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Changing Landscape of Retirement #7 – Philip Smith – Transcript

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Changing Landscape of Retirement

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Philip Smith

XY ADVISER

Podcast

SUMMARY KEYWORDS

clients, advisors, advice, conversation, people, retirement, fee, baby boomers, money, goals, fraser, thinking, australia, retirees, business, demographers, fund, role, year, bust

SPEAKERS

Phil Smith, Fraser Jack

 

Fraser Jack 

Welcome to the x y advisor podcast, a global community of financial advisors sharing and learning with one another to drive the positive evolution of financial advice. To get involved, go to x y advisor.com. Or simply download the x y advisor.

 

 

This podcast is proudly brought to you by challenger at challenger. We want to help you ensure that your retiree clients can meet their retirement needs today and tomorrow. To access thought leadership insights and tips on retirement planning for your clients head on over to challenger.com.au forward slash x y.

 

Fraser Jack 

Welcome back to the x y advisor podcast. I’m Fraser Jack. And we are talking about all things to do with the changing landscape of retirement. And I’m joined by the managing director of hunter financial Phil Smith. Welcome, Phil.

 

Phil Smith 

Thank you, Fraser.

 

Fraser Jack 

Well, thank you for thank you for hanging out with me and having a good chat. Now, tell us a little bit about about yourself and about hunter

 

Phil Smith 

Fraser hunter financial started in 2004 was about 20 staff in the business and we are located in Newcastle. And we look after clients who range from you know in their 20s through to innovate. Our oldest clients are in the early 90s, a broad range of clients, most of our clients, our time core, they want to be well organized financially, they’re not real sure who to trust, they’re happy to take advice, they’re happy to pay for advice. And they have a certain level of complexity in their world. And the way we operate is we meet with clients like most advisors would do, we were the cost of the first couple of meetings just to make sure that we’re the right fit for each other. And then subject to how that plays out. They’ll engage will provide advice. And hopefully, it’s a long term relationship.

 

Fraser Jack 

Yeah, fantastic. Now this is a really interesting story. So you’ve got you started out the business by yourself. Did you start from scratch? Or was it did you were you started from scratch?

 

Phil Smith 

I had two other partners at the time they’ve since we’ve run out a row so to speak. So they moved on many years ago. And it’s been myself and I’ve got another shareholder, which and that shareholder is listed on the Australian Stock Exchange, they own a minority share in the business and I own the balance.

 

Fraser Jack 

Yep, fantastic. And so this is a this is an amazing growth story. 20 star, it’s quite phenomenal

 

Phil Smith  

yet. It’s just what it is. It’s been a challenge. And we need particularly over the last, I’m gonna say 18 months, we’ve had to put on more staff. So probably 18 months ago, our number of staff was probably 12 or 13. We’ve just had to put on more staff in the last 12 to 18 months just to deal with a lot of the governance and advice that has continued to snowball in our business, particularly from a governance perspective. And that’s it. That’s just it is what it is. We changed licensee bit over 12 months ago. So in January 2020, we changed our license, which we don’t have our own license. So as a licensee involved and what came with that every single client existing needed a new standard advice. So as part of that process, we’ve had the gear up. And we’ve also we also outsource a fair amount of our statement of advice, writing. So the 20 people on the deck in the business, seeing clients giving advice and doing a lot of the work behind the scenes in relation to advice, prep, implementation of advice and servicing our clients. We also work with there are a couple of big accounting firms that we like to work with. And we do with other firms as well. Other accounting firms primarily there’s a couple of big accounting firms who like to work with us and we look at the you know, any advice related issues for their clients, and they’ve got a new castle where an hour and 45 minutes from Sydney on down there on a semi regular basis seeing clients and our offices about 100 meters from Newcastle beach. Really nice spot. And it’s we’re busy.

 

Fraser Jack 

He sounds like you’re very busy. Now tell us about how many of that 20 because you just sort of found a new home and doing a lot of work in the background producing you advise. But how many of that stuff is actually advisors, client facing advisors,

 

Phil Smith 

we have four advisors and the rest are essentially advisor support. We also have in the business, there’s a mortgage broker that helps our clients and service our clients when it comes to home loans, car lines, whatever it may be we better that’s a service that we provide to our clients as

 

Fraser Jack 

well. Fantastic. And it sounds like you work closely with the accounting firms as well.

 

Phil Smith 

Yes, we do. We do. accountants have shied away over the last couple of years, with giving advice just with the the change in legislation, so they still believe that their clients need advice. And many firms send us work in relation to their clients. And we like working with accountants, my background is accounting. I started out as an undergraduate accounting with Price Waterhouse, and then Price Waterhouse Coopers I grew up on a wheat and cattle property Northwest New South Wales and I moved to Newcastle to go to university started out at Price Waterhouse and PricewaterhouseCoopers and then moved into the advice game. And I’m 41.

 

Fraser Jack 

Wow. So this is an interesting part of the you know, what’s happened happening with the legislation, isn’t it. So there was a lot of accountants providing advice. And in this space, especially around tapping into a fund, I would say and now they’re sort of they’re getting out that the trend is that a lot of the moving away, it’s just become too hot.

 

Phil Smith 

It’s become too hard to keep up with the legislation from the accounting perspective in our game, because it’s it’s hard for advisors to keep up with it, let alone the accountants giving advice around whether you know, best interests, right. For the client, we all act on the clients best interests naturally, the accountant sometimes have a tough time to tick all the boxes, because often they want to give advice around. And often it’s client directed clients as all want to set up a self managed super fund and the accounting Oh, good idea. They charge the fees, they roll over the funds, and all of a sudden, the client loses all their insurances, because they, the accountant didn’t have a conversation around insurances, and the client may not even know they had the insurances in their funds that become problematic for everybody. And then the advisor gets involved to try and clean up the mess. And they may not be able to clean up the mess because the clients uninsurable. Yep. And it becomes very, very, very problematic. And then there’s other there’s war stories around accountants doing the wrong thing with the money. And the legislation has changed to protect the client. And unless you’re a licensed financial advisor, keep your mouth shut.

 

Fraser Jack 

It’s very interesting, isn’t it? The when it comes around client objectives, and we’re probably get a bit more into this later. But uh, quite often the objectives are not necessarily just, you know, taking into account the, the technical side, they’re taking into account a lot of their emotional objectives as well.

 

Phil Smith 

Yes.

 

Fraser Jack 

Now, as we get into the conversation around, you know, the retirement landscape, what’s changing with it, obviously, you know, the big change that’s coming through and we’ve spoken about this is the is the baby boomer population coming into that, that space of retirement. I know you’ve got some ideas and thoughts on this to talk about what your your ideas around the boomers coming through,

 

Phil Smith 

some ideas are formed on some information that I read. And there was a some reason studies one study, particularly that was released in February, obviously, are the demographics group, and also asked and asked, Is the Association of superannuation funds in Australia and they’ve been operating since 1962. They’re arguably the paid policy for research and advocacy for Australia’s superannuation system. And the industry itself. The It was also sponsored by challenger, I think challenger, a market leader when it comes to this retirement space, particularly with some of the work they do around annuities. Anyway, the white paper was rethinking retirement, the impact of demographic change and the pandemic on retirement planning in the 2000 20s. So this particular white paper released in February 2021, speaks about and did some research around baby boomers, and on the back of the baby boomers, talks about the baby bust and so my thinking is based on A lot of this research and what I read, and essentially the baby bust in the 2020s will be one of the biggest demographic issues impacting Australia in 80 years, as the research would suggest. And the other, there are three of these biggest issues. The other two were women returning to the workforce in the 70s. And the second was the baby boom of the 50s. And essentially, a baby bust is said to follow a baby boom by 70 years. So it occurs when more workers exit the workforce at age 65, than those that enter the workforce at age 15. And therefore, Australia has, by definition has been on a baby bust trajectory for decades. So I like that type of research and thinking because in the retirement planning space, we’ve got this what the demographers referred to as a baby bus. And back in the 20s, the research shows that there were the number of people entering the so called retirement age of 65. And over has ramped up over time and in the 1990s, for example, the Australia 65, and over population increased by an average of around 40,000 per year, in the 2020s, it will peak at 137,000 per year, it gives us an indication of this bell curve of retirees who will be retiring, and then the baby bust that eventually happens. And this surge in the retiree population is caused, of course, by the great babies over the 50s. The impact that this has in the retirement landscape has a multitude of impacts particularly around things like longevity risk, which is essentially the risk that your money will run out before you do, essentially. And there are product providers in the marketplace like challenger that can provide help to advisors like myself, and maybe some of your listeners to help achieve the goals of these retirees. And there are there are also a different type of retiree than they were years ago.

 

Fraser Jack 

Yes, this is going to be really interesting, isn’t it? Because the the the needs of these retirees? Well, I guess, I guess, let’s say and I think the comment previously has been that the baby boomers have always done things differently, as they’re coming through. And so what what you know, planning for retirement now for somebody, we need to start thinking about what the future is going to look like, rather than just thinking about what it is today.

 

Phil Smith 

Absolutely. So the baby boomers will be the first generation of retirees, this is interesting, who I believe will have a memory of their parents in retirement. So some of the demographers have done a study and have shown that previous generations of retirees have no real experience with long term aging, because their parents died in their 60s, based on some of the stats, the parents of the baby boomers lived on into the 80s and the 90s. And there’s actually a photographic record of their time in retirement. So we’ve got these baby boomers coming through who are helping their parents through retirement and into aged care. And we’ve got this wave of baby boomers coming through that very likely, they’ll they have a greater use of technology. And they are arguably more educated, and they are arguably more sophisticated. So the they do their own research, they understand some of the some of the issues that affect their behaviors when it comes to investing in managing money. which I’d like to if it’s okay with you have a chat about that during the course of this conversation. And also these retirees, therefore, when they seek advice, often they want to be either self directed, or they come with their own agenda when it comes to managing their own money and managing the decisions that they ultimately need to make.

 

Fraser Jack 

So it sounds like what you’re saying to me is that a lot of the time their expectations are very different from the previous generations of retirees where it was it was more around, you know, a shorter retirement lifespan. But now the expectation is that in you’re right about the technology part and I hadn’t really thought about the photography part as well. There are a lot of photographs being taken, and remembered and hosted on sites where they can often see them.

 

Phil Smith 

Absolutely. And not only will they be very aware of the aging process of their parents, there’s this acute awareness of their own mortality, and equally as how they are going to ensure that they have the type of life and lifestyle that they want to live whilst making sure that things like aged care. And I mentioned before longevity risk, making sure the money is invested in such a way that they will no, not think, no, that they’re going to have enough money week in week out month in month out for the rest of their life. And these problems need solutions. And this is a this is a real issue that the industry and Australia as a whole is coming to grips with, and it’s arriving. And baby bust is a real thing. And there’s this larger group than any that we’ve ever had before that will be not working without going into the issue around the baby bust and the taxes that they therefore are not paying. And what that has on Australia as a as an economy. The issue fundamentally is we’ve got a large percentage of our population not working, and therefore not paying taxes and needing to live the life that they want to live. And it won’t be new to them, because they’ve just helped their own parents through this process themselves. And they will be acutely aware as to how to, hopefully how to deal with it. And I’ll be seeking advice on how to do it. So I really think this particular market around aged care and retirement planning is going to continue to grow and become more complicated, and which is why advisors need to really step up to the plate and have these types of conversations with clients. Before it’s it gets to a stage where it’s hard to plan for.

 

Fraser Jack 

It seems to me I think the key is obviously planning but it seems to me that if somebody’s seen their parents go through the Aged Care process if you like Miss booty call it a process. I hate that word. But let’s go with it for now. If they’ve seen their parents go through that, that, that that process, then they’re more likely to plan their own way through that process.

 

Phil Smith 

Yes, they will, burn and salt who are like, he’s a demographer, and he was a contributor to the study that I alluded to before that came out in February 2021. He talks about how mistakes will be made by governments and also retirees. He alludes to the fact that we as a as a country will be required throughout this decade to continue the goodwill for our elderly. And there’s an appreciation within the society that there has been no other time in history, has there been this type of position that the country’s being placed in to care for such a large proportion of its population, as they will be over the coming decade. He also refers to this baby bus and this generation that we’re talking about. They are fitter than previous generations, the baby boomers are interested in wellness, they stopped smoking decades ago, they watch what they drink. Some will want to work on not wishing to be a burden. But they’ll also want to work on for the purpose of leaving a legacy of swords. So there’s a myriad of complexity when it comes to this type of conversation. And there’s no right or wrong, Fraser I just I the best time. And the best path to take is just to have the conversation and create awareness for our clients and society at large to deal with it. Yeah,

 

Fraser Jack 

there were some questions about that, that could those conversations in a second. But before we do that, I just wanted to quickly go back to the bust the word bust because to me this or there’s two parts to this. There’s the the the system itself, and is that on? Is that on a trajectory to bust? And then there’s the individual, you know, going past running out of money in that those sorts of things. So are they referring to more the individual running out of money from longevity risk, or are they referring to the system being under so much pressure that is that someone’s going to have to change?

 

Phil Smith 

I think it’s just as simple as without overthinking and fries. I think it’s just as simple as the baby boom. And by definition, they, as we all do, must die. And those baby boomers will die. And essentially, I don’t think it’s a baby bust in terms of in the sense of the economy nor nor that individuals and their own wealth, but just in the course of a lifetime, the current life expectancy rates for these individuals is early 80s. So they’re coming into the 70s. And therefore, over the next decade, okay, there’s this baby passed by a, they’re they’ve retired or they are retiring. And they will ultimately need advice and help around this situation that they’ll be faced with, whether it be retirement or aged care. And it’s a demographer turn of a baby past as opposed to necessarily what I believe in economic reference.

 

Fraser Jack 

Yeah, fair enough. So there’ll be also a huge wealth transfer conversations, or a lot of people looking at Legacy and wealth transfer.

 

Phil Smith 

Yeah, that’s a big piece of the puzzle, the estate planning, who does the money go to what are the taxation implications? In most advice, practices that I’m aware of advisors are having conversations, not not only with their clients who might have the wealth, ie, the baby boomers in this particular context, they also need to be having a conversation with the beneficiaries of that estate, because that wealth transfer that you referenced, you could lose clients, because you’re looking after money, for example, in giving advice to these clients, they pass away, all of a sudden, you’re dealing with the beneficiaries who you whom you’ve never met. And that’s another conversation for another podcast around these Gen X, Gen Y style investors. Because when they receive that money, they are a different type of investment and a different type of client, then their parents,

 

Fraser Jack 

it certainly seems that parents need to be really thinking about how to have conversations with those that next generation,

 

Phil Smith  

I think it’s our duty just to have the conversation. We’re not you’re not having a conversation to go into problem solving mode and thinking that you have a solution. It’s just Hey, by the way, as the years go by, these are some of the things that we see happening with some of our clients. Just want to create awareness around this for you clients generally, then say, yeah, we’ve been thinking about this, what do you think, and then we have a conversation around it, often, it’s a good opportunity to to provide some advice, we do some cash wise around longevity risk, again, making sure that their money doesn’t run out before they do, and we want to ensure that they can continue to achieve their goals. And then you can put together strategies to ensure that the options that I’ll be facing as the years go by, can be factored in to the overall plane. Yep.

 

Fraser Jack 

The planning obviously, involves a lot of technical conversation and strategic planning. But of course, that doesn’t always work. People are going through a process that’s quite emotional and emotive in many ways. And a lot of the decisions that they make during that process, if they weren’t sitting in with you in front of you talking about the the technical side and making sure that the numbers work, can can be that they can make unusual decisions. Let’s put it that way.

 

Phil Smith 

Yes, they can. And I laugh because it’s funny. People make these irrational decisions. And it’s not who they are. And then as time goes by, we reflect on some of the decisions that were made. And often the conversation goes a little bit like this, Mr. Mrs. Klein, remember, we had this conversation 12 months ago, this is what we advise that you do. You were very not receptive to the advice at the time, because at the time, you were concerned about COVID-19 markets crashing, you want to take the money out and put it into cash. And as a result of that, you would have missed out on the recovery since March. Are you happy with the decision that we made at the time clients responses are a lot of emails thinking I’m really sorry that we you know, we thought about taking all that money out putting in the cash and fixed interest. It’s all of this media hype so that the irrational thinking is common when there are these significant events. And it’s hard to be logical, with someone who’s being irrational, male, when people are thinking irrationally, it could be significant health events. It could be significant market events that make them think that way. Part of our role as the advisor To recognize that thinking, that behavioral bias that they may be viewing and create awareness around and have a discussion around it, and give the advice in the clients best interest. So we saw that with COVID, 19, and the market volatility in early 2020. And we see it with clients when they’re dealing with emotional stress.

 

Fraser Jack 

Yeah, I, I’m going to pick up on the term irrational here, because I think it’s a certainly a really interesting part of the conversation because I think a rational or irrational only really happens in after thought, or from a sick or a third chair perspective. You know, like, I think people always, in their own heads are being rational, even when their behavior is irrational.

 

Phil Smith 

I agree with you. And it’s the hindsight to your point that we can look at it and go, you know, what, you’re right. Thank you that I received that advice at the time, whether we’re talking about mental health, okay, so people it’s been, studies have shown that when people are in the grips of depression, okay, they, they feel that the decisions they are making are the right decisions for them. And as hopefully as time goes by, they look back and they’d go, what was I thinking, Okay, at the time, though, what they were thinking and the decisions that they’re making, they believed were right for them. And I took the context of managing money and making financial decisions for people and their lives and their families. Part of our role as advisors, it’s not just in relation to managing money, it’s also in relation to just to managing decisions that involve money. Often, it’s not managing the money, it’s in relation to whether they want to borrow money to buy a property, whether it’s wanting to change goals that have already been said, whether it’s in relation to changing how they live, changing their retirement goal, it’s, it’s we need to be very, very aware, acutely aware of the goal setting process, which in our business, like a lot of good advisors, I think they are goals based advisors, which essentially, when you get to the bottom of Gulf based advice is just we have a conversation about clients, we work out what their goals are, we then put a plan in place to ensure that those goals are achieved. And then we, for example, are close to retiring 10 years time, we say, okay, that’s 120 knots. So why we work out what we need to do each and every month for the next 120 months from today, to get them to where they need to be. So part of the goals based advice process is we need to capture that information. And we need to make sure that we often protect our clients from themselves when not if when they have times in their life that make them question the course that they’re on, particularly if there’s an external stimuli being a health event for another very serious event could be a geopolitical risk with markets could be COVID-19, could be COVID, 20. Could be anything,

 

Fraser Jack 

it is certainly right. If somebody hasn’t got something to focus on, then the in those, you know, external factors could be as little as the Uber drivers come into. But then you also you’ve also mentioned, you know, the client, some being able to see in hindsight of, you know, events and those sorts of things, and to be able to see the value that you provide as a as a planner, in hindsight, but I think it’s also a lot of what you’re doing is is looking at that foresight dumb conversation isn’t it’s providing clarity around what could happen, what will happen in that space. And I’m also going to take all the heat colorspace advice question separately, but I love the goals based advice part. But a lot of what you’re doing in that planning process with clients is then focusing on the past, but on the future.

 

Phil Smith 

Yes. And I don’t think I would be in business and doing what I’m doing. And I still believe that one feature is bigger than my past. And I want to have that public conversation with our clients. We want to make sure that where they are headed that what they need to achieve, we can help them achieve that and if the the trajectory that they’re on, if they’re not going to make it then we need to change course to make sure they get to where they want to get to and that’s our role with the advice we give. In In summary, I think what we do for our clients if I want to bring a lot of flying of life, a pitcher applying a turn up to the airport, and there are two planes. One plane has a pilot on the other plane doesn’t You’d probably want to get on a plane with a pilot, we would consider ourselves in this case, the pilot, our role is essentially to make sure that we take off on time, and lamed on time and get there safely. That’s essentially all we do. We make sure they take off on time blamed on time, get there safely. And of course, there’s going to be issues with the weather, turbulence, the inflight entertainment might not work, the chicken comes out called whatever it may be, someone’s kicking your seat from behind, and then all these sorts of things happen. But our role, make sure that you land on calm, make sure they get there safely. And these types of situations that may arise during the flight, well, we’re okay with it. But we don’t want you to jump out of the plane and jet, we don’t want you to, you know, we’ve all got parachutes at all, that’s what we that’s kind of our role with insurances and our advice that we give around other strategies to protect the downside. So we got as well, essentially, though, the looking forward, as opposed to back is what our role is, as advisors and planners, and we want to make sure that we have a relationship with our clients that they can actually call us to talk to us on a regular basis to make sure that we were across the situation, but personally and financially.

 

Fraser Jack 

Yeah, I love the the pilot analogy, I think, you know, stats or something like 93% of the time of flight is actually off, you know, like it’s hard to change. It’s It’s, it’s, it’s coming along and you know, wind come along and turn on and 93% of the time, it’s not on track, but it still gets to the to the to the end. And I spoke to a pilot once and they said they’re taking off is optional, and landing is essential. So certainly part of what’s going to happen. That’s good.

 

 

that

 

Fraser Jack 

they’ll tell you about goals based advice, because I you know, a lot of what you do, as you as you said, sitting down finding out what your clients hopes, dreams, goals aspirations are. And it definitely fit within the within the context of knowing what their motivations are, knowing what their values are, helps them with that managing or managing the decisions that they make part of it. How do you go about that goes based on voice piece with the client.

 

Phil Smith 

So we all listen to yours. There was another guest that you had on a couple of months ago now. And he nailed it. Those guys are good operators. When it comes to goals based advice, built Bacharach from the US literally wrote the book on values based advice. So values based advice to be a little bit off center to goals based advice, values based advices, we want to make sure that we understand what our client’s values are, think of Maslow’s hierarchy of needs. And we want to make sure that the goals that we are setting for our clients, and more importantly, that they are helping us to help them set those goals. We want to make sure that we never waver from their values to some clients, once you go through the process, you know, we want to say so if you if you’re in this position and risk of being achieved, how would you feel? And they would some answers will be, I’ll feel like I’ve been the best father that I could be. And the best husband that I could have been, I felt like I would have been able to leave a legacy for my family, if I could achieve that goal. So also, so we use that juice to make sure that we remind our clients why they are on this journey, not it’s not just to be able to put their kids to the right education. It’s not just about paying off their home all the time and 50 it’s not just about being able to apply when they 6150 $100 a week, it’s not just about going on a holiday every year for $15,000. It’s what is important about achieving those goals in whatever the answer is, that’s the juice that I like, because I want to remind them down the track when they ring me and say, Phil, I’m thinking of buying investment property. What do you think when we like our mantras, I look at the numbers. And I go, you can do that. But it means that these other things may not be able to be achieved. What do you want to do? Like I don’t know, it’s really important that I continue to send my kids to school, it’s really important that I don’t work past 60 on a stock work at 60. But if I buy the investment property, it means that I they retire at 63. So we want to make sure that not only other financial goals are set, we also want to make sure that what is important about those goals being achieved for them, and then I’ll ask them the question at the end of the process. If this is often before they engage us, Fraser I’ll say if we can help you achieve these outcomes is that type of advice that you’d want to be working with? And they always say yes. And that just helps me help them get some clarity around what our role is our role is not to get a better return on one fund over another, our role is not to have a fund that pay that charges the client less than another fund, that you can you can do, anybody can do that. Right. Our role is more around accountability. And around making sure that they, as you say, it’s essential, and we want to make sure that we land and we land on time.

 

Fraser Jack 

Yep, no, I agree. 100% agree. And I often say that the conversation around values is, you know, how do you know, if you’re providing value, if your advice is providing value to the client, if you don’t know what their values are, and you hit the nail on the head, when you talked about the concept of you know, the values equals your why, and their motivation, their juice, for doing what they’re going to do and staying in and making the right decisions. You mentioned fees in that conversation as well, in the in the rest of the board, I see with regards to the race to the bottom, when it comes to comparing, you know, and what’s important is it high returns and low fees, high returns and low fees being the thing that is it’s sort of pushed out from the you know, it’s I’m the media, but let’s say the industry does that as well. And the profession does that as well. They talk about you know, high returns and low fees a lot. And that has nothing to do with the clothes values.

 

Phil Smith 

Very interesting conversation. Just briefly, again, I’m sorry to go back to the to the airplane situation, analogy, but people can choose how they want to travel. They all take off at the same time. I also leave at the same time they all get there safely. Some people find first class on a business summer economy, it just it just depends on what they want their experience to be. And so when it comes to fees, and performance, I think it’s a it’s an excellent conversation for the industry to be having. And I I it’s it’s horses for courses when it comes to the client experience and how their money should be invested. And if we’re talking about superannuation as an example, there’s been the my super initiative, which I think is excellent. There’s been a lot more conversation around that or why recently, Xavier O’Halloran who’s the Director of super consumers Australia, spoke to some people and already in an article recently, that the average fee is 1.04%. That was up to the December quarter according to the Prudential regulator. So they’re suggesting he has suggested that, to quote him. So a good rule of thumb for people is to look for less than 1% in fees, why I really think that we need to have a more robust conversation with our clients, not just about performance, not just about fees, more around what it is that they are looking for. And again, another conversation for another day, this conversation around ESG investing. So environmental, social governance investing, you know, something more referred to that as ethical investing, some of those funds may charge hydromatic. But if a client’s got 100,000, or 50,000, or a million dollars, whatever, maybe that’s their money, well, they should choose that it should be managed, but particularly if they believe that they would want to make a difference, and want to have bet money in the hands of more ESG style companies will invest their choice. And that gets away a little bit from the cost and performance of funds. There’s there’s also the talk of from July one this year, is proposed that all Australians will have access to a new your super website, which will allow them to easily compare all funds performance. And the tax office is working on prototypes of how we’ll display the data. And the word is that that’ll that deadline will be delivered by July one. The point to that is advisors need to be having deeper conversations with clients not just about performance and costs, because people can go and get that information, easily go back to this the baby bust conversation and the demographers research around how that’s going to work. They are very difficult time on my hands, okay. And they are well versed, generally with technology, and they will do their own research. So it’s going to be a pretty quick conversation. If you’re going to have a conversation about cost versus performance. I’m not suggesting that advisors are only having that conversation, but from the legislators perspective, I feel sometimes they think the only answer And the best advice is if you can have a fund that has the lowest cost, then it’s in the clients best interest. Or sometimes the client doesn’t know what their best interests are, unless you actually have a deep conversation with them around their values, which is aligned to their goals. And that’s an old phrase, anyhow, is possible, as long as you know the why. And it’s our role to make sure that we align to

 

Fraser Jack 

Yeah, or like that saying, anyhow, as possible, long as you learn the Y,

 

Phil Smith 

as long as you know, the Y or the way

 

Fraser Jack 

you will, as your as you were saying that I was sort of thinking of, you know, you mentioned the the airline again, but I, you know, I was thinking also, you know, with regards to that, you know, the fee fee versus, you know, return etc, etc. Any right, it’s going to be very easy for technology to show what they’ve been in the past. Obviously, we know there’s again, hindsight. But also, you know, the the there are that there are many other industries that do this, right, the you know, the cheapest way to buy food is probably the supermarket. But yet we still go to a cafe in in, you know, buy a coffee or, or buy, buy some food that’s been prepared for us. Even though technically, we can get a better value for money if you’re like, if we made it ourselves.

 

Phil Smith 

That is right, it’s about I think it’s about the experience. And it’s about believing that we as advisors, as a, as an industry as a profession, that we can actually add value. And if you cannot add value, then we need to question the relationship with the client. And it’s not just value in terms of dollars, Fraser, I think Einstein said it best when he said the things that can’t can’t be counted. It’s not just about the money, it’s not just about we’ve made you X percent, and you in your other fun, you would have made y percent. It’s about achieving the goals, it’s about having a professional relationship, it’s about protecting the clients best interest, enhancing their position financially, it’s around making sure that they have this level of certainty, peace of mind, potentially, it’s around making sure that they have the level of care that’s required in any profession to make sure that they get to where they want to get to. And they don’t have the stress and anxiety that they otherwise would have. If they were trying to do it themselves. Now, the result, by the way, might be the same, the result might be the same. or from a fee perspective, they actually may be worse off from a fee perspective, ie the advice that they pay us to get the cost of the product fees, the performance and cost within the actual you know, fund, if we’re talking about funds, they may not need to pay an advice fee. And it may be essentially, that our advice that we charge over the course of x years, they would have ended up in the same spot. But it’s nice to have the certainty year in year out year in year out that you’re on track, you’re going to achieve those goals and you can go on holiday, you can do the things you want to do, you can do the renovations of the house, you can put the deck on you can sell the sacrifice, do all the things you want to do. And you’re going to get there and you’re going to be okay. If they didn’t have that advice. They could be in a lot of cases, anxious and stress, lacking certainty around what they shouldn’t be doing, where they’re going to get to, and what are they going to do when they get there. And they run out of time to change the position that they’ve landed upon. And I think that conversation also needs to be having, we have that with our clients to make sure that they know that. You know, they’re in safe havens, the advices sound and you’re on track. And part of our advice is to make sure that they stay on track. And you know, we like it, we see value when a client see value in it. And you know what, if they don’t see value in it, we have a conversation around it. And they are no longer clients. That’s rare, but they’re a bit that they’re okay to choose not to reengage and we re engage with our clients every single year.

 

Fraser Jack 

So as you were saying that I’m imagining you can change the word advice fee or advisor fee with the removal of stress and anxiety fee or the providing certainty thing.

 

Phil Smith 

You could you could what, from a governance perspective how that would go about we don’t have a I just I’m so passionate about what we do. And I see so much value in what we do for our clients by just that I want to help as many people as I can. And I think that our industry and our profession are in such a great position to help as many people as we can. We just need to shift the focus from talking about product, because that’s never been the game, the game is always around the client and their best interests and what is what is it that we can do to add value? And some, some advisors are good at problem being problem solvers. I think the the unique advisor is an advisor who is a problem Finder. And they can they can see those blind spots for the client, they create awareness around it, they therefore create a solution around it as well. And the clock goes on never even knew that that was a thing. And yeah, it’s a real thing. And we’re going to solve it for you. And it’s great. It’s great. And I think the type of advice that we want to give moving forward as a profession is around the continued value proposition being helping the client and making sure that we are always adding value and acting in their best interest, even if the advice is just keep doing what you were doing. Just keep doing what you’re doing. And people will pay for that.

 

Fraser Jack 

Yeah, fantastic. I like the problem, find a conversation. I think that you know, asking those deeper questions and going deeper into those conversations, and finding the issues that are underlying that may not necessarily be on the surface that are there. Any way that you can solve as is, is a great thing for advisors to be focusing on.

 

Phil Smith 

The other thing to add to that it’s really easy these days to you could Google your own client can Google their own problem, and the solution will come up and you you jump on websites and like, Oh, this is great. I guess the point is some of those self directed clients, they need advice on other areas of their advice, not just the things they know, they need advice on great, we can handle that as well. What you really need to be having a deep dive into are things around longevity risk, their risk profiles, making sure they’re invested the right way, taxes, whether it be you know, to throw a technical terminology or strategy around read contribution strategies to making sure that their estate plays the minimum amount of tax upon death, I mean, all these types of things, people like sampling, people don’t want to deal with something because they’re so difficult to deal with. We provide that service in house, it’s just thank you for taking that stress away from me. And we just deal with it. And we, and we do it. This is the trick, we do it with a smile on their face. It’s just we love to do it. And something’s phrase that you just can’t fake. Okay? So you need to, I think, the firm of the future. And there’s a good, there’s Harvard, the Harvard Business Review, released an article recently, and it was referred to as what professional service firms must do to thrive. And it’s an absolute cracking white paper. And it’s almost like it was written for me, it was written in such a way and I was like, This is me, this is what we do. And this is what we need to do to thrive over the next decade, what professional service firms must do to thrive template cracking article. And the one of the key takeaways there for me, making sure that the clients that you are working with clients that your staff also want to work with. Because as their complexity grows, the client’s complexity grows, your staff are continuing to be energized and engaged and they continue to grow, which in line grows, the firm in line grows more complexity, problem solving, and problem finding abilities. And ultimately, as time goes by, it’s self perpetuating, and you attract more and more of those clients, which keeps your staff happy and the snowball effect continues.

 

Fraser Jack 

Yep, fantastic. So what are some of the things that you’re working on in in the future to to become the firm of the future over the next decade

 

Phil Smith 

there are so many balls in the air. So we’re dealing with all of our advisors are going through all the the failure exams and modules and study so we’ve all been that now. That thing, one box ticked, there’s been a B roll out any our firm in the last 12 months and more so over the next 12 months with our capacity to deliver advice. So these statements of advice that we provide to our clients, we are wanting to do them more efficiently, more effectively, and provide more value to our clients and we’re relying on it for that. So we’ve we’ve developed and we and we outsource some of the some of the human resource word processing element. we outsource some of that So as it were the delivery of advice documents and our capacity to do more, and we are ensuring that our engagement process with our clients is seamless, and energizing for our clients. And we’re also probably Thirdly, making sure that that customer experience that client experience across the board is second to none, we really want to make sure that our clients are just thriving on the advice that we give them. And our my, my mindset in my business is we move we need to move from so our, our staff, we need to move from this idea of client retention. And the mindset is and has been for years, it is client advocacy. So as such, it’s just not about doing what needs to be done to retain the client, that’s just a ticket to the game. That is just a ticket to the game where you’re where you really need to play. And the mindset needs to be is around client advocacy. So we ask our clients for introductions that you know, or referrals, and I use the word referral to talk about introductions. And there is a talk about that, as referrals is because our clients don’t really understand what referrals if I want to introduce, if I want to meet Fraser Jack at a cafe, I wouldn’t say to my friend, can you refer me to Fraser Jack? I just say can you introduce me to Fraser Jack, please. And I got the of course, he’s over here. The terminology just needs to change. So it’s a our business, I think, runs very smoothly. And the processes that have been implemented, ensure where possible that this client advocacy mindset is ingrained in all of our staff. So we’re doing more for our clients and with the view that they’ll be happy and see value, and introduce friends and family to us. But if we’re just doing what we did last year, their expectations will be the same. We want to build and exceed those expectations. And if we do what we just did last year, which may be a higher bar phrase, oh, by the way, still maybe a high bar. But if we’re just doing what we did last year, they will just be not impressed. Unfortunately, that’s the way the brain works.

 

Fraser Jack 

Yeah, well, I love I love the mindset that goes along with that in the culture that you’re building there in the business around that, you know, continual improvement and putting yourself in the client’s shoes and working out what sort of things is going through their mind and, and in helping them along the way. So thank you very much feel for coming in and chatting to us today. Really appreciate your insights. Now tell us if somebody wants to continue the conversation. What’s the best way for them to get hold of you?

 

Phil Smith 

If they wanted to get hold of me? They can send me an email. My email address is P. Smith, at Hunter financial.com.au. So P fulfil p Smith at Hunter financial.com that IU or they could call me at the office which is 0249434876.

 

Fraser Jack 

Wonderful. Thank you very much, Phil. I really appreciate your insight and all things regarding the changing landscape for retirement but also a lot of little great little tips on running a financial planning practice. Appreciate it.

 

Phil Smith 

Thank you, Fraser.

 

Fraser Jack 

Well, there you have it, another episode of The X Y advisor podcast and I’m Fraser Jack, of course and I’m joined by Emily Blanche. Get it Emily?

 

 

Hey, Fraser, how are you?

 

Fraser Jack 

I’m tremendous. Thank you for asking me. And of course it’s time for hell as part of the week where we do some shout outs to expert in this.

 

 

Absolutely. Alright, today I want to give a big shout out to x y advisor, Declan Thomas. He is a holistic advisor over on the west side of Australia. And he’s one of our top members over the last little while he’s been actively jumping into discussions, adding plenty of value to comments, answering advisors questions, even adding some of his own thought provoking questions onto those discussions and he’s just been an absolute champion. So a community is really as good as those that get involved and participate. And Declan is really just been a team player which has been amazing so wanted to give a shout out to you love your work that clearly doesn’t go unnoticed. Thank you for your contribution. It’s definitely helping drive the positive evolution of financial advice.

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