Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirkby, the Wealth editor at the Australian. Welcome aboard everybody. Someone I've wanted to have on the show for some time is Nathan Fradley. He's a leading financial advisor. He's unusual to the degree that he is a entirely independent operator and as such is both good advisor and a
voice for the financial advice sector. And it's an ideal week to have him on because you probably know there's been some alleged changes to Super put through Parliament, some simplification of financial advice bureaucracy if you like, which is supposed to cost us all less in the end, which would be good if it comes to pass. Importantly, big
change with Super. You know, the big super funds wanted to expand their advice offering and Big Super gets what it wants normally, and they got what it wanted again this week because they're now allowed to expand advice. But not only that, they're allowed to charge for advice in the manner that they charge for most things, that is in a pooled fashion. So if you've got five million in Super or you've got fifty dollars in super you're probably going to pay the same fee with your big
super fund that's got all sorts of issues. But it look maybe it will widen financial advice for mass market and that would be useful if it's good advice, If it's advice that pays off for the people who use it. Will see And I want to talk to Nathan about a whole bunch of things which are on the table
which would help you. I hope find advice, find the best advice and the optimum way of engaging if you like, with financial advice, because every single listener on this show, I would say needs good advice, including myself.
How are you, Nathan, I'm good, James, thanks for having me.
Now, Nathan Fradley, is you operate under the corporate empire of Nathan Fradley advice? That's unusual, isn't it just to be there by yourself, pay all your own fees, your own license fee, I expect, et cetera. That must be quite difficult. There's very few tell me how many what percentage do you reckon? Of all financial advisors in Australia, fifteen thousand of them are independent in the sense that people might understand what that word means.
So I think that the current number is about two hundred. So and that's sort of meeting the definition which is labeled in the Corporations Act. And to be independent, you're receiving no commissions of any sort, which there's only insurance commissions now all investment commissions have been banned. But also no volume based or any benefits that could influence your advice, which is some that's sort of the questionable bit sometimes.
Yeah, I mean someone came on to me recently, torrent of strongly held views, let's put it that way about our own lists, the top advisor's list, and was mentioning that, okay, there's no commission, but there's all these investment platforms now they're really big and they dominate the space, and that the advisors get fees from these platforms, and so they heard people into those platforms. Is that fair?
No, there is no fees paid to the advisor or the convice company from a platform provider. What you might find is that they've been banned. What you might find is that they will have discounted cards, so rate cards, so if your clients will pay less to be on there, which can be a sticking point because if I leave.
This advisor, my account becomes more expensive.
So that's all that they run their fee through the account itself. But that fee is a normal it's money out of an account paid to them. There's no behind the scenes fees with platforms anymore.
Okay, So it's about two hundred independent advice was out of fifteen thousand. Those two hundred they cost do they cost more? Necessarily?
This is a tricky part.
So as much as I am an independent advisor myself, don't they don't think it makes me better than anyone else. And I think it depends on who you serve and what advice you provide. And so if you're providing a lot of risk or insurance advice, it's really hard to make that work on a fee basis.
I've tried in the past.
They get a discount on their insurance because you write the commission out and then three years later they come back and need to just tweak a bit of a policy and you've got to charge your fee. It's like, oh, I just realize I have to pay because they're not used. It's not something you're used to paying for, so it would be like getting a mortgage broker, charging a fee there and then turning and having to pay another fee in two years.
It's just not normal.
So I think that people who run businesses who have got a lot of clients that built up every years with insurance products, it's very hard to become independent because you have to get rid of all of that revenue, which is quite difficult. So I think it does play to the markets that you exist in and who you serve in your business.
Okay, so the big news this week obviously is about the big super funds being given wider powers legislations in Parliament by Stephen Jones, the Minister to offer financial advice. Interesting this is happening, of course, just as Cebus the super fund is being what can we say, the embattled superfund which has regulatory investigations going on in parallel. I can name three three different investigations going on at the
same time at Cebus over all sorts of issues. The most spectacular I suppose being ACIC taking them to court for delaying payments on death benefits and that sort of thing. But we won't tire them all with the same brush. The different big super funds, do you think for our listeners who don't want to face five thousand dollars a year, well, will it be a good thing and what sort of caveat would you add to that.
I'm probably not the most sensational advice when it comes to the stuff.
I like to be pretty moderate.
What I don't like is the broad base pricing that everyone pays for the advice to access by few. I've never been advocate for that. They get the values what's been given, and it also means, you know, those who don't use the services, who generally won't need to use the services we're paying for those that don't lack a lot of insurances and things like that. But what I would say is, I think there's something I remember reading something recently. It's about half of all over sixty five
year old super fund holders aren't in pension phase. So that's pension phase being the tax free part. There's an enormous amount of people who maybe just needed a conversation that could be saving huge amounts in tax And by way of reference, I think it's about ten or twelve percent for cmsfs. People have a bit more engaged, So I think there's a lot of room here where people
just need small transactional benefits that can be beneficial. I think where we're going to go wrong with this is around the messaging and around what's done around it, and around some of the controls. So if you go to McDonald's you expect a big back, you're not going to get a whopp up. And that should be made very evident if you're getting advice from your superfund that they're only going to give you advice on what they have.
And for the most part that's fine. But there is things like these retirement income products that will come to market very soon which can't be broken very easily once set up, and that could be areas where I see problems.
I mean, surely two things here. Surely the funds could simply send a letter to someone when they get to the age and say, hey, by the way, you should know at this stage, you know a tax fity future is ahead of you because you've just passed preservation edge. They don't even do that. No, they do, Actually they do, they do that happens nobody reads them.
So yeah, I mean this is I remember chatting to someone at one of the big super funds back in just before twenty twenty and something like ninety two percent of money left the fund when someone turned sixty five, so they had a big retention issue.
It was a hospitality sort of sided group.
The bounces weren't enormous. People either pulled it out and paid off their mortgage or they just didn't understand their super. They didn't understand what was there, and they didn't have a great advice component to keep people in neither. So I think they've got a huge challenge on that engaging people in their super.
I think people are a lot.
More disengaged than we think, and they do actually do some of this. I think this is just an added benefit because like, hey, do you know you could do this? But it costs money? Is friction and if it's like it won't cost anything, might encourage people to take advantage.
Of this a bit more.
And the other thing, of course, is if I go to you and you're independent, I'm assuming you've got to tell you you or anyone like you, the two hundred like you that and let's add more than that, because there would be advisers. We'd like to think you have people's best interests in mind and think in a holistic way. But if I go into a super fund and I see, you know, I'd like to put most of my money in gold. Or I'd like to put a third of my money in gold and a third in cash, and
a third and something speculative. There's no way that fund is going to say yes to that, I expect. Or I'd like to take half my money out and put it into an investment property, which I've got my eye on, and I'm an expert property investor and I really know how to do it. I'm going to prejudge them here, but I fall off my chair of a big super fund is going to suggest anything other than stay with the fund?
Yes, So I mean, firstly, I hope they don't suggest anything other than stay with the fund, because that's outside of the scope of their work and licensing. I would like it to be really obvious that we can only do this. And I think if that's the case and people are fully aware of that, which is in different levels, I think that's great. I think then there should be a channel which says, okay, you need a greater level
of service. A lot of the funds will have internal advice capability, but they should also recognize around limitations and refer out as well, and I think that's probably an area we're going to see some challenging who to refer to.
In some sense, some of the funds do have some good processes in place on that already, but ultimately I think that's going to be the biggest challenge in this is people who needed more who didn't get what they actually needed, which is often the case when people seek advice now, and it's something we see in some of the AFCA determinations and things, is people go in for one thing and that person the advisor in front of them, sets them up in a way that they understand or
and it's something they're familiar with, but it may not have been something that could have been available to them outside of that, depending on the school of the advisor. But I will say that that's a minority advisor these days.
It's vastly improved over the last year.
And what about the obvious issue of competence or credibility or qualification. I'm tempted to the awful, the awful, but the awful old joke, but it's got something in it which says, you know, financial product marketing is people who don't know what they're buying dealing with people who don't know what they're selling. Now, you know, if you think about a big super fund and a call center, won't that be a danger that these people and they can't even give them a name yet, who work in the funds,
we'll just know this tiny area this script. Basically the person they're dealing with knows even less. Can we even call it advice?
I mean, that's one step away from some automated and robo based advice that already exists. And some of the retail funds have rolled this out. One of the large retail funds rolled it out of eighty eight dollars a year recently. So I think there's a couple of parts of this. I think if you can get the scoping right who you're dealing with, is there anything else can we actually give advice and follow the rules that are currently in place, then I don't think that's necessarily going
to be an issue. I also think this is a great opportunity to backfill. You know, we've got fifteen thousand advisors that's halfed in the last five years. We cannot at the current position. We won't have advisors in fifteen twenty years. They won't exist anymore, and so we need to find a way to get people experience. And the current pathway in is you go for administrative assistant to all of a sudden full fledged advisor. And there's a
big gap in that too. There's a lot of challenges that come around that as well.
Very good point, very good point. I know they're so desperate they are recruiting of receives for financial advisors. I know that the association is actively underground in India, for instance, trying to get people to become financial in Australia financial advisers in Australia, and as you see, there was thirty thousand, then there was fifteen thousand, and the issue there's no one coming through.
And the ones that are a lot of them leave. So they get into the job and they go, this is not what I want to do. You know, it took me so long to get here, and yeah, now what do I do next?
Okay, so then maybe come training camps, I think in a good way, Yeah, I think so.
I think obviously this comes with any of the issues that we see with large institutions trying to do anything at scale. You're going to you have to have a lot of controls in place. No different to the bank's doing exactly the same thing prior. Hopefully we've learned from our previous mistakes. But it's a different area of large business doing something at scale.
This could go really well, it could go really poorly. I just hope we keep an eye on it.
Okay, very balanced view. All right, we'll take a short break back in a moment. Hello, and welcome back to the money Puzzle. I'm James Kirby, and I'm talking to Nathan Fradley, Financial advisor, independent financial advisor. Okay, Nathan, in terms of how someone optimizes their dealings with an advisor, if they can find one, a b if they can find a good one, see if they can get in the door on the basis that there's a shortage, chrolic shortage really and we haven't seen anything like this in
any other areas. It's not like the number of lawyers have been cut in half, or dentists or anything else. How does someone optimize their meeting with an advisor?
I think the first thing I'd say this We just had our cou big conference and I said I think I said this one hundred times chatting to people financially that you can find a financial advisor that can solve your problems, but you should also find one.
That believes what you believe.
I think if you can have chat with them over the phone or in a zoom and get a really good feel about who they are, you know, google them, see what your podcasts would have being on, articles have been quoted in whatever that might be social media they put out there. You can self select a lot better because even though there's only fifteen thousand of us, the
divergence in the way we operate as enymous. So if you want someone just to build a portfolio complex with shares and golden all sorts of fun stuff, it's going to be vastly different than if you come to see me, for example, where I do a lot more lifestyle based, strategic based, and I suppose hard moments of allse age care that kind of thing.
So there's a real.
Diversity in who you're dealing with, and you've got to like them and ideally you're going to work with them for a very long time, so you better get along. And so I think you know, having that alignment, particularly if you're a couple trying to find an advisor that can be also a balance there and then being prepared them all you can give them. The more time you spend with them on valuable things, less time you spend with them running through your balance sheet, there's better bang
for bucket that and I'm sure they'll appreciate that. A client that is easy to work with as a client you work with more so those two things if you're a bit more organized, but also you found someone that is your kind of person.
I think they're really the best ways to find an advisor.
Well, you've got a page time you check them out, don't you really?
It depends the Most advisors will offer some form of initial contact free charge. I do a fifteen minute call, which you know, if anyone can figured out yet always goes to half an hour because I'd like to talk. But you know, generally you have that as a bit of a vetting. They want to vet, you want to vet them. I think that's really important.
Do you think it's important to meet the person in person?
If that's important to you, So.
Nathan, what a percentage would you think of your client base likes actually insists on meeting you person to person.
I don't think they necessarily insist. I think it's a lot lower than you'd think. I like to meet them at least once. I think that's really important. If I could meet everyone multiple times, I would.
Yeah, but once at least just once to make the connection, is it, or to just too you can.
Get tow withstand them.
Yeah, you can understand someone much better with physical presence.
It's just a factor.
There's a disconnection that comes with you know, being on a camera across from someone, and so I think that's important. There's also the aspect of, you know, we've got responsibilities around our doing our clients.
So that's a big part of it too.
Are they who they say they are?
Yeah, exactly, Yeah, Yeah, so that's a bit part of it as well. But I just I would prefer, you know that to be with all clients.
You know. But because this is that we operate on a national level, work with people over the country, sometimes it's not realistic as well.
Is it delineated in religion to demographics and age?
Yeah, I speaking to other advisors to work with a lot younger clients than I do, I'd say there's a lot more zoom and that's not just because they're used to the technology.
It also is lifestyle.
You know, they've got an hour, well the kids are putting the kids down before they're going to need to do this, and they're trying to get multiple professionals in the same room at the same time.
It's very difficult.
Demographic guy tends to work with is a little bit easier, and they also prefer it when you suggest and look, I really want to meet in person. Oh absolutely please, we want to do that. So yeah, I think it's definitely demographic based.
Okay, I want to ask you one other thing before we go to the break, which is entirely different subject matter, but I know it's something that we said we talk about and you are interested in ESG investing environmental, social and governance issues, which were so dominant for a couple of years there by that when I say they're dominant, I mean the concept was dominant of ESG, and slowly but surely it's sort of percolated through the investment system
to the advisor base where clients were saying, we want to invest in an ESG fashion where we're happy with those issues environmental, social and governance issue of the investments we make. Now it seems to me just as differential advisor regime had grappled to it at all and had a sense of it. There's a blowback on ESG, mostly coming out of the US, but also coming out of places that ESG started, like the EU, on the basis that had lacked definition, on the basis that it was abused,
and some of it was an entire charade. We had greenwashing, if you know what I mean. So we're are advisors and their clients on that whole ESG issue. Now.
I think there's multiple parts that form this. It's a complex answer. One of them is that I think you're seeing a decrease in demand from you know, if you're breaking people into the pragmatists versus the believers versus people that aren't going to do it at all, the believers are still going to be really invested in this. I
think that the pragmatists are looking at their budgets. They're looking at their interest rates and their mortgages and their were payments, and they're going, I need to take care of myself before I think outside of myself. And so we really saw that as rates ramped up, that's starting to change. We're seeing a shift in demand again back and whether that's a broader political concern as well, but
that's definitely shifting. But then the other side, we had every fund and their dog was running some form of ESGRI strategy because it was marketable a lot of funds. You can understand ESG itself is just.
A risk metric.
It's looking at more data points that could have you know, material impact on decisions, you know, But that became a marketable point and if we weren't marketing it and they were, you know, what are we going to do? So everyone started talking about it, and even in recent weeks we've seen some of the bigger funds that did some of the most promotion pulling their more ESG products or just renaming them. They're still doing all of the same stuff
behind the scenes, they're just not marketing it anymore. And I think that speaks to the maturity of the industry as well. I think it's less of a shiny object now and it's just to become normalized, which is what a lot of us are saying was going to happen eventually anyway. So I think those are the aspects. The greenwashing thing is really interesting. When you've got a lot of large companies that said they were going to do a lot but haven't and they're just pulling their statements,
pulling there. And sometimes it's because they're physically impossible to meet what they were talking about, and that's a factor as well. So it's more complex than that, but it's probably as simple as I can bring it in.
Yeah, Okay, it's interesting. I love, I would say I love, but I'm absolutely intrigued by the theory about defense spending. The defense spending fits with the ESG be cause onto a peaceful nation, I can defend itself, So you never know which way that argument goes. One other thing that
just struck me. There is you mentioned about, and I imagine this is relevant that people do get more focused on hard numbers and returns when the cost of living goes up, and they do behave differently and they probably judge in a more severe fashion all the variables around investing.
It's just interesting. I just noticed yesterday that we did something on that the forty year mortgage has arrived, and the forty year mortgage whatever as it means, it's actually a response to people pushing out their mortgages because of cost of living and finding ways to keep going, so you see how behavior changes when cost of living lifts.
And I imagine I don't want to be so facetious as to say ESG is something that you are more willing to do when you're richer, but when you have less money, I imagine you get a little bit more sober and demanding on ESG definition and what exactly you're getting. And I'm more suspicious about grinwashing.
I would say it's more related to I think it's more it's detailed than that. I think it's behaviorally, it's the old mass loves hierarchy of needs. Until you've taken care of where you are, your security, your safety, your family, your social need, it's harder to think of others.
Yeah, but you might never get there. I mean the flip side of that is you know at what point you know, so it doesn't happen at twenty, it doesn't happen at thirty, doesn't.
It doesn't have to happen. It's the thought process of Yeah. If you look at say during COVID, post COVID, people were saving more than they ever had rates below. They weren't necessarily safe or better off, they just felt safe for a better off the messaging that they were receiving
was that. And if you tie that back in healthcare stocks and tech was doing really well, both overrepresented in responsible than any of SG portfolios, then you see, you know, energy crisis for multiple reasons, but you know, obviously some geopolitical ones, and all of a sudden that shifted and people who were in it for the you know, for the nump for the returns, not just for the ethics or the morals or whatever sits behind it moved because
they were tested. And that's I think there's always going to be an aspect of that that's cycliqu with people that are going if everyone's into this, I'm into it because I can see money here. As people going or maybe I should think about it. I've changed my mind, and there's people that are just going to be like, I still stand by. I'd have nothing to do with this. And what this is differs. It could be difference between
nuclear and no nuclear. It could be weapons or not weapons because of the exact reasons you've said, which is always the challenge in the space.
Okay, very interesting, very interesting, interesting too, But you mentioned nuclear, which actually for money fits into the environmental because it's the least forest option, et cetera, and argument for another day. Okay, back in the morment, folks, some really interesting questions coming up and Nathan is ideally pleased. I hope to answer them all right back in a minute. Hello, Welcome back
to the Australians Money Puzzle. I'm James Kirby and I'm talking to Nathan Fradley, financial advisor and well known voice on financial advice matters and the industry issues and how this financial advice industry is represented in the public eye. As he mentioned, and he's the first person to say this that if it keeps going the way it's going, there won't be any financial advisors. There's about as many being recruited. I'm being facetious, but the numbers are something
like that. There's something like priests, that is, there is so few being recruited that they're all getting older. They better get some young people in there, and maybe the super funds coming in will allow the industry to replenish in a fashion that people will start in those big funds, start to know what they're talking about, grow become advisors that used to be how it worked, and a lot of the advisors you know today that are on our
top five one hundred and fifty list. They started in big banks and insurers in the days before those big banks and insurers blew it basically by by advocating a sales culture which absolutely blew up and ended up with their Royal Commission once upon a time. Okay, Now, first question, Andrew, if I understand correctly, when your super is converted to a retirement phase, you no longer pay tax on earnings are capital gains tax for a total super balance below
one point nine Bang on, Andrew. So why wouldn't every person once they reach preservation age that that's okay, that's when you can get to when you can retire. Everybody, why would't they transfer all their super into a pension phase and open up a second super account in accumulation if they are still working, come to some agreement with their employer to stop full time and work say thirty five hours a we come about thirty nine instead of forty,
and then carry on contributing to the fund. The benefits would be that your super in retirement phase is tax free. The four to five percent minimum withdrawal from the super accountant pension phase could be redirected straight back into your super accumulation phase. All very elaborate, and to my first glance, all entirely legal and possibly sensible. Andrew, this is never advice information only Nathan, what do you think of that particular construction?
I missed one detail? Ah, what is that?
So?
Spot on? Spot on?
Accept once you are sixty to access your super you have to finish an employment and employment you can't just drop hours, you can't go part time. You have to finish unemployment. So that means just decreasing your hours doesn't meet that definition. And there's a pretty good argument to say leaving your employer and then being hired again two weeks later is probably early access of superannuation issues.
Has anyone ever been sorry, has anyone ever been fined? Or stop doing that?
I don't know the answer to that, But what I do know is there is a really high number of people over sixty operating at the voting boots that only work for a day.
So sorry, elaborate, what do you mean? What do you try to say that?
Well, if they had an employment and then they cease that employment, then they've made a.
Condition of release.
Oh yeah, yeah, I see, Okay, yeah.
So that's the bit that he missed. Once you're sixty five, it doesn't matter. You can do it straight away. But as we spoke about earlier, fifty percent of people don't still, so you were sent him as one hundred percent. Bang on, Andrew just missed one little detail, all right.
Sounds like a good advisor could help someone like that navigate how to do this if it was legitimate.
I had someone literally two weeks ago who had an advisor for a very long time sixty seven and was an inpension phase. So sometimes things are just missed.
Unfortunately as well.
Yeah, okay, well it sounds like Andrew isn't going to miss it or all the Andrews out there. All right, Okay, now, very good Steve. I've been enjoying and learning good Steve. One thing I see is advertising all the time for platforms. I think he means trading platforms. I'm interested in trading a little myself for diversification, and is often said on your podcast to spice it up. I don't say that that sounds I changed your heart by having an angle
where I am directly involved. However, there are many scams out there. Having some solid and trusted recommendations would be a good start to begin and understand and practice theories and approach safety. I wanted to try something without real risk, and I'm ready to take the plunge to see if it's for me. Thoughts on this, Okay, Steve and all
the Steve's out there. Trading is an early different game than investing, and I see the I see people who trade, and I've talked to people who trade, and I find them very interesting, and I find that they're not particularly interested in I'll give you. I can tell you a story. I met a guy one time who traded BHP. This was his thing. He traded BHP day and night. And I said, Wow, this guy's going to be really interesting. He's going to he's going to know all about BHP.
And I started talking about BHP at the time, who was the CEO, what they were doing, their policies, you know, different commodities and the balance between our and ore and copper and everything else. And he wasn't remotely interested in all that. He was just interested in the trading passions. There was the head and shoulders forming the.
Was this, that was that?
And it struck me that it's just completely different. So difficult question Nathan Fradley. Is there a safe, sensible way into trading for someone who's never done it.
I mean, I think you're bang on, and thank you for taking a little words out of my mouth with it difference here I thought I would do that.
No, it's no, it's great. I'm glad that i'd have to say it. I feel like I'm a downer.
I think you know, if you if your retirement is otherwise locked in for ninety ninety five percent of your money, and this brings you personal satisfaction, then it's a hobby and see it that way. If you get a bit extra money out of it, great, you can rather that if you lose it, it doesn't derail everything.
Great.
I'd like to note firstly, if you're seeing Instagram ads for trading platforms and fun things that seem sexy, the sexier it is probably the least you should's likely you should be taking part in it. Trading is not sexy. It's boring. It's it might be fun for certain people, but it's not a sexy thing. But I would also say that, you know, if you're looking for diversification, it's
also not necessarily speculative stocks. It could be you could have an index fund for the majority of your Australian holdings, and note that half of it is ten stocks, so you buy some other companies that you like to rebalance. It's a very different thing to try to find speculative microcaps. So I think there's a lot of good information out there, but generally if it's the old two good to be true saying probably rings true with this, and also like why are you doing it?
What are you really looking for here?
He's looking to make money? I expect, I think just in it to make money.
I don't know if it's the great There's people who are paid a lot of money with Bloomberg terminals and see if the degrees you aren't able to make more money. So yeah, I would question whether it was your self attribution that resulted in that outcome.
Just not to stamp it out entirely, I would say to listeners that if you know something very well, I don't know hypothetically here, Let's say you were in gold mining all your life, and you really know gold mining, and you know about gold and you've watched it for years, then you know you might, for instance, take out an option on a gold miner that you know very well, a call option, a put option, you might tiptoe in there where you have a reasonable chance of adding value
or adding something or no something more than the vast majority, because by definition, that's what trading implies. And if you don't know something other than the vast majority, then you're betting. And that's feel feel free to bet. I mean, off you go, but I know what you're doing. That you're betting out there. That's that's my overarch in common to everyone on that one. Okay, we have a few questions. I want to keep going, but thank you Steve, thank
you Andrew Daniel. I have a reasonable amount of equity and would like to use my principal place, my principal loan to invest in Shairs through borrowed funds. Are you able to explain the difference in debt recycling versus just increasing the size of the existing loan and splitting the increased amount to invest for tax purposes? Complex question? What's you really trying to say there?
Yeah, I think I've got I think I know what you're saying. This is really hard to explain without a whiteboard, but we're going to We're going to try so gearing or borrowing to invest is the first step. Year it's very separate from debt recycling itself, and effectively, what we're talking about here is when you have a loan and you borrow against that loan, or you borrow from that facility and you invest. If you're investing a NOD or earn an income, then.
That loan becomes tax deductible.
It's not what that loan is secured against that met defines its deductibility. It's the purpose of where that money goes. So that's the first part. So if you're in a forty five percent tax bracket and you took out a hundred thousand dollars loan and you invested it, you know, and that loan was ten percent, it's only it's going to cost you five point five percent after tax. So that's sort of the way to think about it.
That's the first part.
Debt recycling is effectively trying to increase the amount of deductible debt and decrease the non deductible debt, but your debt position is the same. So a really simple example of this might be you've inherited one hundred thousand dollars and you want to invest it. So you invest one hundred thousand straight away just from your pocket, and you've got a mortgage to say half a milk, or you put a one hundred on the mortgage, take it out
and then invest it. So now you've got the same amount of investment, the same amount of debt, but you've recycled one hundred thousand of it from non deductible to deductible. Your overall cash flow position should be better because you're paying less interest in and of tax. And what a debt recycling strategy then, is all your cash flow, your dividends, your normal surplus that you would otherwise invest, goes onto your non deductible and then you draw it out of
the deductible and keep investing. And the argument is you would pay off your debt faster because your net cash flow is better.
That's the simplest way I can explain it.
Yeah, No, it's good. That's a very good explanation. And I would say to people, explore that, explore death recycling, optimize it. Okay, very good. None of that was advice, of course, it's all general. Thank you very much Daniel and Andrew and Steve for those very good questions. I think We are running out of time, Nathan, so we might just leave it there. Lovely to have you on. Thank you very much, Thanks James. That was Nathan Fradley, Folks,
Nathan Fradley financial Advice. We'll hear from him again, I'm sure. Let's have some correspondence the Money Puzzle at the Australian dot com dot au for all your emails, questions, observations, complaints, and thank you very much to Leah Samuel Gloup for producing today's show. Talk to you soon,