What's a robo-advisor, Vince?

Yeah, so a robo-advisor is, as the name suggests, an advisor who's a robot.

Um, generally that's come to mean automated or digitally assisted portfolio construction and management, that the rest of what a financial advisor does is pretty hard for a robot to do, but the investing piece is a relatively solved problem.

So if, um, our engineer friend is looking for someone to take that investing piece off their plate, and so a ro- robo-advisor in that case will do a, an assessment of their risk profile, gather some goals and timeframes, and recommend one of a number of portfolios based on that risk profile and time horizon.

And then it will do all of the ongoing maintenance and rebalancing and, um, reporting and tax tracking and making sure that it stays up with what's happening in the world.

That's, that's the core what a robo-advisor does, and that could be a great way to solve that investing piece.

As you say, Glenn, you know, he's or she, um, you know, still young, don't know whether married or kids, but, um, probably if they're saving 40 to 60% of their income, they probably don't have kids.

You strip out any inflation.

Um-

I mean, this is a tough nut to crack because the concept of improving financial literacy, as it's defined in these sort of things, it's a fairly narrow definition, and I would distinguish it from financial capability and good financial decision-making.

They are three different things, and, uh, the more we focus on this building financial literacy piece, as defined by the academics- We give people the illusion that they know what they're doing and are therefore more likely to make poor decisions.

There's certainly a lot of research now coming out of the US that high school financial litera- literacy training is actually leading to higher measured scores on financial literacy tests.

Whereas a mortgage holder would be doing a bit more.

Yeah.

The distinction though is, um, um, that if you're borrowing off your mortgage, you're not rebalancing your debt when the price falls.

So the, the...

But what did you learn from Red Barber, Vin? What was the greatest lesson you learned from Red?

Well, a couple of things.

Number one was to be yourself, and of course, that's very difficult when you're first starting.

And we had three teams in New York, a lot of fine broadcasters, and Red said, "I don't want you to listen to any of them." And I said, "Really?" He said, "No, because you bring into the booth something that no one else can bring." And I thought, "What is he talking about?" And I said, "What's that?" And he said, "You." And he said, "You listen to others, and it will change you subconsciously or otherwise." So that was the first thing.

And the second thing, of course, was prepare, prepare, prepare.

He was an absolute stickler.

Uh, I would go and get the lineups in those days, and, uh, let's say so-and-so was hitting third one day, and the next day he'd be hitting fifth, and I would just write the names down.

What, what's your definition of a good baseball broadcaster?

Open to all options.

Hmm.

[sighs] Well, let's just deal with what's actually changing.

So nothing will change in terms of CGT or deductibility of interest on a share portfolio until July 2027, and at that point you'll get your updated cost base at the time.

So the question really remains, am I happy with a guaranteed 6% after-tax return by offsetting the money against my home loan, or do I want to potentially earn more, or less as the case may be, um, investing in, in shares or ETFs or whatever it is that floats your boat?

Mm.

And that hasn't really changed.

Um, that the increasing interest rates have probably helped the benefits of debt recycling.

Yep.

Um, and some of the other providers is, do they include, um, companies that aren't primarily listed in Australia? So companies like Xero, Fisher and Paykel, Cochlear, um, they are in some and not in others.

So it's not exactly the top 200 companies.

And they're also tweaked differently depending on-Who holds which? So if you've got a company, News Corp was a really good example here.

So News Corp, heavily owned by the Murdoch family, and so the amount of it that was counted in the index was reduced by the amount of the Murdoch family holding.

So it's not a perfect measure, but the measure has now become the target, and we need to be conscious of that, which is why I'm a big fan of noting that there is no such thing as passive investing, that the choice of market, the choice of index, the choice of index provider are all active decisions and will drive your outcome.

Now, the differences are smaller than the differences between active managers.

I think Aussie banks are the most expensive, isn't it, in terms of performance and, or PE ratio or something?

... and get some questions that we'll answer around this CGT and negative gearing.

Well, there are two big changes on the income tax front for working Australians, is the introduction of the WATO.

So we've got the LAMITO or LITO, we got the SAPTO, and now we have the WATO.

So that's Working Australian Tax Offset, and that's a $250 reduction to your tax bill.

So you work out your tax, and then deduct $250 if you have income from employment.

And that's worth $250 regardless of how much you earn, as long as you earn over the tax-free threshold.

And the other big change is the introduction of a fixed $1,000 deduction against employment income, which is designed to cover all your normal working deductions.

[laughs]

Like, this is a real problem.

So, it's, I mean, it's obviously good to have energy efficient houses, but if you put in those laws that make building house go more expensive, you're sort of saying to people, "Well, you can't have a cheap energy inefficient house.

You can only have an expensive energy efficient house."

Yes

... is if there's fewer negatively geared investors competing for the same stock, and Treasury are saying prices are gonna rise at 2% less, that makes it easier.

Yeah.

Less demand, lower prices.

What's not to like? Now, we got an inflationary budget.

Mm.

I think, you know, increasing fuel prices, increasing energy prices, inflation being a bit more stubborn... three rate rises in a row.

I think the public is willing to accept something.

I think to be fair, though, they did all their tweaks in the last six months anyway.

Although, if you look at some of the treasury consultation around forcing or encouraging, [clears throat] nudging super funds into investing in private equity and venture capital.

I mean-

Before we get into it, Vince, what do you hope someone walks away from after this chat?

I think the, the important point is to understand how all of these consumer protections that we've worked very hard over the last 20 years to get in place, they have a cost implication.

But I think as a country, as a society, they're valuable protections.

Some might see them as unnecessary red tape, but overall, that's a positive.

But it does add to the cost of delivery of the service.

But part of the messaging here, a part of the understanding, is that for every cost, there's a benefit, and it's up to us as advisors and to demonstrate that benefit, and it's up to a consumer to accept that the benefit they're getting outweighs the price.

[laughs]

... detailed legal questions.

What do you mean by that?

As in if you look at the, the proportion of income after transfers and taxes, the spread between the, yeah, bottom decile and the top decile actually isn't that big in Australia compared to global equivalents.

Could it be better? Quite likely.

But when you look at the pre-tax number and the pre-transfer number, we are getting more unequal, absolutely.

Yep

Um, which obviously led us into a decade and a half of extraordinary high inflation.

But I think there's no doubt that Aus- Australia's got some particular drivers here.

So we've got, you know, extraordinary low unemployment, extraordinarily high government spending, and a, now a externally driven supply price increase that, you know, we...

What are you saying to me?

Yeah.

I mean, w-what I, that, what I would say to most of our members who we have this discussion with is, if it's taking you longer to save that deposit and the price of the house you're buying is going up, so if house prices are rising by six percent a year, the ex-- if you save, if you have ten percent today, you need so much more in a year's time to get back to ten percent.

So the price of the lender's mortgage insurance is often eaten up by the rise in house prices.

So what's the advantage, what's the advantage of having a larger deposit, assuming you're borrowing the same amount of money, um-

There just comes a time where it's like, "Well, we're happy to forego fifty dollars a week net savings because we want to do this."

Yeah.

And I think the bigger question around the four-day a week argument is what does that mean for your future earning capacity? So we don't say how old they are, but I assume they're thirty something with young kids.

Where were you on Pearl Harbor, Vin Scully?

Uh, December the 7th, 1941, I was where I would normally be found during the football season.

We had a rather large radio in the living room.

It stood on four legs.

There was a crosspiece to give it some strength underneath connecting the four legs, and I was forever taking a pillow and maybe a box of saltine crackers and maybe a glass of milk or whatever, and I would crawl under the radio.

And the point of it all was, and I did that with college football every Saturday, was... and it meant nothing to me that Tennessee was leading Alabama, because here's a kid in a fifth-floor walk-up apartment in Washington Heights, uh, listening to a game in the Deep South.

But the roar of the crowd absolutely intoxicated me.

(laughs)