Ask An Advisor: Cost of advice, best platforms, topping up super & pay off mortgage or invest more | Glen Hare

Bryce: [00:00:15] Welcome back to another episode of Equity Mates. We are back in the studio. We've both had a bit of a break overseas, which has been nice friend. 

Alec: [00:00:22] Yes. Yes. You're looking very tan. I'm just a bit red.But yes, we have been on holidays and we are back from our six episode arc of is there money in the cavalry? A lot of fun and some very interesting topics. But we're back with classic equity mates. We're back with an Ask an Advisor episode.

Bryce: [00:00:43] Yes, that's right. We had a great conversation with Glen Hare from Fox and Hare answering many questions that had come in from the equity mates community. We covered superannuation, we covered investing, psychology of money, plenty of stuff covered in this episode. So firstly, a thank you to everyone who sent questions in. These are fast becoming a very popular episode amongst the Equity Mates community for good reason. 

Alec: [00:01:04] Hmm. If you want to ask a question, ask at equity mates dot com is the email address. Send us your question. Will either ask it on one of these episodes of the podcast or in our Ask an Adviser email, which you can sign up to at the Equity Mates website. But Bryce, before we get into the show, we should introduce Glen. He's got a fascinating career before launching Fox, and here he was at Macquarie Bank for more than a decade. He worked in a number of roles from institutional broking to wealth management. He was actually one of the youngest directors in the company at the time when he left in mid 2017. He then went on to co-found Fox and Hair and has been voted among the top 50 advisors in Australia three years running. That's the beauty of the platform we've built. We get to speak to some of the best advisors in Australia. 

Bryce: [00:01:50] That's it. And I certainly learnt a lot in this episode. So I appreciate everyone sending their questions in because I'm I'm getting a lot out of it. A quick reminder. Yeah, we.

Alec: [00:01:59] We got you to rate yourself out of ten. Yeah. 

Bryce: [00:02:01] And yes. Anyway, so just. A reminder that while we are licensed, we're not aware of personal circumstances and neither is Glen. So any information in this show is for education and entertainment purposes. Any advice is general advice only.

Alec: [00:02:16] Now, Bryce, two quick things before we get into it. First of all, we released a book this week. Don't stress, Just Invest is available in all good bookstores or online booksellers wherever you buy books. Check it out. And if you enjoy this podcast, if you want to take the next step on your investing journey, we hope that book helps. And then finally, the first question you ask. You obviously had a little bit of inspiration while you were overseas because you're introducing a would you rather question when you told me that you want to start doing, would you rather I thought it would be financial, would you rather stocks or property Bitcoin or Ethereum? But no, that is not what you're going for. So if people are wondering about the first question, this is price holiday inspiration. 

Bryce: [00:03:01] It is a classic quote. Anyway, we'll leave it there, and I hope you enjoyed the conversation with Glen. Glen, welcome to Equity Mates. 

Glen: [00:03:09] Thank you for having me.

Bryce: [00:03:10] So before we rip in, we're going to introduce a new segment. Would you rather for all of our experts. 

Glen: [00:03:15] A little nervous about this one overall?

Bryce: [00:03:17] It's not like. The drinking would you rather yet, but to kick off, would you rather have the ability to see 10 minutes into the future or 150 years into the future?

Glen: [00:03:27] Wow. That is big. 

Alec: [00:03:29] It's good. It's good. 

Glen: [00:03:30] Can I pick when I'm looking into the future? Like right now, I want to look. 

Bryce: [00:03:35] I think it's just at all times you have the ability to be, like I can say, 10 minutes into the future or 150. 

Glen: [00:03:41] Years. I'm going to go 10 minutes. I think 150 years would freak me out. 10 minutes of, you know, if I could make some smart decisions in that time and then and then move on. 

Bryce: [00:03:52] Right. You ran. 

Alec: [00:03:53] Well, so I was thinking 150 years, you would be able to see what the world looks like and invest accordingly. Yeah. And I was like, okay, there's some money to be made that way. But if you could say 10 minutes into the future, you could get to 10 minutes before the end of a footy game and see who was going to win. Live back. And so there's money to be made. 

Bryce: [00:04:12] I guess the nuance here is can you action anything by saying in in front that far? Do you know what I mean? Like can you change the future. 

Alec: [00:04:20] By betting On it? 

Bryce: [00:04:21] Well, if you can say 10 minutes in front, you're like, I don't I don't like that. Can you do something about it? Like you're in a cell? 

Alec: [00:04:28] It's like, Oh, shit, I'm going to be like, Oh, yeah. 

Glen: [00:04:31] So if all my research watching sci fi movies is anything to go by, you just don't want to change too much. Yeah, I said, Do you ever get the opportunity? Just don't. Don't say. 

Alec: [00:04:41] You say, 150 years into the future and everything's great. And then you do something, you look ahead and it's terrible. And then, you know. Yeah. What was that? 

Glen: [00:04:47] Yeah, totally. In this documentary with Adam Sandler called Click that's got. Something along the lines of that.

Bryce: [00:04:55] Anyway, we have plenty of questions to get through today in our Ask an Advisor episode. And thank you to all of the community members, equity mates community who have sent in questions for Glen. We've got a bunch to cover crossing, superannuation, investing and then a whole heap of general. So we'll start on the general and we'll talking about this offline, Glen and it's the conversation around, you know, is an advisor worth it? Like that's what it comes down to. At the end of the day, there's this, you know, this idea that, well, it's known that getting advice is objectively expensive and for us it's understanding when is it worth applying that cash. 

Glen: [00:05:30] Hmm. So I'm going to start with a potentially controversial view. And so I think the advice industry is not articulating the value advice as advice for a younger generation as well as I could be. And the reason I say that is the advice industry is very much focussed on pre and post retirees, and that's not a bad thing, right? Like there's a huge opportunity where people that are looking to move into that phase of their life, you need to be really conscious of how you, how do you do that? And we were talking earlier like the average age of an advice client, so someone that has a financial advisor is 58. So the whole premise behind what we do or forks in here is work with a demographic that we feel the advice industry has broadly left behind. So our youngest member is 20. She just turned 24. Our older members are probably in their mid 40, so we only work with those that are in that accumulation phase. So a majority, probably majority would be in their thirties, I'd say. And in terms of the cost, you know, I'm really conscious of the fact it is an investment. But, but I'd really encourage people to consider it as an investment. And the reason I say that is because some of the decisions that you make in your twenties and thirties will have huge compounding impact on what your thirties, forties and beyond looks like. And I want to be conscious that I'm not saying that all we need to do is plan for the future. We want to do that in the short term, but we also want to make sure that we're we're making clear progress towards the medium of the long term as well. So, you know, an example might be if you're living at home, you know, you started your corporate career earning good money, you've got two options. You can either spend it all, blow it out on stuff that you don't really care about, or you can start making some really smart decisions that are going to seriously set you up for that for the medium and long term. 

Bryce: [00:07:21] And so then just to close that out, you know, part of the question is around, at what point is it worth going to see an advisor? And if and you know, is there a number in terms of disposable income or free cash flow where you believe it's like we can make a difference or a meaningful impact given the cash flow that you have? 

Glen: [00:07:40] Yeah, so I'll answer that in two ways. So we were really shocked. We held a number of focus groups before launching the business and we had a room full of our ideal members and half the room said, Put your face on the website, otherwise I'm not going to reach out because I've no idea what I'm going to get charged. The other half of the room said, Well, if you put that fee on the website, I don't really know what it is I'm going to get for that. I'm not going to reach out. So we went. We went with you. We went with. Not putting our face on the website. So when someone reaches out, we have a conversation in the first chat with them, which is free in terms of where we believe we can show value. If you're in a position where you're able to save or potentially invest around $2,000 per month, then we can show value. And I'm very confident in saying that because that amount of money you can do, you can again, you can in terms of what you do with those funds, it can have quite a considerable longer term impact. And another example might be we've had a number of members reach out with that have accumulated some bad debt. How you define bad debt, whether that be, you know, a car loan, credit cards, personal loans, etc.. One example, one member reached out to us and had $103,000 worth of credit card debt. He was paying $18,300 per year in interest. 

Bryce: [00:08:56] Oh, my God. 

Glen: [00:08:57] And when he first signed up, he said, Glen, I'm about to pay my fee on the credit card that you're about to help me try and pay off. And my response to that was, if we don't work together, where are you going to be in three years time? And he said, I'm going to be in the same position. So we've worked together for about four years. He's completely debt free and he's just bought himself a one and a half million dollar apartment with his partner. The advice was simple. It was a Really clear. Don't use credit. He's certainly changed his relationship with credit cards. But the advice was a cash flow strategy. But it was someone to hold him accountable to it, but also someone to share with him what the picture looks like beyond the debt. And that can sometimes be really hard to see if you are in that fairly lonely position, I would say. So anyway, I'm going a bit off tangent. 

Bryce: [00:09:50] No it is good. It's good. It's good to have that number in mind. I think for a lot of people who are in that position of being like, Should I should know? Do I have enough money? Is it worth it?

Glen: [00:09:57] Yeah, hardly. 

Bryce: [00:09:58] Having that number from your point of view is handy. 

Glen: [00:10:01] You don't need to be old and rich. If you've got some disposable income to make some smart decisions, get cracking. 

Alec: [00:10:07] And if you're on your way to getting to that $2,000 a month free cash flow, the good news is you can send your questions to ask at equity mates dot com and we're going to put them to advisors that we get on the show. And in this case we've got a number of questions, as Bryce said, a few specifically around superannuation and a number of general questions from the agreements community, but we want it to start well, I guess we wanted to turn the tables a little bit and have you ask us some questions. Let's say Bryce and I go to your website, sign up for the free session and we come to you. What are the sort of questions that you or any of your advisors would be asking us as potential clients to sort of, I guess, get a gauge of our financial situation? 

Glen: [00:10:53] Alright, so I've got three to go. I'm giving away all my secrets here. I've got three goals. So, first do you have any financial frustrations?

Bryce: [00:11:06] Interesting. That feels like an emotional question. Well, it is an emotional question. Financial frustrations. Okay. Housing affordability in Sydney and the ability to afford a house. That's frustrating. 

Alec: [00:11:17] That's the same thing. Yeah. 

Bryce: [00:11:21] Do you have any, Ren?

Alec: [00:11:23] Yeah. Housing is the big stressor, I think. Well, not stress, but frustration. Yeah. Yeah. 

Glen: [00:11:30] Greatest financial aspirations. 

Bryce: [00:11:33] The ability to.

Alec: [00:11:35] Own a house. 

Glen: [00:11:37] Fairly common. 

Bryce: [00:11:38] One. The ability to feel the ability to rely on my assets to generate enough income so that I don't have to rely on a paycheque from someone else. [00

Glen: [00:11:49] Yeah. And do you know what that figure is?

Bryce: [00:11:51] No. As big as possible. 

Glen: [00:11:54] As big as possible. 

Bryce: [00:11:55] I've never done that. A number I've never crunched it to. Yeah, I'm just in the. Let's just get it as big as possible right now. So. 

Alec: [00:12:01] Yeah, well, I mean, it would change, like. Yeah, circumstances would change. I have a kid, all of a sudden that number becomes a lot bigger. Yeah. [00:12:08][6.2]

Glen: [00:12:09] And the aspiration ones, you know, again, the general conversations of when, when reaching out to an adviser is what are your goals and aspirations? And for someone that is in their twenties, thirties, even forties, fifties, like it's really hard to define what your goals are. And the reality is we often then see people put decisions around their financial wellbeing or the financial decisions they make on the backburner because they're not really sure what they're driving towards. Whereas if we think about our, you know, our careers and our businesses and our things like that, like we we know what successful look like. We know if we've had a good month, we know if we've had a good quarter, we know if we're hitting our KPIs. We often don't put that same lens when thinking about our financial goals. So we often encourage members to think about what position would you like to be in? What are some of the things you'd like to consider doing? So potentially softening the language and the theme around aspirations is some of the key kind of responses that we often get. I want financial security. I want financial stability. I want financial freedom. I want financial flexibility. The late on question and that certainly doesn't come out in the first conversation is then, well, okay, how do we define that figure? But anyway, the third question that I would ask in in a first chat is how would you rate your overall financial world in terms of driving towards those aspirations? Ten. You're nailing it, You're absolutely killing it. You're all over it. You zero. You're the other side of the spectrum. 

Bryce: [00:13:37] This is and this is probably why I would want to go to an adviser, because the other two, you know, I think for me, yeah, it it I don't know, six. Six, I guess. 

Alec: [00:13:48] You once told me on this podcast that you were you couldn't save any more, that you had perfect.

Bryce: [00:13:55] I think you misconstrued go through the archives. I think for me, though, it's like going to see an advisor is where I'm not fully versed and want to know more and like, how should I be maximising my cash flow when it comes to like super contributions and the first home buyer scheme thing and insurance and all those, all those things that I feel like the saving part and the cash flow. Part two Ren's point I think I'm confident with, but it's then like, am I with what's left? Am I actually really maximising this for the goals that, you know, totally not just setting it up and putting it into investments kind of thing? 

Glen: [00:14:36] Yeah. And six isn't a bad score, right? You're like, Yeah, I'm kind of, I'm in the middle. But my, my challenge to you would pay what's going to get you to a seven. What's going to get you to an eight. Like what's where's the shortfall? And whether someone responds eight or they say, oh I'm probably one. The my, my, my lead on question is always the same. Okay, you're one. What's going to get you to five is six. What's going to get you to seven? That's the exciting bit. That's the sweet spot where we can then delve into that and go, okay, cool. This is what's going to then enable you to move forward.

Bryce: [00:15:11] Here's a follow on question then. How do you know if you're getting bad advice? 

Alec: [00:15:15] That is a good question.

Glen: [00:15:18] That is a good question. How do you know? 

Bryce: [00:15:21] That's a lot of trust implied in.

Glen: [00:15:24] Totally. 

Bryce: [00:15:24] And it's like where in a fortunate position, I think where we would go in with a level of base understanding. Given the work that we're doing on this show. Yeah. But someone who's going in with one. 

Alec: [00:15:36] Yeah. Out of ten we had someone DM us, we did a three part series on superannuation. And they DM'd us and they said they really like the series. I have a financial advisor, I'm in my twenties and my advisor had 60% of my super in cash and like that is a classic example of bad advice. But, there's a level of general advice only. 

Glen: [00:15:58] But maybe look into that. Really really good call out. And it is a trusted relationship, right? Like you know your hand at your paying phase you expecting to get good good advice. How do you know if you're getting bad advice? It needs to feel right and the advisor needs to explain to you very clearly how this is the right advice and putting you in a better position and really conscious of the fact as you kind of alluded to, price, everyone reaches out to us with very different degrees of financial literacy. You know, one of the things that we're very passionate about is empowering our members through education. So I think I'm hoping that this doesn't happen as much anymore. But an advisor would sit across the table from their client and try not give too much away because they didn't want to, they wanted to be seen as the expert. I know everything. Like you just need to trust what I'm telling you. We completely flip that on its head. We believe that the more our members understand their strategy, the more likely they are going to then stick to the strategy because they understand the implications of the strategy and then inevitably achieve their goals. So if you don't, if you're seeing an advisor and you don't understand the advice that's being put in front of you, challenge it and make sure that you're asking questions constantly until you get to the answer that you want.

Alec: [00:17:18] Yeah, well, let's get to some questions from our community and a reminder that if you do have a question that you want us to ask on the next episode of Ask An Advisor, ask our equity mates. Dot com is the email address. We've been speaking about cash flow a little bit. So let's start with this one. When talking to clients, what do you suggest in terms of cash flow? 

Glen: [00:17:39] Best practice similar to a number, the other guest that you've had. So having, you know, buckets with accounts for specific purposes, maybe I'll answer that by touching on a few mistakes that I see people make. So one of the big ones is they're just saving whatever's left over. And if you're saving whatever's left over, then that's going to give you absolutely no insider clarity as to when you're actually going to be able to achieve your goal. Like if you're if you're wanting. Sir, by $1,000,000 players need a 10% deposit. You need 100 grand if you know that you're saving $2,000 per month or $3,000 per month, it's going to be really clear as to when you're going to be able to get there. If you're just saving whatever's left over or putting money in a savings account and then subsequently taking it back out, that's going to give you no clarity as to when you're actually going to get there. That's that's certainly one that I say. I say quite regularly.

Alec: [00:18:32] That is that the pay yourself first glance. Exactly right. It's like when you get paid, there's a set amount that goes into your savings account before you start spending. 

Glen: [00:18:39] Yeah, automate it again. Very similar to that in line with your your philosophy around automate as much as possible. Set yourself a weekly amount, quarantine your fixed costs in a separate account, save in a separate account potentially with a different bank. So if you're down at the pub on a Friday and you need another dollar, Rosie, it's a little bit harder to kind of get those funds out.

Alec: [00:19:02] Although everything with instant transfers is. 

Bryce: [00:19:05] Yesterday we looked at the top savings account, interest rates in Australia, and the number one is the National Bank. Maybe, maybe not. You know, I can't. Maybe. 

Glen: [00:19:16] And I know what it might be but I'm always nervous about saying specific. 

Bryce: [00:19:23] Those are obviously like minimum deposit level, but also it wasn't available on an app and you couldn't. It wasn't it also wasn't available on internet banking.

Alec: [00:19:36] Yeah. Just like well, so they have branches.

Bryce: [00:19:39] I can't remember what it was, but it was like super locked up. Like you're not able to go down on a Friday and start transferring out for another bottle of rosé. 

Glen: [00:19:49] Or you know, start looking at term deposits. So that's not something that we were very interested in about 12 months ago. But given where interest rates are now, if you want to lock away those funds for a period, then you can get some really attractive rates on those accounts. 

Alec: [00:20:03] Well then why didn't you look at term deposits and at least from the major banks, the term deposit rates weren't even. 

Bryce: [00:20:09] It's still better to have it in there if you've got savings. 

Glen: [00:20:12] Side or if you do in the 17 transfers and you got the three you're tapped twice. Today and all that kind of stuff.

Bryce: [00:20:19] No rules on.

Glen: [00:20:21] It depends or like if any guy, what's the cost of having that money at call and then taking the money back out versus having any deposit. Right. Like, yeah, I did accounting at uni. I genuinely wish I did psychology. I think that one. The conversations we have about money are very much kind of I guess emotional base, which is why a lot of my questions are how do you feel? 

Bryce: [00:20:44] Yeah. So then secondly, speaking of interest rates, with interest rates going up, is there such a thing as good debt or is it all just bad now? 

Glen: [00:20:53] Good question. So the controversial view interest rates aren't higher. They're just where they were about a decade ago. We have come out. I know. And I don't know that that might sound a bit blind, but I know that there's been considerable hikes and that that naturally is having quite, quite an impact on a lot of households. But, you know, in terms of good debt, there are without turning this into kind of a tax, like there are advantages around having negative geared properties. So, you know, paying interest that reduces the amount of tax that you pay. But at one point you want to be debt free and that the concept of being debt free again does come up in conversations a lot. And I'll always challenge that based on where they're at and what their goals are. So if you're in your mid twenties and you've just bought a property and your whole focus is not just on being debt free, I'd argue that, well then what happens when you turn 40 and your debt free? Then do you start investing? So it's about taking a bit more of a balanced approach. Whereas if you are looking to, you know, pull back on work and this is the forever home, then again the focus might be more on that debt pace. So there still is some aspects of good debt, for want of a better word, like you're not going to buy a place in, in, in Australia without some degree of debt. I would argue yeah so you could class that as good debt but they really you know when I ask you know some of the people I speak to, oh what's the interest rate on your car loan, What's the interest rate on your, you know, your credit cards or your personal loan? Often they have to go away and check. So make sure you're really conscious of what you are actually paying before you make any decisions around how you allocate that surplus cash flow. 

Alec: [00:22:35] So we had a question around insurances. So the question basically was, is all this insurance really worth it? 

Alec: [00:22:46] I know that's a bit of a piece of string because it's so dependent on your life circumstance and stuff like that. But yeah, we'll ask it generally. And then maybe if we drill in, I know we're going to talk about superannuation a little bit later, but yeah, maybe if we generally talk about insurances and we talk about super insurances. 

Glen: [00:23:01] Yeah, totally. So and I'm going to answer this through the lens of who we work with. So I'm. Most of our members are in the 20 1340s. So fairly early on in their career, generally speaking, fairly fairly healthy. The biggest mistake I see people make when it comes to insurance is they look into that. More often than not, their super fund it to work out what insurance they have when they're trying to claim. So up until that point they have no idea. They're like, I think I have something which they are paying for from their super. And then if something does happen, only at that point do they then actually care about what it is looking for. So before we make any decisions around super understand what you currently have and what you're paying for, what you are covered for, and what you're not covered for in terms of the key triggers that way, say when insurance certainly becomes quite a conversation with our members first, when they're looking to start a family second when they've got debt. So typically purchased a property. And also people often when thinking about insurance, go to the worst case scenario. So they think of life insurance or total permanent disability, never able to work again. In terms of my experience, again, reflecting on the demographic that we work with, most of the claims that we've assisted with have been income protection. So I'll give you a really good example. One of our members pretty fit in. He's 33, he's a cyclist and he was hit by a car, so he was off work for three months full time and then he was off work and then he went back to work part time for another two months. What that meant was income protection. So income was being paid to him on a monthly basis while he was off work so he could continue to pay the mortgage, and it didn't have a huge impact on his household cash flow. So don't always just think of insurance as worst case scenario. Like we ensure our dogs, we ensure our cars like we're travelling like, oh, I've got to get travel insurance. If you don't have an income, you can't pay for any of your other insurances. So just be, be conscious of that. 

Bryce: [00:24:56] And so when you say the trigger is going to debt, that's not going to debt, but like a mortgage, you can get a mortgage. You're saying you should definitely consider income protection.

Glen: [00:25:06] Yeah. So how are you going to pay the mortgage? I always think about what's the backup plan like Taking out an insurance policy is essentially transferring the risk. Like even if you don't have a house and a property rather, or a mortgage or you have kids or anything if you're renting and something were to happen to you and you weren't able to work, let's say, for six months, what's the back up plan? Can you move back to the emergency fund? Can you move back with the parents? Would you know what's the decision there? So insurance then and I would say once that kicks in, too, then for you to be a bit more in control in terms of what that looks like.

Alec: [00:25:43] Now correct me if I'm wrong, but in your superannuation, those are the three types of insurance you can get: income protection, title and permanent disability and life insurance. And then outside of your super, the obvious one is health insurance. Yep. Because of the Medicare levy, once you're earning over a certain amount. Yeah. And then it gets more expensive with that lifetime health cover daily. Outside of health insurance, are there any other insurances that you see clients sort of at our age, early thirties, late twenties.

Glen: [00:26:12] So the so there's income protection total 100 days to be in life insurance. There is a personal life policy that you call personal insurance policy that you can't get through superannuation and that's called trauma or critical illness. So this was actually developed by an oncologist, which I believe is a cancer specialist. So what this particular doctor found was people were suffering a critical illness event such as cancer. However, they weren't able to claim on their total disability because they weren't totally and permanently disabled. They would in fact be treated and then go back to work. So they didn't meet the definition of total and permanent disability. So there is another policy critical illness or trauma which covers you for the main reason why people claim that it is cancer. So it's a lump sum amount, but it's paid out if something should happen. But you do go back to work so you're not totally and permanently disabled.

Alec: [00:27:12] Just know it's a minefield. 

Glen: [00:27:14] Yeah, let's, let's move on from insurance. Like my my main advice though, is just make sure you understand what you do, have what you are paying for it, what you are covered for, and what you're not covered for. That's okay. All right.

Bryce: [00:27:27] Glen, the next one has come in from Emily. She says she's in need of a new car. Her work offers no rated leasing. The question is, is it worth it or should she look at a car loan with a reasonable interest rate? 

Glen: [00:27:40] Good question. So I'm not a car person. My advice is similar to our friend Scott Pape. Buy the cheapest car your ego can afford. And I say that respectfully. Some people need cars like, you know if you got young family, things like that. But for me, when I was living in the city, I just used go get really cheap, didn't have to worry about when to break down all that kind of stuff in terms of the. So no evaded last year. It can have some tax advantages. But also acknowledge like if you buy let's just say you go out and buy a $30,000 car. Don't just think about the cost of the interest that you're going to pay or the tax that you're going to save. That $30,000 car in two years time is going to be a $20,000 car. So I also want you to take in that that 10,000 depreciation cost into account when thinking about purchasing that car. So there are pros and cons for there are pros for the no evaded. Let's be conscious of what right you are paying on that there are some tax advantages but for me, my wife personally has always just been paid for a car from cash. 

Bryce: [00:28:48] As cheap as possible.

Glen: [00:28:49] As cheap as possible.

Alec: [00:28:52] So we had one question here. That Bryce and I don't have a lot of experience with it was around school fees.

Bryce: [00:28:59] Which let's just say we have zero experience for. 

Alec: [00:29:03] I've heard how high they are. Yeah. So we had a question around is it a good or a bad idea to invest in bonds for school fees? And I guess there's probably two parts to this. One is if you've got young kids and you're looking ahead at school fees and the other is if your kids are at school.

Glen: [00:29:21] Totally. So most of our members, their kids are not at high school because, again, the 2030 sport is. However, chatting with advisors that that work with I guess an older demographic where their kids are had high school given that you can pay ten, 15, 2030 $40,000 per year per child per year for school fees. What they have seen most of their clients do is redraw on mortgages, so they spend all of this time paying off their mortgage and they then need to fork out $80,000 per year, which over a six year period, if it is just high school, is, you know, half a million bucks. They're redrawing on their mortgages that they've just spent the last decade trying to pay off. So we have conversations with our members around schooling even before they've can save their first child. So and the reason why we do this is because we want to understand if private school is important for them and there's no right, right or wrong, some of our members really comfortable with public some of our members, they they they want to send their kids to the school that they went to. So what we do for those members that have kids have a wanting to send their kids to private school, we would definitely consider an investment bond is the main advantage of utilising an investment bond or an education bond is tax. So if you are in the highest tax bracket, any investment or even cash you have in a bank account naturally is going to be taxed at your highest marginal tax rate, whereas using an investment bond or an education bond, it's actually capped at 30%. And you can also then take those funds out after ten years tax free. And it doesn't actually need to be for education purposes. It can actually just be for any purpose that the caveat to that is that ten year period. Right. It's you can take the funds out, you then lose the tax advantage. So you'll have to then if you're in the highest marginal tax rate, you'd have to then pay that top up tax of the 17%. So it's a really, really Good way to almost start prepaying those school fees. And the most common feedback I get from members is when we talk, bring up the conversation around private schooling if they're not sure. Maybe they do, maybe they don't, But they want to be in a position that if they want to, they financially can. So that's where an investment bond can still be quite a favourable consideration, because even if the time comes and you're really comfortable with something like a local public school, you can then use those funds for other purposes.

Bryce: [00:31:50] How do you even buy an education bond? 

Glen: [00:31:53] So there's different, there's certain companies that so it's a structure, an education bond is a is a type of structure in terms of the underlying investments. There's usually a menu of about 20 or 30 different funds within that. Within that. 

Bryce: [00:32:07] It's not a listed product. 

Glen: [00:32:09] No. 

Alec: [00:32:10] So there are like specialised providers that you go to, correct? Yeah. Okay. Yeah. Do you need to do it through an advisor? 

Glen: [00:32:16] No, I don't believe so. 

Alec: [00:32:18] Cool. Yeah. It's a whole world that I just don't have a lot of experience with. 

Glen: [00:32:22] And so it's a Really cool one to look at, not just for educational purposes, right? But just reducing your taxable income for a lot of those that if for a lot of listeners that are y j you know, it can be really challenging to look at ways to, to minimise tax. But this is a way where you can invest and do it in a tax effective environment. 

Bryce: [00:32:43] Nice to have it. All right, we've got a couple on superannuation. So the first one, Glen, is there a limit to after tax super contributions? 

Glen: [00:32:51] There is. So there's concessional and non-concessional. So concessional is where you're able to claim a tax deduction. Non-concessional is after tax, but you can put those funds into super and I believe the bring. Forward. I think you can bring forward around all contribute about $100,000 post-tax now. And if you haven't done so, you can bring forwards. I think the last three years I make a one off contribution of $300,000, but then for the next two years you won't be able to do so. So that might have increased. So definitely check the numbers around that. Given again, who we work with, most of our members are starting families buying properties, putting more money into super beyond what they can claim deduction for isn't super front of mind for them. So but front of mind. But yet you can put in additional amounts but just double check that.

Bryce: [00:33:46] Yeah. Yeah. Nice. 

Alec: [00:33:47] The other question we have about super is one of the most common questions I think we get, which is should I be investing in or outside of super and what are the considerations specifically? This question was I'm salary sacrificing the max into superannuation. Am I better to invest in ETFs after tax instead? But maybe if you just give us some of the general considerations around that in super out of super. 

Glen: [00:34:11] So the very generic response is, well, what's the goal? You know, what's the goal? What's the objective? The biggest advantage of super is tax. So by salary sacrificing that money's going into your super and not being taxed at your marginal tax rate. That's going to have huge compounding impact again over the long term. So again, you know, we are having conversations with our members that are not retiring for 30 years, 40 years about making small contributions into their super. The downside is obvious. You can't touch that until you inevitably retire. So our approach is one of diversification and not just looking. When I refer to diversification, I'm not talking about asset class like are international shares of Australian equities versus property, but it's also about considering putting additional funds into super, considering an education bond, considering, you know, your traditional exchange traded fund stock portfolio, considering properties. So big advocate of looking at making considerable additional contributions to super, particularly referencing that first home super saver scheme where there's caps and caveats to this. So I look into it, but though if you're looking to purchase your first property, you could salary sacrifice and then subsequently get the tax advantages and then subsequently take out a portion of those bonds to go towards your first home. But if you're going to the effort of making additional contributions to super, make sure you understand what you're investing in. So this is another thing that I say somewhat regularly. So people have heard, Yep, awesome. I want to make more contributions to super. This is going to help you over the long term. Those contributions are being invested. What's it being invested in? What's the performance? The portfolio? What fees are you being charged? I love the fact that we've gone to the effort to be conscious and put additional funds in. Make sure you understand what those funds are being invested in.

Bryce: [00:35:55] All Alright, well, next we're going to move to some investing questions and the classic: should I pay off my mortgage debt or invest more in shares? But first, we're just going to take a very quick break. All right. Well, welcome back. We're with Glen from Fox and Hare, and this is our ask and advisor episode. You can hit us up at Equitymates.com for future questions. But let's get into the investing questions for today. The first one, Glen, is I'm earning decent money and trying to figure out my investing philosophy. That's a good one. What should I think about? 

Glen: [00:36:31] Good question. So investing philosophy is a very broad a broad, broad kind of spectrum. What are we trying to achieve? I'm always going to circle back to goals. But in terms of philosophy, I think I mean, I can answer that by sharing my philosophy. Yeah, and that is one of I love property. I'm investing in real property. I love investing in the stock market. I'm invested in the stock market. I'm also really conscious of what my super's doing and every single investment decision I make. I'm conscious of the tax implications. So it is a broad spectrum and it's in and it evolves. Right? So he asked me eight months ago, I would have not considered things like a term deposit or high interest savings, kind of like whatever, 2% that aren't going to get me far when inflation is what it is. However, fast forward, you know, I can get five and a half percent in a high interest savings account. And I know that that's a guaranteed return. Yeah, I put money in my offset account. I think my interest rates are around 6%, I know that I'm not going to save 6% in interest. And just a quick one on that. Something that often gets overlooked I think is the fact that if you've got money in a high interest savings account generating that, that five and a half per cent, you then subsequently have to pay tax on that interest. However, you've got funds in the offset account offsetting 6%, you're not actually receiving that 6% interest, it's reducing how much interest you have to pay. And the double win on that is because you're not actually receiving that money, you're not then subsequently paying tax on that money. So offset to offset accounts are much more powerful than what they were again two years ago. If I was offsetting 2%, I wouldn't be that excited. But if I'm offsetting 6%, that's a very different scenario. If we however, then broaden that to look at the longer term trajectory of different asset class, I also will be investing irregularly into the stock market as well. So it is a very balanced act and a balanced play, but it's also always about looking. And this is something we do a lot with our members is looking at projections. So if I stick to this strategy, if I stick to this philosophy, say, where am I going to be in five years time? What does that look like? And if that picture isn't what I thought it would be, then working, understanding, well, what do I need to change now in order to drive towards and create a different saying? 

Alec: [00:38:59] Yeah, let's get to the question that we always get asked. For those with a mortgage, should I prioritise paying off my mortgage faster and putting more money into the offset account or should I be investing it in the stock market? I should clarify. 

Glen: [00:39:14] So where where we're at now, where are the interest rates are? I definitely think there needs to be. I don't think I know there needs to be much more focus on debt because of, you know, paying six, six and a half per cent, whereas if you look at investing in the stock market, you could even just go on to passive index funds. If you look over the long term, you could argue you might outperform that, that 6% or six and a half per cent, but the outperformance is much less than what it was. Not that not that long ago. Again, I want to challenge that just paying off debt, although it's not a bad strategy, it is a fairly conservative one as well. So if you're in your early thirties and your whole focus is just keeping as much money in that offset account as possible and paying down that debt, you've got to then think, okay, well, if you're then going to be debt free in ten, 15 years, then what do you start then investing then? So it's about I genuinely do believe it's about having a balanced approach and understanding if I continue on this current trajectory, where am I going to be?

Bryce: [00:40:17] Yeah, I think that's an important one. Like you don't want to leverage yourself so much that you can't continue to build build wealth outside of your house. Correct. Because I think then you just seriously consider it. 

Alec: [00:40:27] And then you're 40 and you've paid off your mortgage, you're not liquid. 

Glen: [00:40:32] And then what happens? Then you start investing. And I feel like your house.And if it's your home tax rate, but if. Yeah, it's a really good call. Like, if you turn 40 and your debt free, you've kind of missed out on the opportunity of establishing that regular investment strategy or putting additional funds into super that could have saved you tens of thousands of dollars in tax.

Alec: [00:40:56] There's just so much to think about. And anyway, that's okay. Anyway, so a

Bryce: [00:41:01] Couple to go. So what are the steps to set up a family trust and invest through it? 

Glen: [00:41:06] So the first point of contact would be. Agent, accountant. So we work. I'm an accountant by car.

Alec: [00:41:12] So can we take a step back before we get into the practicalities of it? Like pros and cons of family trusts? Like, is it something that we should be thinking about? Bryce has a fair bit of wealth tied up in the Caymans.Is it worth it? And then how do we do it? 

Glen: [00:41:29] Good question. So is it worth it? So it depends on your circumstances. So to determine if it's worth it is to understand the costs of running these things. So it is going to set you back a couple of grand just to set up a family trust before you get started. And it's also going to need to lodge its own tax return on an annual basis. So in the business there's potential for audits and things like that. So there's a lot of costs kind of not too dissimilar to a self-managed super fund, right? Like there's, there's costs of running these different types of structures in terms of how to set it up. So the first point of contact would be the accountant to actually do that, that the practical side of things in terms of where we get involved. So we work really with our members that do have a family trust or are considering a family trust, which we'll obviously work very closely with their accountant. The main advantage, there's probably two key kind of call outs. So first for business owners, a lot of business owners do have family trusts because they're trying to quarantine their business wealth from their personal wealth. So if something were to happen in the business, then the there's a disconnect between the business and, you know, their family home. So there's a degree of asset protection. The second, which is certainly something that we talk to, is the tax advantages. The way that the structure works is you can distribute the income that's generated from the investments within that family trust to the beneficiaries. So if you're distributing that income, so say you're generating, don't know, $10,000 of income per year through the trust, you can distribute that income to a lower income earning beneficiary as opposed to the higher income earning beneficiary. So there's a bit more flexibility in terms of how you allocate that income. And obviously, allocating it to the lower income earner essentially means that income will be taxed at their marginal tax rate. They're on a lower marginal tax rate. And the effect is that I guess the household then inevitably pays less tax. Yeah, but in terms of we would only really consider a family trust one if there's one already established because there's a business involved, so there's one established you paying the costs, you might as will utilise it more broadly. Two if there is, there probably needs to be a couple of hundred grand before these things really start, in my view, start to make sense purely from a cost perspective. 

Alec: [00:43:53] So final question, we got through from the equity mates community. This is another very common one. Who is the best stockbroker to go with when you want to do a set and forget index fund investing strategy? 

Glen: [00:44:06] So they're talking about I'm assuming they're talking about like a platform to use. So I will name two names. This is not advice, but one that we say a lot of people use that are many of the listeners would be familiar with is Rice. So that's a platform. Obviously, micro investing funds go in. So it's a good I've got a little bit of a love hate relationship with rice. Okay. So I love if anyone from Rice is listening. I love the fact that it's got people engaged with investing and active in investing that that that's filled. It's not available or accessible to them. So I love that rise's made that that accessible. The challenge that I have with that is more often than not for those that are invested in rice, they don't know what they actually invested in. And I think there's a missed opportunity there from from the team at Rice to Really Educate their customers in terms of what is the underlying investment, what companies are they actually invested in, How do you make money from from these things? So a bit of a love hate. Some of the there's some really cost effective platforms like I believe Vanguard just bought out a personal investor platform. So, you know, looking at that kind of traditional passive index, I believe I haven't researched it myself, but I believe it's fairly low, low cost as well. Yeah. So that that's certainly one that that comes front of mind. 

Bryce: [00:45:31] Nice. Nice. Well, Glen, thank you so much. Covered a lot of ground there. And thank you to the equity mates community for sending in all of those questions. A reminder, ask an equity mate sitcom and we'll make sure that we include your questions in the next episode. We also have a weekly email that we answer one of the community questions we actually get the advisor to answer. So Glen will be coming up with that if if not already. So make sure you are subscribed to that. You can do that at our website Equity Mate sitcom. Glen If anyone listening has it really enjoyed what you've had to say, where can they go to find more info on Fox and hair and pit about what you guys do? 

Glen: [00:46:07] Yeah, the easiest place would just check out our website at foxandhare.com.au. Proud certified B Corp as well for the listeners that they're across what that certification means. So yeah, happy to have a chat with anyone. I'm really conscious that advice can be. Feel like it's just for old rich people where we're breaking that notion.

Bryce: [00:46:25] Nice. Love it.

Alec: [00:46:27] And you did say the first meeting was free? 

Glen: [00:46:30] Yeah. How about have a chat with anyone? For if the first meeting is really about just understanding where you're at, what you're looking for, and sharing with you a little bit more about us. 

Bryce: [00:46:38] Great. No obligations. Check it out. 

Alec: [00:46:40] Now, every year here at Equity Mates, we have an expert of the year competition or guest of the year. And it really is just a chance for us to celebrate everyone who gave their time and came on the podcast and shared their knowledge. Now, as a guest of the podcast, you're automatically in the running of that. So as a final question, can you leave us today with maybe a piece of advice or content recommendation or something we should go and do and implement in our financial lives? Just one thing to leave us and everyone listening with. 

Glen: [00:47:09] I'm quite competitive, so I'm really hoping this is a good answer. Think about. So think about the question that I asked and I asking that that first chat with everybody and that question is how would you rate your overall financial world? And then think about whatever your answer is, think about what's going to then enable you to move forward. You know, really setting yourself up for the future is is is about making really conscious decisions and that can be really overwhelming. So simply break it down. If you're six like Bryce Bryce, his homework is to then go away. Think about what's going to get him to a seven and then implement that.

Alec: [00:47:47] Love it. Well, good luck. What would you rate yourself out of ten? 

Glen: [00:47:55] I would write myself probably about a seven. I'm not. Because it's just more than Bryce, but because. Because I'm across everything. But there's just a lot of moving parts, so there's just always something that needs to be done. So it's constantly looking at, okay, well, this is we just bought a house, you know, two, two months ago. Okay, What are we? How does that work with the considerable amount more debt we've got? So, yeah, probably about seven. And just constantly re-evaluating. 

Alec: [00:48:27] A good reminder that even professionals are still figuring it out. 

Glen: [00:48:31] Yeah. It's a journey. 

Bryce: [00:48:34] Well, thank you so much, Glen. We really enjoyed that. 

Glen: [00:48:36] Thanks, mate. Appreciate it.