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The Finance Show With Joe
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The Finance Show With Joe
Are Financial Planners Only For the Wealthy?
Think financial planners are only for the wealthy? Ray Regmi and Malissa Vargas from Ryker Capital don't think so, revealing why financial advice might be most valuable for everyday Australians.
Ray, with 21 years in financial services, and Malissa, with 32 years in lending, share powerful insights about the transformative impact of good financial planning. They explain why waiting until you're wealthy to seek advice is like saying "I need to be fit before I go to the gym" – completely backward!
Joe explores the critical differences between financial planning and accounting, with planners focusing on future strategies while accountants reconcile the past. Ray and Malissa highlight how innovative approaches like the "cash out and re-contribute" superannuation strategy can save beneficiaries up to $300,000 in taxes. This is knowledge most people simply don't have access to without professional guidance.
Perhaps most valuable is their insight into creating a financial ecosystem where advisors, accountants, and brokers collaborate to maximise client outcomes. This comprehensive approach protects against government policy changes while ensuring all aspects of your financial health are optimised. Whether you're struggling with debt, uncertain about retirement, or simply wanting to make better use of your income, this episode proves that financial planning isn't a luxury, it's an essential resource for building the future you deserve.
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DISCLAIMER This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs before acting on it.
Most people think that financial planners are just for the wealthy.
Speaker 3:No.
Speaker 2:And it's wild when you say that it's like I need to be fit before I go to the gym no. It's the opposite. We've had clients cry because obviously when we sort of ask those personal questions to them what money means to you they don't know how to articulate that.
Speaker 1:We have so many changes happening in the Australian federal government and the ones that are impacting both productivity as well as tax and financial planning advice. How does a financial planner and a good accountant protect you from these future changes? Welcome back to the Finance Show with Joe. As always, I am your host, joseph Dowd. Today, we are joined by two powerhouse guests Ray Regmi and Melissa Vargas. Ray is a senior financial advisor with over 21 years experience in the industry. Melissa has spent over 32 years in the lending industry. In this conversation, we're going to unpack a bunch why Australia might not be as productive as it was previously and what the potential of an increase in GSD could do to the everyday Australian. As always, guys, the information displayed in this episode is general in nature and should you need specific advice for your personal situation, please speak to your financial advisors. Ray, melissa, thank you so much for coming on. Thank you, joe. Thank you for having us Excited to be a part of it. Wow, what an introduction. I know We've got two great people here, I want to introduce.
Speaker 1:Have you seen how I'm dressed today? I've got Ray here, mate. I've got Ray and I've got yourself. I've got to look the part. I'm often in a basketball jersey and shorts.
Speaker 3:I want to call you Mr Pachito.
Speaker 1:Ray, I want to start with yourself. You didn't start off initially as a financial planner. Am I correct in saying?
Speaker 2:that. Yeah, absolutely right, joe. So when I first started out in my career, I was always sort of bogged down from my parents to go you've got to be a good accountant, and I think it sort of was ingrained for my mum and dad at that point to go I think you need to study accounting, yeah, you're going to do really well at it. So like, okay, I'll give that a go. So I did, and soon I university.
Speaker 2:This is not for me, but whilst I love it look, don't get me wrong I love numbers and I love creating tax strategies it just wasn't my pathway. I needed more um and and that made me sort of the realization of, as financial planning was evolving at the time, um, that it's not just about investment, it's about creating a good amount of tax strategies for good clients and working out a pathway forward so they're going right. This is what, how it's going to sort of work for me. So that was my idea of it. Yes, I was a spreadsheet prisoner prisoner for a little bit I think I'm, uh, very similar to yourself.
Speaker 1:I studied economics and I don't think there's any economist that hasn't spent 10 hours behind their desk every single day. It's just spreadsheet, spreadsheet, spreadsheet. This prediction, that prediction, and I just go to myself. This isn't for me. I like talking to people and I like creating solutions, so I think that's why you and I got along straight away. It was like a nice little hug at the MFAA.
Speaker 3:People have introduced me to you two as the long-lost brothers, me and Ray, long-lost brothers. Yeah.
Speaker 1:That is all.
Speaker 3:You're the younger version of Ray or Ray's the younger version of you. It depends on the day.
Speaker 1:That is nothing but a compliment.
Speaker 3:Oh, I don't know about that.
Speaker 1:If people are saying that that is nothing but a compliment. So I will take it. I don't take compliments. Well, you can see me, I'm starting to go red in the face but I will, for our listeners. I will accept that today, melissa, you've come from my world. You've actually come from the world of lending. Yes, I think 32 years working in the lending space.
Speaker 3:Yeah, I started when I was one Okay, I hope there's a good lens on this camera. So, basically, not dissimilar to Ray or very different to Ray, but not dissimilar, where I started my degree in law and realized very quickly that this was not for me. I worked in a law firm while I was doing it and it was the most horrendous experience. I was like yep. So I deferred for a year, ended up working in auto, started out selling cars for a bit of fun.
Speaker 3:A very wise, fun man said Mel, come and sell cars for the summer. And I'm like women don't sell cars, we're talking in the nineties. And he's like that's what will make it fun. So I sold cars and very quickly I had an aptitude for finance and I transitioned into finance and I worked in asset for a really long time. You know I worked at BMW for, you know, in varying capacities, for close to 20 years of that, then transitioned into broker and, yeah, into into partnerships, because everything that I've ever done has always been about relationships. So partnerships was a very organic thing for me to move into do you know what I love that you mentioned partnerships?
Speaker 1:because many people work at the bank and they think that being a broker is transactional, because they see a client once, they hear about a client once and then they go okay, that's it. Yep, that client's done. When you're a broker, you almost move into that accounting, financial planning space, because you have to manage the book Particularly as an asset broker.
Speaker 1:Especially with asset broker, because asset broker is all about business and when it comes to business, you need to make sure and you need to ensure that if you're selecting the correct product for one of your clients, they're able to grow their business. We don't want to impact their cash flow that's where you guys come in Exactly but we also want to make sure that they're able to grow in the long run. So I think a little tidbit of advice and why I said if you're a broker, you need to listen to this episode Ray and Melissa create relationships and maintain those relationships and the values that they bring to the table. Because when you have those types of things, that's what makes you a longstanding broker, as opposed to somebody that just relies on transactions.
Speaker 3:Can I just say, like, for me, the transition and you know there's been a lot of changes in industry over the last, you know, 30 years and the one thing that has traveled with me from day one to now and will travel with me forever, is transactions, are transactions and you know, even back in the 90s, anyone can buy anything from anywhere, but what people buy are an emotion and a feeling and a genuine authenticity. And if you can do that, and do it with all your heart, you will always be successful and people will follow you. Like I've got clients I've been written asset finance for a long time, but I've still got clients that I've had for over 25 years Like hey Mel, I need a new Ferrari or I need a new Porsche, I need a new boat or I need a new, whatever it might be.
Speaker 1:Where do I go? But?
Speaker 3:they're the kind of clients that I used to deal with because I worked in luxury. I was very lucky from a very young age and I've seen a lot of colourful things and you know, compliance wasn't a thing back then, so assessing those things was much easier. But they'll, they'll throw me a go. You know where do I go? Cause now compliance is so tight is they want to go where they know it will work, where it will fit and who's going to look after them in a really genuine way. But again, it all. Everything circles back to relationships everything.
Speaker 1:So how do you continue to level up the individuals within Riker? Sometimes, you know, you see people. They're just trying to get a statement of position or a statement of attainment over the line, but it might not be ethical. I'm just, I'm, I'm. I'm just talking about previous experience and what I've seen in other shops, you know. So how do you continue to enforce those values?
Speaker 2:So I think you start from a very grassroots level of what the client's about. You want to understand their relationship with money and and the relationship with money for each individual client is very different. I'm like we've had clients cry because obviously they're going to be sort of asked those personal questions to them what money means to you. They don't know how to articulate that yeah and that's astonishing sometimes because they go, they feel like they're sort know how to articulate that.
Speaker 2:Yeah, and that's astonishing sometimes because they go they feel like they've sort of they've lost that time, They've lost that way of how to manage money because no one's sort of educated them and it's always been about transaction after transaction and that's not what we were about.
Speaker 2:So we would sort of really go from the grassroots level to sort of go let's understand what are you trying to do, what are you trying to achieve with money, and then we can sort of build on what you're trying to do and what tax strategies we can look at. What is the investments you want to buy? You want to buy three properties, four properties. What does that look like? Is it even attainable? And then once we sort of build out a bit of a roadmap along that side, that's where the trust comes from. It's not about just going here's a paper, here's a transaction. Thank you very much.
Speaker 3:But one of the things the team do really well is it's not literally about just a transaction. The team do work on cashflow and budget, whether you be an individual or a business. So it's not just about what is it that you want to achieve. It's like how can we achieve it? Is it in your realm of affordability? Let's have a look at it and how do we budget for that to achieve it? If it is there, and if it's not, what do we need to do to help you strategize to potentially achieve that?
Speaker 2:and the team do that really well and it's not like we're trying to put them on a diet here or the financial diet, but you know. But sometimes that conversation needs to be had a little comes down to the relationship with money right it does badly do they want to achieve what diet do?
Speaker 3:that is, if you use the analogy of a diet there's a keto diet, there's a.
Speaker 1:You know calorie deficit, exactly like there's all different kinds.
Speaker 3:What diet do you want what? What works in your world?
Speaker 1:yeah and let's create it yeah over the last five years in particular, I've noticed an addiction to mobile phones, and there's a reason why I'm bringing this up. Every single time I'm on instagram, once I view three or four stories, I get hit with an ad. I get hit with a hundred dollar ad or you should buy my ebook, or you should buy, uh, you know, this accessory for my ipad, or you should buy this, or you should buy that. So for someone like myself, okay, who has battled adhd their whole life uh, thankfully, you know, thanks to meditation and stuff, I've been able to get out of the control. How do you assist those individuals and how do you help them get back on track? Because people are just getting overly exposed to spending all the time. We're in the largest amount of debt we've ever been as individuals in Australia. So how do you help people? How do you guide them back onto the path? Is it a phone call? Is it a text message, email? What do we do?
Speaker 2:So I think you start to learn from the spending practices to go what they're spending on and, I think, what information they're soaking in their head, and sometimes it's about unwinding that information and then rewiring it to go well, look, I think let's just go back to the basics here. What is debit? What is credit? What is it coming in? What are we spending out?
Speaker 3:here and sometimes and what do you want to achieve, though?
Speaker 2:Exactly. But also it's what is your budget telling you, what is your cash flow telling you here, and sometimes there's a moment of realisation to go oh, I'm spending more than I actually.
Speaker 3:Yeah, but for some people it's also going. I don't want to change how I'm spending. I'm very comfortable with what I'm doing, but with what I do have left over as my surplus, what can I achieve?
Speaker 2:Yeah, but I think there's got to be then choices conversation to go. What is your priority?
Speaker 3:That's exactly right. Yeah, yeah, and there's no one size fits all.
Speaker 2:No, and I think different people have different priorities and you sort of you work with that. Yeah, and you will try to sort of make their goals and tax position achieve based on what they're after. Yeah.
Speaker 1:I like that a lot. It's making sure that you're fitting around them, but also pushing them towards their goals. I'm an all or nothing person.
Speaker 3:And I think you guys have realised this. You've this, you've definitely realized this. Really, I'm really shocked that you say that I look at you and I feel like you're a little bit timid.
Speaker 1:No, yeah, completely timid person over here. No, so I, I am all or nothing, you know, it's. Uh, I go all in and I get excited. And when somebody says to me this is your diet, you know, I'm on the diet, that's it, let's go, but how sustainable is it when you're all in, that's?
Speaker 1:the thing. I'm not going to comment on that one, but but it's for the average. I don't even want to say average for the everyday individual. You know it's. I see what you guys are saying, and maybe myself, maybe I do have the discipline to go on a crash diet or something like that. How do we guide people back on that sort of thing, like do you know what I'm?
Speaker 3:saying, yeah, no, I do.
Speaker 3:And look if I could speak for Ray and you know, have a different opinion, absolutely.
Speaker 3:But when I listen to Ray say all the things that he says and I listen to the team do the things that they do, I think there are two parts is there's guiding and there's also listening. So one part is, firstly, listen to your client, understand their mindset, their strengths and their weaknesses, and you know, when you're guiding someone, there's no point guiding someone into something you know that they will not do or is not sustainable, because you're setting them up for failure and not success, and that's not what we're about. So I think it's, you know, putting people on that trajectory. That you know is in the realm of you know, again, circling back to Ray's comment before the diet that they can sustain and sometimes with those people, when you put people on a diet, you can push them that little bit more and they'll jump on because it's that mindset and that rewiring. But it's almost the team are almost like counsellors as well. You know it's rewiring the way they think and that's a journey, it's not a one conversation.
Speaker 3:Definitely not, and it's not in a day, and we have team members in our team that their role every year and I love that we do this their role is purely and I'll use the word compliance, but every year, their one job is to reach out to every client on the annualized basis of this is the journey we set you on for the last 12 months. How's that going? Let's look at the numbers. Let's look at your budget. Look at your cash flow. What do we need to? What do we need to fix? What do we need to change? What do we need to reassess so that everything that we do for that client is current and valid and in their best interest for tomorrow?
Speaker 2:Yeah, but it's also, Mel, a good point. It's the accountability piece, and I think what needs to happen in that position is almost like before.
Speaker 1:I went on diet.
Speaker 2:After I went on diet. So, what does that transformation look like for me from? A financial health perspective.
Speaker 3:And how do I feel?
Speaker 2:Yes, I've got to have a reward mechanism. Because I can't consistently be on diet. I need a bit of a reward to say going great job here's my chocolate.
Speaker 1:I absolutely love that. Yeah, and like, how exciting is it when you put someone on a?
Speaker 3:path and you go.
Speaker 3:Okay, in 12 months, prior to 12 months, your your projected growth on whatever it was that you were working on was five thousand dollars for the year, as an example, and this year, with that new diet, you've now got, instead of five thousand dollars in year two, you've got twelve thousand dollars that you've earned this year. It's like when you lose that five kilos or you gain that muscle mass or whatever it is that your diet wants you to achieve, you're like, yes, you see the wins and you feed off those wins. You do.
Speaker 2:And I think I can give you a bit of a case study on that. I mean, like we've had a couple who would earn really good income. Well, when I say income, they earned about $120,000 each. The couple combined they were paying about $68,000 in taxes. So we looked at the whole holistic position of what they had. They wanted to pay their mortgage a little bit faster, they wanted to acquire a little bit on the superannuation side. So when we sort of looked up a bit of a catch-up contribution strategy, what we would do is go look, instead of you sort of salary sacrificing and letting go all of that, let's have all of that money come into your offset account and every May, june, we utilize that $10,000, $15,000 to throw that in your super fund because you want to build that up faster and when you do your tax return, we're going to claim that $15,000 as a tax deduction.
Speaker 2:So now that each individual was getting about $4,500, $5,000 each as a refund, that's amazing.
Speaker 1:That's the sort of stuff that people need to know why they need to go see a financial planner, and we spoke off camera about this. You know whether you need to be wealthy or you could be an everyday person to speak to a financial planner. And the reason I bring that up is that's $4,500 that has come back as a tax refund that is usable each. So that's four and a half thousand dollars that has come back as a tax refund that is usable each, so that's nine thousand dollars each now and you compound that for the next 20 years.
Speaker 1:That's magical correct and then you reinvest that I'm not even thinking about compounding, I'm not even thinking about that. I'm thinking that somebody's grocery bills for the year, yeah, yeah, because the cost of living has gone up so high that most individuals that are on a salary or they're not on a job, that you is paying a high commission or any bonuses or anything like that they're actually suffering, yeah, and the reason I wanted to bring that up is because most people think that financial planners are just for the wealthy. They're not, no, and it's wild when you say that it is.
Speaker 2:I need to be fit before I go to the gym. Yeah, I'm like no before I go to the gym.
Speaker 1:Yeah, I'm like no, it's the opposite. It's the opposite, yeah. So I'm going to tell you my story. I love the fact that you guys keep bringing up the gym. I used to be 131 kilos, dropped it all, naturally. One bodybuilding competition has got down to like 80 kilos and all that sort of stuff.
Speaker 3:Congratulations. Thank you, thank you.
Speaker 1:But the reason I bring that up is because of the discipline. But I walked into the gym and when I was 131 kilos and people were more happy that I was there than upset that I was there, I'm a rookie. I couldn't bench five kilos, I couldn't. I could not lift myself off the ground like that's how heavy I was. But people were so excited to help me out. And I think that's the same with the financial planner. You know, if somebody comes to you and I think you, I could, especially like I see it in your face and you've been doing this for how long, ray.
Speaker 2:I've been in financial service for almost 21 years now, so for 21 years.
Speaker 1:For somebody to be in this industry for 21 years and still display that level of excitement and that smile to help someone the individual is the best thing in the world.
Speaker 1:And now let me go back to my question. I'll talk a massive roundabout on that one. That's all right, someone being, you know they don't need to be wealthy. We've said, as you said, you go into the gym. You know you don't need to be fit to go into a gym, you don't need to be in particular shape, you just need to go to get started. You just need to start.
Speaker 1:Now I want to talk about a particular case study that you guys have, and that was about a single mom. Yeah, and the reason I'm bringing up the single mom is because the divorce rate in this country is higher than it's ever been. Okay, there are a lot of people that don't have the fiscal knowledge to be able to assist themselves. Yeah, we have unfortunately we're not going to start the arguments yet a government that doesn't know how to support the individuals out there. So how has a financial planner gone and assisted a single mum with just two boys or two kids sorry, two kids be able to wipe out 13 years from their mortgage and save on their taxes at the same time?
Speaker 3:Do you want me to do this one? I'll let you do that one.
Speaker 3:So, look, I'll preface with this particular case study really resonates with me and you hit on some of those things a moment ago which is I was raised by a single mum and I was raised uneducated about financial services, as was my mum. You know, we lived week to week, we lived in a housing commission and you know, even for my mum now to this day, she lives week to week and it's a struggle To hear that we have a team of advisors at Riker that look after everything, from the example we're about to talk about right through to your ultra high net worth clients and the fact that this particular case study for us as a group, we celebrated it. It really rings true that you're in the right place in the right environment and basically what it is is one of our advisors, dean, he had this lovely lady come to him going. I'm in my mid forties, I have a mortgage, I have two kids, I'm a single mom, I have an average income. I'm never not going to be able to stop working and I'm never going to be able to finish off this debt, and God forbid anything happens to me. I've been paying off this debt forever and I've got nothing to leave to my kids. I'm not protected in any way that they have something should something happen to me. So Dean sat down with her and he had a look at it. And you know you talk. You know we come from the world of brokers. We talk about money-making exercises. This was not a money-making exercise and that's okay, because it's good to give back and it's good to understand that things that are good for other people are good for everybody.
Speaker 3:So what he did for her is he. You know he can't change her salary, he can't change her investment portfolio. She doesn't have any of that. So it's about looking at her world, how it's fixated and how does he make it the best that he can be. And what he did is he went through her cashflow. He went through her income. He went through her budget, gave her a diet that she can sustain. She now will have a mortgage. That way she was like I'm never going to end this debt. She will have it paid off in 13 years within the budget that she can do.
Speaker 3:He reworked her super and the strategy investment in that super that her super balance will increase to retirement age by. I think it was about $190,000. She doesn't have money to throw around. It's just adjusting it. And also, you know her tax saving each year is $1,000, but that's $1,000 for a single mom. That's a little weekend away with her kids, it's whatever it might be. So and also he set up her insurance. So now that she's protected and it's an insurance that she can afford. So for us as a team, outside of the big examples, we can tell you where we created someone's wealth over millions of dollars and bits and pieces. We have a million of those examples as well. This for us as a team. You know a lot of us come from families where they've moved abroad. We've come with nothing, single mums. We all have little stories to tell where, if I look at our team, all of us have generated from families where we've come from very little and to do those little wins that for this particular mum she was in tears Like it's a big win.
Speaker 1:It really resonates with us and it's the reason that we do what we do.
Speaker 3:You know, like there's big successes and little successes, those little successes are sometimes the most rewarding.
Speaker 2:And I think it was powerful that Dean used some of the strategic strategies for compounding that work both against you as well as for you. So just recognising those key components where it's working against you and for you, and then how do you sort of collaborate a strategy on those? Yeah, that's quite powerful in that example. Sorry, I just no, don't say sorry, absolutely.
Speaker 3:And the thing is I'll use this example for years to come. And you know, like in my career, there are different stories that I have and I use them over and over and over, and it's it's not because they're powerful to to tell a story. They're powerful because they're real emotions, they're real people and they're genuine outcomes. You know, and as you said, you know, we we have a government that is not necessarily looking after the people with low incomes. Well, it's nice that we can do that. And then you know it's circling back to what you're saying is there is a big conception that or perception is the right word that you have to be wealthy to have financial planning or financial advice or a strategy.
Speaker 3:Two things One is if I would chat with brokers and they're like oh really nice to meet, you, love what you do. When I've got someone to refer to you, I'll give you a call. It's like how does that work? I actually said to one broker I go explain that to me. What do you mean by when you've got someone to refer you or refer? And they're like well, when I see an opportunity, I'm like how many loans do you settle a month?
Speaker 2:Because all four clients have super paying taxes Right? It bewilders me. They have insurances. Now you either choose to look after that or someone else will it genuinely bewilders me.
Speaker 3:Yeah, and I'm like the consultation is free, right, and that's the first part. Most brokers don't realize To have advice from us from a first point of consultation. It's complimentary, and we really do understand that for clients. People get scared to have a consultation because they think, firstly, what is that going to cost? But when they then have that consultation and realize this is the potential reward that you're going to get out of it, so it's not what the advice will cost you, it's what is it going to give you back. And you've got so many examples, ray, where someone might pay $2,000 for an SOA but the reward on that is $10,000. What makes more sense?
Speaker 1:I'm hearing everything that you're saying, but the thing that I loved the most was the four opportunities. You set a four class, that's four opportunities right there, and the reason I say that was when I left high school, I got three speeding fines. Okay, I didn't want my parents to find out and I wasn't earning much money. I was working a footlocker, and that was it. I walked into CBA and I've got a credit card. Okay, I've got a credit card and, mind you, I'm still the 131 kilo kid right there. Okay, so I've got a credit card. They gave me a $5,000 limit without knowing anything. They go yeah, here you go. And then I've spent the money and then, all of a sudden, minimum repayment was like 21 bucks, something like that.
Speaker 1:I go yeah, that's fine, that's fine, that's fine, yeah, the unrealized expense on that is craziness so I ended up owing like seven thousand dollars towards the end, you know, and just by having that and then going over my limit and all those types of things that really affected me, yeah, and then once I started limit and all those types of things that really affected me, and then once I started to get a little bit more finance acumen and everything, that's when I started to realise hold up a second, why aren't we teaching this in school? Why aren't we teaching this to individuals? Why aren't we? You know, programming kids, what you know? This is my favourite thing Like why are we learning about geology when I'm telling you now, kids out there, they're never going to look at a rock and say, oh, it's this or it's that, but every single person, at one point in their life, is going to have a credit card, they're going to have a charge card, they're going to have some sort of debt.
Speaker 1:They're going to have super. Yeah, they're going to have super.
Speaker 3:They're going to have some sort of debt. They're going to be a broker. Tell him to come what? So what was that anyway? He probably does. He keeps like all I wanted to do is make money. But this year he did commerce in year nine and he elected to do. Just for clarity, there's a 200 hour course. It's very different to when we went to school and talk about units now.
Speaker 1:It's 200 hours um what they do work from home at school as well now.
Speaker 3:But but they've got 200 hours, which is over year 9 or 10, where you can choose 100. So he did the 100 just in year 9, but now he can't do commerce in year 10. His school have introduced and they're launching it next year a course that's sort of like a branch off from commerce, and we were looking at his electives the other day and we've really leaned on him to do this and it's how to get a loan how to do a budget.
Speaker 1:You're joking.
Speaker 3:How to open a bank account. What does tax mean?
Speaker 1:Yeah.
Speaker 3:When you get a credit card, what does it really mean and what does it cost? Like all of these different things, superannuation, and it's real-life. Advice, advice and experience like not experiences, but learnings. Around you're in year. What does a mortgage look like? What can you afford? And I was like, how amazing is this? And the head of commerce rang me and said, mel, you know, I'd really love it if your son did this course. I think you do really well at it. So I'm like yes.
Speaker 3:Well, he's been around it all his life, so well, this is the thing, and I said this is probably one subject I can actually help you study with Woodwork.
Speaker 1:I can't help you with I do want to touch on something about I love that. I do want to touch on something about investment properties. Now, as a mortgage broker, this is one thing that quickly, or you know, all the mortgage calculators have, and there's a section called negative gearing, and because something is an investment property and there's negative gearing involved.
Speaker 1:All of a sudden, somebody can afford a mortgage. All of a sudden, oh yep, it's an investment loan. Now the reason I bring that up is most people don't understand that just because something's negatively geared doesn't mean you don't have to pay for it up front with your cash flow Exactly.
Speaker 2:It's such a misconception out there, for that part.
Speaker 1:Yeah. So the reason I bring this up is when you're discussing these things with your clients and, as we talked about before, you know it's not always for the wealthy, it's for the everyday individual Are you outlining those things? Hey, just so you know, just because it can be negative geared and you can get that money back at the end, that doesn't mean you don't have to come up with the money up front.
Speaker 3:Correct, are we having those conversations? Investment strategies for property are not for everybody, because they're not necessarily affordable, because negative gearing still has to be serviced. Correct and not?
Speaker 2:only that ultimately you have to pay that debt down, because you're really losing the capital value on that property if you just keep paying interest, because what you're really hoping for is a capital gain.
Speaker 3:Ultimately, yeah, and that capital gain has been eaten away by all the holding costs, which is interest rates, agents' fees, insurances, so that all compounding factor comes into play 100%, and I love that you raised it, because I was actually having a conversation with someone about this just this morning and I was thinking, oh, I should have spoken to Joe about this and spoken about it for today. So it's, we're in tune. There we go.
Speaker 1:We're properly in line.
Speaker 3:That's it exactly. Yeah, but it's a real thing you know, and we spoke about this just recently in one of our podcasts where if someone has an $80,000 salary and wants to get an investment portfolio, that's great. Let's work on that.
Speaker 1:What's your post-tax income? How much is going to superannuation? How much are you spending on your credit cards? Are you actually spending $200 a week on groceries, or is it actually $400-something?
Speaker 3:a week. But what stress are you putting on yourself to have that investment portfolio? Is it sustainable?
Speaker 1:100%. I do want to touch on something now, because as financial planners, you're often planning for the future. The accountants are often reconciling in the past. Now I do want to note a lot of listeners don't actually know the difference, because you have a lot of accountants that advertise themselves as advisors as well, but most of the time they're just trying to reconcile what has occurred in the last 12 months. So could you provide a definition as to the difference between financial planning and accounting for our listeners?
Speaker 2:Okay, so, from being an accountant, essentially what we did was we looked at the review. What I mean by that is we looked at what you've done the last 12 months, because you've come to me in August, september now you're on a tax return. But essentially what I'm looking at is your past, of what you have done, what you have spent on, what you have earned. And I'm going to go right now let's pay Anthony Albanese this amount.
Speaker 3:Oh, man, why are you guys trying to rev me up? We're trying, it's not working.
Speaker 1:Oh no, I did like a 45-minute meditation session before this. But yes, sorry Joe, no, it's okay, it's okay.
Speaker 2:From a financial planner perspective, what it's about is going and previously, when I was an accountant, I couldn't talk about that because I wasn't licensed exactly to go. Well, no, let's have a look at this strategy. Let's look at the you know, the five years, the 10 years, the 15 years. I've had clients who were really good at making but worse at keeping it and even worse at managing it. So for me it was like it's wild that I can't speak about it. But how do I go about talking about it? So hence the financial planning part. So financial planning allowed me to sort of then go right, let's look at the fast-forward strategies as to what we're going to be thinking about in two years' time, five years' time, a decade, and what does that look like? So advice is all about future planning. Accounting is like so. So advice is all about future planning. Accounting is sometimes also there can be a business advisory part to it which can come into play.
Speaker 2:But accountants purely look after the tax and lodgement of tax and management of tax. Advisor purely planners. Uh, they structure out your investments, your portfolios, what works, what doesn't work. Um, as an example, I'm like if I've got bhp shares in my super fund, I'm hoping that BHP is going to take me to retirement. That's the wrong misconception. You've got to look at how you invest it.
Speaker 3:And at risk of upsetting the apple cart and offending anyone and disclaimer my husband's an accountant, so he's a very good accountant at that. We've worked in finance forever. Okay, how many clients do we know that have taken their accountant's advice and their business have gone bust because it was not the right advice?
Speaker 1:I believe the fifth.
Speaker 3:Right, but it's just, we've got so many you know you hear them go. My accountant told me to do this. My accountant told me to do that and you know it's a trusted relationship and I'm sure that accountant did it with good intentions.
Speaker 1:Yeah.
Speaker 3:But walking out of your square that you're not licensed, authorised, accredited or equipped to do. Lean in on the other people that are around you.
Speaker 1:One thing I want to bring up the reason why people need financial planners and accountants. For that matter, everybody needs an accountant.
Speaker 3:It's a collaboration.
Speaker 1:It's a collaboration. But one thing I do want to say, and I'm going to make you two laugh in a second please don't ask your broker about the advice for your tax structures or how you should set up a business. We are here to help you borrow money. After we get the advice from these lovely individuals not myself do not come to me and say, hey, should I go trust, co-create, unit trust and start trading, and I'm like, no, no, no, wrong person, no, no, you don't. You don't come to us. My biggest issue with the broking industry right now is you can get your certificates in a day. You're on board with AFCA, you register with one of the bodies You're a broker in two weeks.
Speaker 3:Someone told me the other day they became a broker in two hours.
Speaker 1:Yeah, I believe it because there's so much access to quickly to become one and university for five years, five years, five years. University for University for five years, five years, five years. University for I went for two and a half, but you were studying law, correct, if you did want to complete your degree. It was four years at the time.
Speaker 2:Yeah you had a year at the bar or a year at law school and then you had the three years of placement, which means you were then still learning as an advisor to go well, how do you manage it? Perfect.
Speaker 1:Perfect examples. Okay is for a broker. It's a one-day course now and you can handle tax file numbers, passports, driver's licenses, tax returns Like there's so much sensitive data that people have access to. As brokers and I've said this time and time again People are like there's too much compliance in broking. I think there needs to be more. Like I know it's such a left of field thing, but I'm saying this from the position of I have seen so many people come to the industry and just say, oh, am I supposed to do? I need cybersecurity and data protection, yeah, and I'm like, I'm like I'm going to jump off the balcony, like that's it.
Speaker 3:And if it makes you feel any better. It's been like that for such a long time. So I'd say two parts to that. One is when I was in finance, when I worked at BMW. I still remember, like back then, two things.
Speaker 3:You know, auto was a dirty word and brokers was even a dirtier word, so compliance was loose. Nobody wanted to go to a broker. You either went to your bank where you were trusted you know ex-accountants and things like that and you know it was just so much harder to be in that space. And you know the broker industry back then was very few and far between and now it's a large space and good for that, because brokers the reason for brokers is it's a great purpose, it's the largest capacity of lending in any space and we do a great job. But I do think there definitely needs to be tighter rules around your ability to access people's information and what you do with that information and how you provide that advice. But I feel like we are moving in that space better with the mentoring and the two-year requirement of somebody looking over you. But again, you know you're right, it can be tighter.
Speaker 1:Guys, we have so many changes happening in the australian federal government and the ones that are impacting both productivity as well as tax and financial planning advice. I bring this up to you guys because I want to know how these changes are going to affect people in the long run. How does a financial planner and a good accountant help you? How, how does a good group of planners, accountants, brokers and I am shameless plug right there.
Speaker 3:No, it's a triangular collaboration.
Speaker 1:But how does that protect you from these future changes?
Speaker 2:I think you start to strategise a lot earlier on, because you know what the bills are going to be proposed and what's likely to go ahead.
Speaker 2:So, we don't want to jump necessarily the gun either in terms of the strategy, because if not, you'll just make yourself worse as soon as the bills are passed. At least what you've done is you've got a plan in place that, should an event occur like that, how are we going to tactically strategise an asset? I mean, like for one of our clients, they've got $4.5 million in superannuation asset. Now, point five million dollars in superannuation asset. Now what we're going to be utilizing is is a structural investment bonds. Now what is the investment bonds does is we've taken out that superannuation asset and we've had that in investment bonds, which means whatever he's earned in the next 10 years completely tax-free yeah I've got to give you a phone call after this.
Speaker 2:All right, there's so many different strategies that you can align yourself to go. Okay, if this is the rule that's going to change, we're going to pivot this way or we're going to pivot that way.
Speaker 3:And if I say it from more of a layman point of view, because you know Ray's lens is definitely from the advice point, Mine is from the person on the subject of all of this stuff is it's the realisation that you need a good broker so that you have access to the right loans, the right rates, the right policies, all that bits.
Speaker 3:You need a good accountant that is optimizing all the right taxes in the right areas and the claim abilities, but you need a really good financial advisor that you have those annual reviews because you know. It's like a someone saying I don't need a lawyer because I understand the law but you don't understand the intricacies of it. You don't need. If you need heart surgery, I don't need heart surgery. I know my heart beats Like. You need a financial advisor now because, while you might understand your finances to some extent especially the way the government moves, policies move, shifts, move all of it as an advisor your niche is understanding the deeper intricacies of you know what the propositions are, what the future might be, deeper intricacies of what the propositions are, what the future might be and that whole triangular relationship is that ecosystem is required, I think, more than ever, because what we can control is how we manage it, how we look forward, but what we can't control is policy shifts and changes.
Speaker 2:Yeah, but it's also. They're all individual. So you've got your personal tax law, you've got your superannuation tax law, you've got the investment structure. So what are you trying to do now? Personal tax law, you've got your superannuation tax law, you've got the investment structure. So what are you trying to do now? Pivot from different places to work around, to go well, what is the best scenario that's going to fit for my client from a superannuation tax law perspective, from a personal tax law, and what investment I can sort of circle around to make sure that I don't pay inheritance tax or a oh no no, no, no, true.
Speaker 3:It's like understanding how do you build for that retirement plan in a different, clever, strategic way that gets you the most and you pay the least, yeah, and that constantly changes.
Speaker 2:Yeah, I can use an example for that. Just only a couple of weeks ago I helped my clients who they've got roughly around half a million dollars each in superannuation side. Now, inside superannuation, what they call is a taxable component and a tax-free component.
Speaker 2:So a taxable tax component is where the kids, if they were to inherit that money, win their pay tax. So what we did for them, given their age, we did a strategy called a cash out and re-contribute. Now we had to obviously look at what was allowed for them in terms of the ATO rules. We cashed out the super fund and put it back in, so what that allowed was the entirety of the taxable component now became tax-free.
Speaker 3:You put it back into their-.
Speaker 2:Into their own super fund. So we took it out of the super fund and put it back inside the super fund. Now that's treated as what they call a non-concessional. Now, in saying that when their kids inherit that money which is up to 360, 360, they've saved over $300,000 in debt taxes.
Speaker 3:See. So, Look at both of us.
Speaker 1:Both of us are going okay, this is why I keep saying to people don't go to your broker for financial planning advice, okay. Final question Sure, how is your group supporting more brokers out there? Because I see you guys at every single event. I see you guys at the MFAA, at the FBAAA, I see you guys at, you know, the large gala days, everything. So how are we supporting more brokers and how can these brokers find you or reach out to you?
Speaker 3:You go Ray Okay.
Speaker 2:So how are we supporting brokers? I mean, like most of the brokers want to do the right thing and they go Ray, we just don't want to step into something and say something wrong where I put my client in a worse position. And every broker is about that and I love that part. Most of the clients I talk to about SMSF they're becoming more and more popular they go but look, I don't know much about it, but if I say something incorrectly I've set them up for the wrong part of the tax. If I say, go buy a property, in a company name.
Speaker 2:The company has no CGT exemption. I don't want to say that and I might sort of set my client up in the wrong way. So the good thing is there's now awareness starting to build up as to what we do and how we add value.
Speaker 2:So we're starting to educate brokers on why is it important to sort of re-look at tax strategies. Because if their goal is to buy a second property, how do we best position them now to get them to that second home or third home or fourth home? What is the tax strategy involved? What is the cash flow should look like? So when the client walks away out of that meeting, they go right, I've got a clear pathway on what I need to do. My goal is to buy second, third, fourth property. So that's one part. Second part is how do we ensure that there is a safety net for me should something goes wrong? That safety net, maybe in the form of the insurance, will catch me so the bank doesn't come and encumber my assets. Yep.
Speaker 3:Yeah, so I think also too, though, that, like the thing to probably note is how are we supporting brokers? It's also around education for them, and I think you sort of hit the nail on the head earlier. A lot of brokers sort of think of financial advisors purely for insurance or super or retirement plan. There are so many other things. It could be a divorce, as you mentioned earlier. It's you've had more children, it's you've just acquired your first mortgage. How do you strategize for that? It could be for the cashflow. So it's also asked how are we supporting brokers? It's that education around. There are not two or three areas that we specialise in.
Speaker 3:There's probably 20 different trigger points that are outside of just the. I settled a loan that you would go. You probably should speak to an advisor to work on that, whatever it might be. So I think that's a really key thing to note.
Speaker 2:And trying to create an ecosystem for that client, because that client comes to you going well, you have got a wealth of knowledge to the broker and they'll ask those questions but we want to be that supporting ecosystem for that broker and the client's so so happy walking away going. I came in with that part. I got help with every other part that I was looking for because I had to go somewhere else to look for those services anyway so one thing I want to bring up as a final sign-off for brokers, the riskiest thing is a client leaving because clawback.
Speaker 1:Clawback will always affect a broker's back pocket. That's their upfront commission and their trial book, the sizability of it. So, by working with a financial planner, what ends up happening? Well, it's not so much there's no clawback, it's you're creating an ecosystem where they're not going to be leaving you because you're not acting. As I said previously, transactional.
Speaker 3:And I'm glad that you said that. Yeah, because if you think about it and you're a broker, you get this right. The majority of your clients as a broker. Your lifespan with that client is three to four years.
Speaker 3:Yeah, that's not happening here, no but, like as in, not every client buys investments, not every client like a lot of them, you know, whilst you keep that relationship and there might be a refinance or referral, but the reality is a lot of people have one home.
Speaker 3:A lot of people buy one car every three to four years, or some people buy one car every 10 years. So your ability to engage with them as a broker there are limitations for some of those clients when with us, whereas and it's also about that ecosystem, as Ray has mentioned is we are building an ecosystem where there is an annualized requirement and want for us to engage with that client. We're building on that, we're circling it back to our broker where it's obviously fits and it suits, but that client is always owned by that broker. So that relationship with you for them is also a different kind of conversation, it's a different touch point, it's a different trigger and it's a bigger care factor. But then, with that, one of the things that I do love with the team is, let's say, you send us your sister, jo and we look after her and the team. I'm going to be a bit, you know, sales-like for a moment.
Speaker 1:No, no, no. I love shameless plugs.
Speaker 3:It's all good this is one of the things that really drew me to come work with this company is you know their ethos, their values and their genuineness of wanting to do the things that they do. And you look at that and you see their NPS score sits at roughly 4.8 and above consistently. And that's no easy feat in financial planning Like it's not an easy feat, it speaks volumes. But the result of that is you send us your sister, your sister's Laura Laura has such a great experience with Ray Ray's shown her.
Speaker 3:You know we circle back to the case study we used of our lovely client earlier. You know that client. She's going to tell three of her friends and she's going to, they're going to refer to us. Now, statistically, that client is not yours, that's ours. But what we do at Riker is, if you could imagine, you're a trunk and you're the root of that branch, of that tree. Those clients that come referring into us whenever we have things that need circling back into a lending space, come to you. They build on your ecosystem and we remunerate you on that. So we're expanding Consistently.
Speaker 2:so upfront and ongoing.
Speaker 3:Yeah, whatever we do for that client, even though you didn't refer that extended client, we still remunerate you on it. We want to build your ecosystem. So there's two parts. Is what we do with that? Referral from Laura comes to you anyway as well, and then anything from a lending point of view comes to you as well.
Speaker 1:Comes back. It's a boomerang.
Speaker 3:It's a full ecosystem that we're branching out that you would never see.
Speaker 2:But we want to act as your second layer relationship manager, more than anything else. Absolutely, if the client's about to make some wild decisions and about to go. Well, look, I just spoke to my cousin who's a mortgage broker. Oh right, no problems at all. Whilst I'm here with Joe and I've just looked after you from Joe's perspective, I think you might want to give the courtesy to Joe as well at the same time and the client wants to do that. It's just a matter of sometimes there's just time for it no-transcript.
Speaker 3:Understand, by talking to a different broker, the impact that has on you.
Speaker 1:Yeah, from a remuneration point of view, uh, yeah a lot of clients do not understand that they don't understand that, but the truth of the matter is you said something and I started laughing. Sorry, ray said something and he goes. I spoke to my broker, my cousin who's a broker, and my head exploded. I'm like the amount of times I've had to tell people, guys, if somebody's at a barbecue with you and just because they say they can get your lower interest rate or something and your broker has been in the game for a long time, just make sure you're doing your due diligence before you go and jump and sign a different statement of credit assistance.
Speaker 1:Ray, Melissa, this has been way too much fun. I need to get you guys on again. Where can people find you?
Speaker 3:Well, we're usually at every event, as you highlighted. So you can find us at the brightest yellow stand Actually no, I won't say that, because we're transitioning our bright colours, so watch the brand links that we're having. But you'll find us at FBAA, you'll find us at MFAA. We're online, yep.
Speaker 1:Your website Just reach out website.
Speaker 3:We've got a really great podcast guide. Follow that on.
Speaker 1:you know the Wealth Guide podcast Sorry no competition, but it's just a shameless plug. It's all right, it's a shameless plug.
Speaker 3:We're on spotify. We've got a youtube.
Speaker 1:You can find us on instagram linkedin everywhere you can google us perfect and you can google us and if you need any help with your lending, you can reach us at wwwitsimplecomau. We promise, if you're already a broker, we're not going to steal you away from riker capital.
Speaker 1:Okay, if you're sorry if you're already a client at riker capital, we are not going to steal you away from Riker Capital. Okay, no, absolutely Sorry. If you're already a client at Riker Capital, we are not going to take you away from your broker. And if you need any help, whether it's your investment properties, you're purchasing an owner-occupied property, or even if you need to borrow in your SMSF I know I said it before, but I still do it Reach out to us at wwwitsimplecomau. As always, my name is Joseph Dalwood. Thank you Ray, Thank you Joe, Thank you Melissa, Thank you Joe, See you guys next time.
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