you’re gonna pay us $10,000 a year, or you’re gonna pay us $20,000 a year.
People recognize that more, and that’s why the regulator requires in a statement of advice that you actually display the dollar fee that’s being charged. Same with product disclosure statements. They don’t just show you the percentage based fee. They’ll tell you the actual dollar fee being charged.
And again, just you can just go on forever about fees. But , even within your fund, there’s different [00:47:00] kinds. So even a top fund, top industry fund, there’s typically two. One is an admin. , totally fair. They’ve gotta have call centers, they’ve gotta have email, they’ve gotta have working, website.
They’ve gotta get audits, all that kind of stuff. And then there’ll be an investment management fee as well. And again it’s that case that a hundred percent you the lower you want low fees, not necessarily the lowest. Cuz there’s some truly horrific products out there that don’t claim to charge incredibly low fees, like genuinely.
And they’re just dismal. But equally, if you can get in that good value it’s money that’s actually gonna continue to be invested, not just ripped out. And again, there’s 40,000 different options, right? And there’s, I dunno, 130 odd my super registered funds or something like that.
So the discrepancy is huge. And it’s not just the fee of your fund, it’s also what else are you getting done for, are you paying your vice fees, which you getting zero value for? Are you paying admin costs because that product benefits the [00:48:00] advisor, not you? Are you paying more than you should because you’re buying new groceries from say, the 7-Eleven as opposed to going to the wholesale sale direct, I suppose would be an analogy.
So you have fees are just very crucial.
Captain Fi: Yeah. And look, I also just wanna point out as well because I’ve read that standard line, a one. Fees results in like a 20% lower balance. And I was like, huh. I think it’s important to, just to note the timeframe as well. So I’m actually just, I’ve got Eli’s website up here and I’m looking at the graph he’s done from his modeling and yeah, that 20% reduction I think that is around the 20, around 25 year mark.
Whereas the modeling that he’s done is, I guess more on a more realistic career of 40 years being that you start the workforce somewhere between 20 and 25 and you retire, oh at 65. So there’s, your 40 year working career
,
Andy: Further to that as well, what you generally tend to find is again, using that analogy if one top performing [00:49:00] fund is charging, say 0.55% for their, balanced option and another fund is charging 0.77% for their balanced option that’s okay.
That’s fine. They probably go about it in slightly different ways. One fund might internalize more, or one fund might use, more costly investment strategies, which theoretically are better. But again, it’s when there’s big disparities if you’re paying north of 2% for a fund, my question would be why in what universe is that gonna benefit you?
And yeah , it’s not hard to get a low cost fund. And as you say it’s over time because, superannuation is for most people the biggest asset outside the family home. And again, it’s in there for a long time. So the earlier you catch it the less the effect. And another thing as well on the fee discussion that can really savage people’s balances is insurance costs.
They did actually bring some new laws in to protect people around that. But typically what you tend to find is often, if people have, three or four funds, just by virtue [00:50:00] of, you signed up, you joined a new employer, which is a pretty common thing to do they might have three or four different funds that are all paying different insurance costs.
They’re all doubling up on that administration fee cost. , and again, maybe some of them are good and some of them are just pure rubbish. Because again the thing that some of said to me once, which I thought was great, so I’ve stolen it, is, would you let your employer choose your house or your car or what bank you’re with?
Because ostensibly that’s what you’re doing with your super. And I’m not inferring that they get a. Interest for it, but it’s more that there, there’s a whole sales, channel in financial services, which is called Corporate Super, where basically funds go around to employers and say, we want to be the default fund for your company, and here’s why we think we should.
And some of those funds are probably really good funds, and I guarantee you some of them are shit out. Yeah.
Captain Fi: The takeaway there is that they’re not tailored for your personal situation. You fairly comprehensively elicit of the, a huge number of of factors, that people need to [00:51:00] consider for their personal circumstance when they go about choosing a fund that, you’d sit down and talk to them through.
But if you’re just jumping onto a default bandwagon that’s, oh, you’re basically missing that whole process.
Oh, a hundred percent. And
Andy: again, there’s a really high chance that you’re already in one of what I consider to be the top performing funds, which is fine. But again, your, your HR professionals or your people on culture, professionals, whatever you wanna call ’em they’re not qualified financial advisors.
They don’t pretend to be. So if you’ve got a really good salesperson that’s representing a really rubbished fund or that’s, maybe they’ll get through ’em, they’ll get the default option. And again, the it’s less of a problem now than it used to be just because. There’s been a few changes to the way that workplaces and super funds interact.
Namely, there’s less default insurances, which savage people’s balances over the long term. And that was one of the key things that the productivity commission found, that was a real hand break on people’s retirement balances. But also your super’s more likely to follow you now rather than just, I started a new employer.
Cuz the whole thing [00:52:00] is right, if you’re in your twenties, thirties, or even forties, it’s just outta sight outta mind. A pretty regular, reason for people to get advice from me is they come and see me. They’ve got three or four funds and, one of, maybe two of them are brilliant, two of them are garbage and you’re just basically, you know, consolidating is a , pretty rational first step.
Captain Fi: So you said something a moment ago, which kind of made my eyeballs pop outta my head a little bit. We were talking about fees and the number you mentioned, you were talking about comparing two funds, one with 0.55% fees, one with 0.4%, or those to me they sound like bloody high numbers still because, when we talk about outside of super investing in the brokerage platforms we’ve just seen a few of the players in Australian shares like dramatically.
the management expense ratios which is making index investing just even more cheap than it was before. The, I guess the question is active versus passive. Why should it be different in super and why are the fees [00:53:00] so much higher when you’re investing in super compared to just in your brokerage account?
Andy: A hundred percent. . Australians pay 30 billion in super fees alone every year, and I’m not a hundred percent sure whether that includes advisor fees. I suspect it doesn’t. But yeah, so it’s talking about, it’s a massive industry. Look, this is where I suppose I, I differ a little bit from the standard fire playbook.
And again, I think it’s hilarious how on the money, 99% of the stuff that’s self-directed, people in the fire camp just get bang on. But always say to people, and this is just my personal opinion passive investing is the second best way you can ever invest your money. You’re never gonna turn around and be, rude the day that you utilized a low cost, index based approach.
It’s just not gonna happen. It’s a really good way to manage money. But again, this is where superannuation is different. Going back to that earlier point it’s not just the fact that it’s a really good tax haven. Again, it’s some of the participants in it are owned by the members.
And I challenge you to find another, mutual[00:54:00] society that there’s one really big one that I suppose most people would be aware of. But apart from that, like there’s not many left. And yet you have a bunch of them in super, and again what do you tend to find with mutual loans?
Like they represent member interest better, but again, what makes super different is, or a few things really. For instance, if you just invest in a bog standard high growth index based passive whatever approach, you’re gonna invest in different things to say a high growth investment option in a top performing super fund.
And what do I mean by that? So like industry funds or just, consortium of them at large own, I, I believe it’s, they own every single international airport in the country, or at least a share of which excluding Canberra which is privately owned. And again, so that’s one of those cases where every time a plane lands you get paid.
Same with all the ports they own. Every time a ship docks you get paid. And if you’re in a passive investment, you don’t get exposure to those kinds of investments. Same thing being with property. You’ll find that good super [00:55:00] funds own reams and reams of property. And that’s everything from pubs to medical centers to often very attractive buildings that are tenanted by government tenants.
It might be someone like the ATO or a state government or something like that. And then another one that’s coming more and more into the four is private credit. Which is, again, unlisted. And again, if you just stick to a passive approach , I don’t think you can turn around and, be de depressed or disadvantaged or anything like that.
I think they’ll do fine, but again, that’s what makes super different. There’s nowhere else on the planet that you can go and give someone $1,000, $10,000, $5 million and get a ready made product of cutting edge investment managers that are all selected independently. And again, some, a lot of that’s done in house.
So what you tend to find is any good super fund, take for example the s and p five. It’s pretty goddamn hard to add value after you’re managing, an investment like that because again it’s quite an [00:56:00] efficient market and it’s, so followed. But compare that to say someone like Japan where managers can often actually add a bit of value because again, they’ve got some really interesting things just with corporate governance in Japan, which makes it quite an interesting place to invest.
Same thing with China, for instance. It can pay to have someone actually running a ruler over that and China find the better investments, cuz again, it does come with its own. Peculiarities investing there cuz just the nature of, the communist government and that kind of stuff.
But a again, what it goes back to is if in order to get that person who’s trying to pick the winners and dodge the losers, you pay advisor fees, admin fees, layers of fund fees. And then at the same time the end product you get, you are paying double cuz you’re retail, you’re not going through the wholesale channels.
Are you gonna get any benefit? Absolutely not. It’s just gonna get eroded and you’re gonna get a lesser market return. However, if the only person in between you [00:57:00] and that superstar bond manager, hedge fund manager, property manager, whatever it might be, is your super fund, that’s it. And your super fund is charging an admin fee of 78 bucks a year.
You’re probably gonna see a bit of advantage there. And again if that particular manager didn’t perform well, they’re not owned by the super fund they’ll get sacked and someone else will do it. Or they’ll just move it to act bar passive. So again, what you tend to find is that most of these good.
It’s like anything in life. It’s not one or the other. But again that’s part of the things that I discuss with people. Cause some people come with that mindset. They’re like, I’m all about the index approach. It’s my it’s the way I understand. I love everything about it.
And I say that’s fine. Here’s what I think the better ones of the index products are. Cuz that’s actually pretty interesting actually. We can talk for a while about that. Some of the index super products are pretty pretty nauseating, but equally there’s really good ones as well. And I also think, and this is particularly of, I think of interest for the fire community, is that it’s no secret that a, again cuz I [00:58:00] consider super stand alone there outside of super, I struggle to find a more attractive way to invest money than just putting it in a simple index etf.
It’s low feed, it’s low tax, it’s low turnover, it’s brilliant. And again, going back it’s like anything in life. It’s not one or the other. So what I tend to find is that particularly for, cuz I get heaps of fire, people come across, if you do have a significant amount of money and passive investments or index investments outside of super or maybe it’s a really good diversification that you get a super fund that does do quite a bit of active management.
because again you might be investing in things that you’re otherwise not exposed to be they airports property private credit long, short strategies, whatever it is. You might be getting access to that. That’s really complimentary. But again it depends on the person. Some people just don’t wanna borrow that, and that’s totally fine.
But when I look at it anecdotally, I just think it’s a perfect combination. And again, if under that 0.75 [00:59:00] balance fee or something like that is, quite literally some of the greatest minds in investing who time and time again really deliver value, that’s fine. If underneath that 1% management fee is a bunch of low grade third tier managers that are affiliated with the bank or financial services business that runs that super, Get rid of it.
So again, it depends what you’re paying for. And again I just find it entertaining. I was listening to a podcast and it was it was one of the business ones that I had the chief investment officer or what have you for a big American firm that have a really large advice business here.
And he was just waxing lyrical saying and they do a big investment consulting business as well. Like it’s just amazing how ahead of the curve Aussies are with respect to super and that they are in a lot of these alternative assets. And I found it quite amazing cause he was of shooting himself in the foot cuz his actual advice business would try and steer people clear of that.
But a outside of that as well it’s it’s a bit ridiculous to say, but over the next 30 years or so, I [01:00:00] think like the investment climate will change. Like you, you’re seeing a lot more businesses getting taken private off the ASX at least. And as a result of that, if you’re just in a passive exposure, you might miss out on certain investments.
But again, it really depends on the person or fundamentally it depends on the product.
Captain Fi: So just exploring some of those alternative investments. So you’ve mentioned things like airports and I’m aware like, there are different investment groups that have things like to toll ways. Yeah.
And other like infrastructure, that was an option when I was going through like Host Plus was, do you invest in the infrastructure? I forget the name of the fund, but it, I’m pretty sure it was just called Australian Infrastructure. Can you tell us a little bit more about these unlisted assets and the role they feel in Super?
Andy: It’s a bit of a personal gripe of mine, which is a fairly long list, let’s be honest. But, one of the most common things that advisors will say is that or anyone who’s got a vested interest is that X, Y, Z funds they’re full of shit. They’re [01:01:00] just cooking the books on their, on the returns of their unlisted assets.
Cause if you and I own, for instance, Sydney Airport’s a perfect example and it’s traded on the asx, there can be no argument as to what it’s worth. It’s worth $6 50 a share, or whatever it traded at as that close. Where it gets more nuanced is once that thing’s taken private. It’s up to the fund to determine what it’s worth.
And again, there’s very stringent processes in place. It’s almost always done by accounting firms, ideally one of the big four. And they’ll have a methodology, whether it’s comparing like for or multiples of the profit, it made a year, whatever it might be. But again where it gets interesting and that, and there’s two quick things I wanna unpack there.
But first of all, and again, it’s a common thing you’ll hear from advisors that’ll say, oh no, they’re rubbish. They’re just imagining the cost of Port of Melbourne or something. And then the exact same advisor will go and port a portion of your money in something like a private credit fund [01:02:00] or infrastructure, unlisted infrastructure fund, or an unlisted property.
There’s, some advisors quite active in the media and I just find it hilarious. They’re always talking about, oh, this is the commercial property trust that we’re doing and this is all the yield on the properties, et cetera. And again, it goes back to that point okay, do I want to invest in a property portfolio that’s going through my advisor through an admin fee that’s cut up into little retail portions and then finally goes to the manager?
Or do I just want to go direct through my hundred and 50 billion super fund? I’ll take the latter example for me personally. So first of all, I would just always take that with a grain of salt cause it’s just a common BS line wheeled out by the industry. But the other more kind of interesting thing with regards to these unlisted assets is again, a lot of these funds are 50, 60 billion, some are, up to 200 billion plus.
And once you get to those sizes, It can get more difficult to manage money, and it’s a uniquely Australian problem. So the ASX as a whole, like [01:03:00] Australia is a nation of houses and holes, and the ASX reflects that. A lot of banks, which are, exposed to property and that kind of stuff, and a lot of minors, there’s some fantastic quality miners on the asx.
But, outside of that, it’s, I think it’s 2% of stocks globally or something. It’s a minnow on the world stage. And one of the problems that super funds have is that they’ve just got this wall of money coming in. For some funds it’s a billion dollars a month. For some, it’s more, and they’ve gotta put that cash somewhere.
And for instance, one of the things is if you are a Australian Super Fund, all of your members wanna get paid in Aussie dollars and their retirement needs are gonna be an Aussie dollars. So you might think, oh, that’s fine, I’ll just go invest in the states where, it’s really easy to do that.
But then you’re just taking on loads of currency risks. Essentially you’ve got this issue where they do wanna keep a big foot. In Australia, you want about 20 or 30% of your money, depends on what risk profile you fall into in Aussie stocks. But unfortunately, as I alluded to earlier, there’s fantastic [01:04:00] miners on the asx.
There’s really high yielding banks. I wouldn’t go accusing them of being fabulous businesses. And, there’s a handful of other companies, once you go down the list, when you get to the 200th company, like the market cap isn’t that big. So they’re in a bit of a bind cuz they’ve got all this money and they need to put it to work.
But equally, you’ve really got no choice for it to be really heavy on the top 50, top 100. So again, that’s what I was talking about earlier. Some of these funds are better prepared for, the next 20 years or so. Cause you know, the, it’s the exact same thing with the 1% of fees. It takes a long time to get from $1 billion to 6 billion, but.
as you’re growing every year that gets bigger. It’s like a hockey stick graph. Like the growth gets bigger and bigger. And again, so , a lot of funds do like the element of these unlisted assets because again, you are seeing certain businesses and particularly infrastructure, getting taken private off, off the boss off the stock exchange.
And, a lot of that was a function of the low interest rate world, which some people argue, is done. And some people [01:05:00] argue we’re going back to, but again, a big part of that was that because you’re getting, less than two, less than one or 2% on your government bonds and you need reliable cash generating assets.
So you’re happy to, buy a toll road or a bridge or an airport or, an office block or an, whatever it might be. Because again, it’s a strong, reliable income. So there’s a good argument if interest rates stay where they are, which, plenty of intelligent people say they will, and plenty of intelligent people say they won’t.
I couldn’t imagine that they will for a long time. But you know that it’s less of a focus now. But going forward, if you can, particularly for these big funds, keep a foot, in the Australian dollar and you can do it by virtue of holding these big. Big assets, which you can pour money into, you can also load them up with debt, which is, can really enhance the return.
But I think a lot of it’s a function of just keeping exposure in Australian dollars. A lot of it’s a function of trying to diversify. More and more stocks are more volatile. And fundamentally as well, it’s just preparing for being that 200, 500 billion. And you see some funds [01:06:00] are really beefing out their internal capacity to do that.
So they’re off opening offices in, Shanghai, London, New York, Zurich, you name it. And the basis being they’re trying to get ready for when that comes so they don’t have to go and pay some, rather expensive manager. Macquarie is one of the biggest infrastructure managers on the planet when they can just do it themselves in-house.
And it’s one other silver bullet that the industry funds have. They’ve got a business called I FM Investors, which is just a consortium of funds. I think there’s about 10 or 13 of them, which all industry funds. And again it’s the same design as Vanguard. It’s a non-for-profit entity.
They charge us the lowest fees they possibly can. And some of those funds are just fantastic and you can’t get ’em outside an industry fund. The actual IFM business itself, which is owned by the funds worth a lot of money. But again, so it, it comes back to. It’s not one or the other, but it really does pay when you take a long term view.
And I think it’ll be something that plays a big part in House Group has managed over the next 20 or 30 years. However, it is extremely important that everyone’s held honest on their [01:07:00] returns. And I’d say that we’ve got a fairly decent regulator that at least tries to do that. And let’s not forget as well, like there’s one side of the political divide, which is pretty pretty vocal about not being a fan of um, industry funds.
There is a lot of scrutiny that these funds go through year in, year out. They went through the Royal Commission too, and they came out with the Clean Bill, bill of Health. So it’s a, it is a fair argument that, which is a common line wheeled doubt. How realistic are these valuations?
And I’d say it’s a very fair question, but I’d say what’s a lot more indicative is who’s asking that question and why, they really just want to do it. So they can put you in a portfolio, which again if they’re half good at what they do, we’ll have a ton of unlisted assets in it anyway.
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So might be opening a can of worms here, but we’ve talked about wrap accounts through advisors. We’ve talked about retail funds and talked about some of the benefits of industry super funds. What about self-managed super funds like the old smsf and now I say that and I’ve already probably got a negative bias towards them because most of the time when I hear S M S F, it’s somebody trying to spook me.
Yeah, through my super. So there you go. I’ve probably , already tarnished it, but yeah mate, what can you tell us [01:09:00] about SM sfs?
Andy: I’ve dealt with a lot of SM SFS over the years, so whenever you work as a stock broker, typically those kinds of businesses are very biased towards smsf cuz it, it means that the business can design a product that’s got a lot of managed accounts, it’s run by the brokers and it’s a real gravy train for the business.
But the answer is simple. I would say 99% of the time, if someone’s telling you to set up an SM sf, it’s in their interest, not at yours. Or they’re either just hopelessly not aware of what better things are out there. So, you know, Whenever you hear horror stories with super funds, nine outta 10 times SMS FS are involved.
They’re complicated, they’re expensive. They’re expensive to set up, they’re expensive to operate, and they’re expensive to close down. I deal with them all the time and it’s almost the same thing every time. I’m in this, this complicated piece of garbage, please help me get out of it.
And it takes quite a while to do that. But yeah, just by and large, other problems with SMS FS too, it’s , a common, intention of people is [01:10:00] to access property via that. My looking on bias, I’ve always worked in you. breaking houses and the like. So I’ve got a real bent towards, listed investments as opposed to direct property.
But super property in my opinion is like oil and water. The two just don’t mix. They’re horrible to combine. But yeah, sm sfs by and large, they’re expensive. They’re complicated. They typically expose you to less consumer protection. So again, going back to that example of the financial advisor puts you in a portfolio of funds, they’ve gotta go through what’s called an investment wrap, or an wrap account whatever they might call it.
In order to be one of the 800 odd funds on that products list, you’ve gotta proof that you’re not doing the illegal stuff and that, you’ve got a rating agency behind you and that kind of stuff. Versus soon as you get into SM s f territory, like by and large, you can go invest in whatever you want.
You can buy a collectible car or, coin collection or stocks or whatever. And again, so it’s a lot riskier. Also, just inherently complicated and [01:11:00] fundamentally like taking it all back. , they don’t do anything that you can’t just get through a decent fund.
So if you want to have an active approach and play a part in managing your funds, wonderful. There’s probably a really good industry fund that can help you do that. Whether it’s buying ETFs yourself or, taking your own approach to, the infrastructure fund or the shares fund or whatever are active or passive, so it is purported that they’ve got more control or they give people more control.
And to that, I say not in my opinion, it actually gives you a lot less control. Cause you’re a lot more reliant on having an advisor and an accountant and prohibitive costs and just complication. Yeah there’s no reason to there’s no compelling reason to, to maintain one. And again, I, as I say I’ve dealt with them throughout my career and I, I still get clients with SFS all the time.
And, more often than not, the question is, do I still need this? And, the answer that we get to at the end of the process is absolutely not. Because the other thing with SMSF is, it’s not impossible, but it’s a lot harder to find, just [01:12:00] do it for me, set and forget. Because again, in that admin fee from a super fund, they’re doing your tax return.
They’re, they’re handling all the administration of it all. When you’re an N S M S F, you’ve gotta do it yourself, which you might get wrong. You’ve got a pay an accountant to help you, which it’s also the case. . I always find it terrifying that you could get, if you were just doing an exercise, you could get one person go to two different advisors and you might just get radically different quotes for what is literally the exact same piece of work.
And accountants are a lot better than, financial advisors are a lot less salesy, but still a lot of the firms that focus on smsf, you can see a pretty wide, broad like spectrum of fees that people will charge, might be as low as a thousand bucks a year. It could get as high as four or five.
And that’s just the accounting cost. Yeah, before I wrap it on too much I very seldom could ever even imagine a reason that someone would actually benefit from an smsf. I can think of lots of reasons why advisors would benefit. I can’t think of many, if any, why a client would, and that’s after working with them for a [01:13:00] long time.
Captain Fi: Okay. So red flag firmly planted over SMSs.
Yeah, and
Andy: there’s a loophole that you can get some very salacious commission payments with property too. So if anyone’s trying to sell you a property and for heaven’s sake and off the plan property via an S M S F, I would be extremely wary of that person.
And the regulator has been in. It’s pretty intense in communicating that they’re not very stoked on advisors that go around recommending SM s f. So you’ll find that some advisors, for instance, are a bit scared of recommending them because again, the regulator actually takes an interest in, all which firms are recommending them by the bucket load.
Cuz again, historically speaking, they tend to result in higher costs and lower outcomes for clients.
Captain Fi: So what are some other myths that exist around Super? .
Andy: Yeah. Some common ones that I’m always complaining about is when people for instance might think that, they’re always changing the goalposts, which is [01:14:00] fair, they are I just hear a lot of people are really likes the government’s money and it’s, this, that and the other.
And the truth is they are always changing the goalposts and they will continue to. But what they’re more than likely gonna change is getting money into super, not getting it out. And the reason being that it is such a lucrative way to save tax and build wealth. And again, you’ve got think tanks and, both sides of politics all over talking about just how much of a black hole for tax purposes super is.
And you know , that is slightly different now as well. But there are actual changes , to the law, which means some people in certain circumstances might not have to focus as much on super in your younger years cause there’s some tax concessions that make it really efficient to just migrate wealth into super, once you’re in your forties or fifties and you’re more comfortable with that, you.
Timeframe because again, the trade off for super isn’t one to ignore. You can’t access it. It’s so hard to access that you can declare bankruptcy and they can’t get on your super. So for instance, you might get [01:15:00] sued for doing something horrible and if there’s a victim involved, they can’t even claim on your super.
I think there’s a movement trying to change that for victims of pretty heinous crimes, being able to access perpetrator super. But again, that’s how lucrative it is. And protected it is, but again, you can’t access it. So that’s just one thing. They are gonna continue to change the loss around it, but for most Australians, like it’s still gonna be a fantastic way to build wealth.
And one of the other ones that I’ve just always had a bit of a bug bear with that I just, here over the years is that they should get rid of Super funds and it should just be managed by the Future Fund. In some part, the Future Fund actually is there to back up the defined benefit pensions of government employees and that kind of stuff.
So in a way it’s true. That’s absolutely not the case cuz you do want more than one option. You do want competitive tension, between different funds, which will, get better outcomes and push them to do more and get higher returns and get better low fees and that kind of stuff.
And secondly as well, the Future Fund is designed very differently from a super fund. They’ve only got, I think it’s about [01:16:00] 17% or something like that in Australian equities. And the whole point being they don’t want to be correlated to the Australian economy. And second to that as well, their portfolio isn’t designed to be as liquid as say a super fund or something like that.
They’re just a couple of the myths that I hear, and particularly on that first one. It is locked away for a long time. It’s not something to ignore. But again it’s about just making sure that you don’t waste the opportunity. So it might just be planning to, attack your superannuation, so to speak, more in five or 10 years.
But again, just making sure that you don’t just ignore it. Because again, , there’s, there’s nothing like it.
Captain Fi: I mean, Super’s, I guess holistically speaking, it’s one aspect. It is a pretty big aspect, but it’s just one part of financial advice. It’s obviously important and if you’re interested in fire or fire you, your early retirement. eventually become a typical retirement and you will eventually get access to your super.
So it’s, it is something you need to pay attention to. But just quickly on the other side, what are some other areas of financial advice that you would concentrate [01:17:00] on to get some quick wins for your clients?
Andy: It’s often some of the simplest solutions are the best.
So, you know, Just helping people understand are there ways that we can save tax is a really common one. And a really easy one. Just helping people make decisions. Should I invest in, outside of Super Insider super, a combination of the two. Obviously we’ve discussed that nausea in the actual super fund itself.
Yeah, it’s it’s really different. The more complicated someone’s scenario is, the more you can do. So if you see someone who’s, got a really disparate income to their spouse, for instance, or that might own a business, or they might have a windfall gain from an inheritance or an asset sale or something like that.
The more going on in someone, the more levers whereas financial planners can pull. But again, I know of. Created a or conveyed a pretty grim take on just the financial services industry. But it’s not hard to give good financial advice. It’s really not. I’d love to say that I’m the smartest guy in Australia and it’s super complicated.
It’s actually pretty simple. All you want to do is save tax efficiently, of which there’s simple ways to do that. Again, [01:18:00] tricky thing with financial advisors. Think of them like gps, you know, they’re kind of a jack of all trades, master of none. Like I’m in no way, shape or form a tax accountant.
I can give general advice on how to save tax and that kind of stuff, but, you really do need to see an accountant if you’ve got some complicated tax affairs. But outside of that, just investments outside of super. Again, I’m sure this resonates with a lot of listeners. Huge fan of passive investing, particularly outside of super low tax.
They’re not constantly buying and selling stuff, so we’re not, getting hit with capital gains. Super low fee, very complimentary by a lot of the stuff we try to do within super. Just helping people understand how to structure. Those kinds of things. So, you know, Do you want it in your name, your partner’s name is perhaps something like a, an entity like a trust or a company on the cards, you know, you want invest for kids or grandkids.
How should one go about that? Again, pretty simple solutions. Again, my kind of philosophy on all this stuff is you should just pay for advice. And same way we pay for everything else when you use it. And I’d say often people don’t need [01:19:00] financial advice. I’ve just got a sometimes I see people and they’re 99% of the way there, so we’ll just do an hour review and just talk about some general concepts.
And they’re fine. They don’t need a statement of advice. It’s not gonna add anything to their world. But equally, let’s say you do go down the road of getting an soa and common reasons for that is which is term first statement advice is, whether you’ve just gone through a life event like maybe you had kids, or you’re approaching retirement, or you’ve started earning heaps for much larger income.
Maybe you’ve paid off your house, any number of things. Generally speaking, , once you put it all together, you really shouldn’t need to seek it again unless you want to for, maybe three, five years, maybe five or 10 years. Again, once you’re set up in a good product investment wise and super wise, and you’ve got a clear plan as to how you’re gonna save tax and, protect your assets, et cetera, et cetera.
It really should be the case that, you don’t need to pay someone a retainer cuz again, you’ve got X, Y, Z looking after your personal investments for a very fair fee and you’ve got a ABC looking after your [01:20:00] investments in super for a very fair fee, et cetera. And again, if you do need tax advice ongoing, your accountant will do that.
Unfortunately that’s not typically in the bandwidth of financial advisor or planner or whatever you wanna call them. So yeah, I, I would say that, good things to look for a financial advice if you do have a lot going on. Retirement’s obviously a pretty big one for a lot of people.
Again, I’m a sucker for just reading books and blogs from other advisors. I just can’t help myself. And a good line I heard from one was, you know, planning a retirement, it’s like playing a game of chess. Except, you really only have one chance at it, which you know, isn’t totally true.
You can always change whenever you want, but it can pay to get advice there to just make sure that you are doing all the right things cuz you don’t know what you don’t know. The problem with that is, again, as I’ve communicated pretty thoroughly, that I think most of the time advices aren’t actually gonna help you there, but yeah, so it’s a range of things.
Captain Fi: we’ve focused on a few of the shadier ball looking areas of financial advice. [01:21:00] What are some of the good areas of financial advice and what are the benefits that financial advice or getting financial advice, getting a statement of advice can have to someone and their financial health?
Andy: Oh if it’s done right and it’s not that hard. You can really set yourself up. So if you aren’t a top performing fund fortunate enough to be for 20 or 30 years, you’ll retire with a lot of money. And if you really, if you get someone who can review your situation and figure out when and why and how you’re going to use super as a tax structure, you can save a fortune in tax.
And the exact same with, investing outside of super. If you set it up right at the start, it can make a massive difference. And again, like it’s not all that dissimilar from super where there’s just thousands of products, there’s. A million different competing interests buy for your attention with respect to personal investments.
And if you just get set up initially, you may well find that you get really long dividends over long term. And again, it’s [01:22:00] not a zero sum game, right? It’s not that if you choose one particular manager, which I don’t think is as good as another, it’s not, oh, you’re gonna be bankrupt and everything’s ruined.
It’s more just, oh, perhaps you’ve had a little bit more fees or perhaps under the bonnet this company actually does these rather rogue things to generate returns as it, so what, appears on the face value is a really low cost product, actually has a few kind of spooky things going on under the bonnet.
But again, it doesn’t mean that it’s not gonna work, it just means that Yeah, exactly. You might just not be aware of it. The reasons are it’s really easy to set up. And also one of the other things that just isn’t well communicated is that everyone just seems to think, oh, if you’ve got heaps of money, are you just automatically shouldn’t be in, a simple super fund and a simple investment strategy.
When you tend to find that is actually the best thing to do, whether you’ve got $6 million in financial assets, or whether you’ve got 160 grand in financial assets, like often you’ll find that the solutions aren’t all that different, depends how it’s structured. [01:23:00] But again I’d also just, really punch that one of the benefits of the Australian system.
Everyone has super, more or less. And by virtue of that, everyone can access all of these really low cost, really high performing ways to ensure yourself, save tax, invest for the future. And the same being said, particularly in the last 18 months or so, there’s been just one or two things that have come out for with respect to personal investing which just makes it super easy to set that up long term.
And again, if you know when and why and how you’re gonna do things for the next five or 10 years, you’ve got a plan. Fantastic. You’re not leaving anything on the table. And again it can just set you up to what we’re all out here for. So we don’t have to work for the money.
So you can spend your time doing what you choose to do.
Captain Fi: Yes, financial independence, that’s the goal. Look, it’s been an awesome morning slash afternoon chatting. I’ve only got few more questions for I’ll uh, graciously let you go. Cause I’ve used quite a lot of your time up today.
But just on that concept of financial independence, [01:24:00] now maybe putting on your hat as, a bloke on his own journey to financial independence. What are your top three tips or your top three strategies in terms of, getting the best bang for your buck, the best value? What are the top three things you should focus on?
Andy: Make sure you’re in a top performing super fund. That’s just number one. You’re not overpaying your fees, you’re not in a crappy investment product. Number two, make sure you are saving tax where you can. Again, the Australian system has some just incredibly low hanging fruit where you can either save tax or you.
boost your returns. And, similar to paying off debt when you save tax, it’s a guaranteed return. Doesn’t matter what markets do we get that money, because no matter what, so that’s number two and number three if you can just set up your investments correctly at the start, which again is incredibly easy to do , you’ll be in the arena where you won’t have [01:25:00] to pay prohibitive ongoing costs.
One, find a good super fund. Two, have a plan as to how you’re gonna minimize tax. For a lot of people, maybe that’s not possible. But for, I’d say a good proportion of the population, it’s quite achievable. And thirdly, just make sure that, if you are investing outside of super, which I think a lot of people should, and for a number of reasons that you just do it via really low cost, high quality product, which I’m pretty certain a good portion of the listeners already do, if not all of them.
Captain Fi: And you mentioned that you’re a big fan of reading reading blogs listening to podcasts, books. Do you have any top recommendations for books or any learning resources?
Andy: Not particularly. I’m like a bad gambler with forums and all that. But the thing that I’ve always found very entertaining is I don’t think there’s ever been so much good information and so much rubbish information out there at the same time. And I’m not much, into crypto and that kind of stuff. I’m not just pooing that, but again, if you’re getting advice on a read forum or something like that, it’s highly likely that the person typing [01:26:00] that comment may be all over it and 100% correct, but they also might not be the pain in the neck is that if you go and see a professional, as we’ve discussed for a long time I don’t think that they’re necessarily gonna put your interest first.
So the, I think the best thing you can do is that if you are in a really top performing super fund, I think you’ll find that they have and they’re getting better and better at this which I think is wonderful. They’ve got really good resources online about what’s going on in investment markets and how you should think about that.
They’ve got really good fact sheets on, oh, what happens to my super when I die? And that kind of stuff. And again granted they’re not independent in the sense that they do wanna re retain their members, but they’re also not trying to flog you an insurance product that’s owned by the bank as well. Or, a mortgage is affiliated with the product provider.
So that’s, I think a good super fund is just a wealth of information and they. Better and better, particularly with their own podcast, just for updating market performance and loving a lot of the stuff that they’re putting out. And [01:27:00] thirdly, I think there, there’s a resource that’s done by naturally my website, independent wealth advice, iw advice.com.au.
It’s, it’s world renowned for just being fabulous . And then the, one of the other really good ones I think is ASIC Money Smart. So that’s of like an online financial Block’s not the correct word. Wikipedia, if you will, of Aussie finance and, all the things that make it up.
Managed funds, mortgages, insurance, super, et cetera, et cetera, et cetera. And I think they do a pretty good job of making it pretty readable. I think whenever you’ve got a question, you want to try and find a couple of different places to answer it. But I’m a big fan of asset money Smart.
I just think they do a really good job. I also quite like super guide. I think they do quite a good job. Again, show me the incentive. I’ll show you the outcome. People like Choice and super consumers, Australian, that kind of stuff. They’re not a lobby group or anything like that. They represent consumers and astoundingly.
They tend to be closer, on the money, so to speak. And then just anecdotally, I just personally love it. I’m [01:28:00] really focused on markets and that kind of stuff. I just love Twitter for that reason. The amount of pretty well regarded investment professionals that are on Twitter.
There’s a lot of morons on there as well, myself included. But yeah, just on entertainment value, I think you see some think it’s underappreciated. How could the investment feedback you get up on particular stocks on Twitter?
Captain Fi: I’ve been blown away by some of the conversations that even I’ve been able to get in touch with people.
Like I remember getting in touch with people that run these companies, even when I’ve had guys and girls come on the show from companies you like Six Park and Stockpot and, other like investment brokerage firms and often I’ve just reached out, via Twitter or Instagram.
Yeah. And they’re like willing to talk to me and I’m like, oh, perfect. You never know unless you give it a go, right?
Andy: Oh, exactly. Yeah. And that’s one of the re I’m the exact same. I’ve, had conversations with and met people via Twitter that I otherwise wouldn’t have. And again, yeah I just find it very entertaining.
But yeah I think Money Smarts a brilliant resource and sos a top flight super, super fund. But yeah, unfortunately neither of those two will ever lead us to [01:29:00] meeting very interesting pioneers and tycoons in the industry. Look .
Captain Fi: I like the Money Smart website too.
I think it’s good. I think it’s definitely going in the right direction. But there was, oh, I remember there’s one thing about fees, and it was just like an example, I can’t remember off the top of my head what it was, but it was normalizing. It was like a one or a 2% fee or something, oh, and Andy pays 2% in fees on his super and blah, blah, blah, blah.
It was, they were giving a worked example. And just from going through Eli’s worked example on the 1% fees over. Years you end up losing half your income in retirement. I was a bit shocked that they, when were normalizing that. Anyway, we provided some feedback.
Just on
Andy: that though.
And good on you. Like in all seriousness point, for super funds charging you 0.7 or 0.8, that’s not necessarily a bad deal because again, fees matter fees really do, but just because a fund charges half a percent more and there, honestly there’s phenomenal funds out there that’ll charge you close to 1%.[01:30:00]
But what you’re getting for that is an incredibly good investment solution. And so you can’t just say, car blanche that, just because the fund charges half a percent more that it’s return on half a percent less. It’s, again, it’s the value that you get for that. But yeah and that’s just cuz you know there’s funds that I love that will charge 0.7 odd percent.
And again, I think people get cracking value for that. And that’s all inclusive. That’s everything. There’s no visor fees or anything lying in there
Captain Fi: Oh, it’s the fire dog mate. It’s that index fund life. . .
Andy: Yeah. And as I say, in my opinion, it’s the second best way that you can invest your money.
So is anyone gonna turn around and just Yeah. Throw their hands up in the air and, be miserable as a result of. I can’t foresee a scenario, it is, it’s a fantastic way to go
Captain Fi: about it.
Yeah. Hey mate, so speaking of fantastic value, gives a plug for the business mate. Tell us a bit about what you do, services you provide, and what services you could offer to the fire community or someone on the path to financial
Andy: independence.
[01:31:00] Yeah independent wealth advice based in Sydney office, in Martin Place by virtue of technology. I’d love to say I have a client in every state, but I don’t have anyone in the Northern Territory and I’d love to be able to, I’m almost considering running some Facebook adss there, just so I can say that.
But again I’d like to think that I’m a little bit different in the sense that , it’s not an ongoing fee piece with us. It’s more about just getting people set up and, if people wanna meet with me on an ongoing basis, or they do have something going on that they do need to see me regularly, it’s the case that you just pay an hourly rate or you haven’t agreed upon, hourly, amount of time.
So that’s one thing that I just do quite differently, that I think is a bit of a no-brainer to be honest. And outside of that, I also pride myself on what I think having a solution for anyone. So I’ve got dealt with clients well north of, you know, in the , multiple, multiple millions in investments, north of five.
And then equally, we’ve got a lot of people that are just, quite everyday Australians. And again at least with me, if I see someone and they’re already in a good super fund [01:32:00] and they’re already pretty much structured correctly, my little line I always say is good for you, bad for me.
Because my perfect client is someone who’s in a retail fund or a poor bank fund, or they’re paying advisor fees and they come and see me in, they’re basically say, look, x y Z’s such a nice person, they’ve got this beautiful office that overlooks the harbor or the river or whatever.
And they seem really nice, but I can’t quite figure out why I’m paying this person thousands a year or tens of thousands a year. And I say yeah, cause I’m sorry to tell you, but you’re actually not getting good value. Spend a lot of time and money trying to make the website as interactive as possible.
So it’s just the case that tries to outline, are you gonna be a good client? Very simple process. Drop me an email, drop me a call, book in via the little booky thing. It’s just iw advice.com au. It’s [email protected] au. We’ve got a one 300 number and an oh two number and all the rest.
And again, the point being that I really do pride myself on, it’s not just a default. Everyone goes into the same cookie cutter advice of conflicted [01:33:00] products. It’s about doing things right for people. And also I do spend a lot of time sometimes a little bit too much time blogging about things that I think are interesting and I’m personally very interested in fees.
If you are, check out the blog from time to time because, there are plenty of examples of specific companies that I write about and some of those companies aren’t particularly enthused about that. But yeah, so by all means, subscribe to the blog or the newsletter and hopefully if you don’t need advice, you can at least get an entertaining update and, keep abreast of change.
Captain Fi: Awesome stuff, mate. I’ll make sure we’ll include all of those links in the show notes as well. So if you’re listening and you want to head over and check out Andy’s site and his business jump onto the blog and scroll down to the bottom. There’ll be, links to Andy’s website and some of the entertaining blog posts that he’s that he’s written recently, which just stirred up the hornets nest.
Always good to see people poking the bear. Found it. Mandy’s latest one’s quite entertaining. Andy Mate, again, thanks so much for your time. Yeah, just really appreciate your time mate, and your experience.
You’re obviously a wealth of knowledge. I personally [01:34:00] really appreciate what you’re doing. You’re not out there to rip people off and or bullshit ’em. So good on you, man, and I really hope the business model works for you. So yeah, I, I’d encourage if anyone, has been thinking about getting some advice, yeah, hit him up.
Elise, he’ll be honest enough to tell you whether it’s actually gonna be worth
Andy: it or not.
A hundred percent. And thanks for having me. I’m big fan of the podcast, the blog, and I love this financial advice to the love of my life. I love talking and I talking about it, so it’s a pleasure.
Captain Fi: Mate it’s been awesome and enjoy the rest of your Sunday.
Andy: Thanks so much. Appreciate it.
So just one piece of housekeeping, all the information we discussed in this podcast is just factual information and at most general advice. And what that means is it doesn’t take into account your specific needs or circumstances. And so you need to consider your own financial position, objectives and requirements before making any decisions.
And ideally, you should seek financial advice. Independent wealth advice is a corporate authorized representative. And I, myself, Andrew, [01:35:00] Derek, am a registered financial advisor as well. Thanks. Thanks
Captain Fi: for listening to another episode of the Captain Fire Financial Independence Podcast. To read the transcripts or check out the show notes, head over to www.captainfire.com for all the details. If you have a question for the captain, make sure to get in touch. You might even make it on the airwaves.
You can reach me online through the Captain Fire contact form or get in touch through the socials. I’m active on Facebook and Instagram, as well as a number of online finance and investing forums. And finally, remember the information presented on the show and the links provided are for general information purposes only.They should not be taken as constituting professional financial advice. You should always do your own research when making any financial [01:36:00] decisions and make sure it’s appropriate for your personal circumstance.
Captain FI is a Retired Pilot who lives in Adelaide, South Australia. He is passionate about Financial Independence and writes about Personal Finance and his journey to reach FI at 29, allowing him to retire at 30.
