Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby, the Weld editor at The Australian. We came
aboard everybody. You may know. One of the biggest mega trends in money in wealth is coming down the line is the transfer of what they call intergenerational wealth now the Productivity Commission and you can trust the Productivity Commission on there on for numbers at least, and they said in a recent report there's three point five trillion trillion to be handed down between the generations in the next
thirty years. A little bit sooner, Deloitte tells us that there's half a million Australians are going to retire in the next five years. So as you can see, it's going to be a lot of money transferred in Australia and many people in the middle of this transition really you have very little idea how to manage wealth, particularly if they don't or won't use financial advisors. My guest
today is ideal on this subbit. His name Israe Tubman and he's been in the wealth business software side for quite some time and obviously in the business of wealth some time as well, because he sold two companies in the past, and the one he's probably best known for was there was the sale of the Inpocomp group back in two o seven to the GBST Group that was as a reported fifty million dollars at the time fifty
six back in two oh seven. He went and did it again with the second company, Finocomp, which he sold to Bravura Solutions, the Listed group more recently and now he's up and away with a group called air Wealth that's h EI or air Wealth Group. It's a platform really for advisors who are dealing with with wealthier Australians and gives us, i think hopefully an insight that we haven't had before to the whole landscape, if you like, of making money in Australia. How are you Ray?
Very well, Thank you, James, Thanks for having me on today. Great to have you on today.
It's interesting because obviously, as I was saying in the show at the introduction, there you've been on both sides of the fence, if you like. And one of the things about investing in Australia is that there is this formalized legal division between investors. There is every day investors and there are sophisticated investors, and they are actually defined
by law. You must have two point five million in investable assets or a salary and income of two hundred and fifty thousand per annum for two years in a row, and you must prove this with an accountant's certificate. First of all, do you think that is actually a good system, because I know in the US, for instance, you don't have to go through the rules like that. What do you think I mean, I know we're protecting people, but it's debatable, isn't it. I actually think it is fair
to have some sort of differential between sophisticated and retail investors. Obviously, if you're a retail investor, there's a lot more safety nets and protection put in place. But I think for people who understand what they're investing in are prepared to take the risk, and I think that's fair that they
should be able to go into those wholesale investments. I know that Aseka proposing increasing the levels from two and a half million of assets up to four and a half and from two hundred and fifty thousand income up to I think it's four hundred and fifty thousand. I think that's quite reasonable because interestingly enough, the limits were put in place in two thousand and one and they were never indexed.
They were never index so at the time they covered one point nine percent of Australia's population and today, obviously with property prices booming and all the rest of it, it's it now allows about sixteen percent of Australia's population to get a Sophisticated Investors certificate. The other thing I would ask is just because you have money in investable money, and just because you have income, it doesn't necessarily make
you a sophisticated investor. So I think there's still some traps around that.
I mean, as I said in the past, you can be thick as a brick and if someone hands you two million, are you in? You're sophisticated by definition, and that's no good. That's funny. I did read some of the submissions on this inquiry and some operators I think, I'm always such a Winson that being Jeff Winson and cool. They're suggesting an exam, not just money in the bank, but an exam. What do you think of that?
Well, it would better provide your credentials as sophisticated invested than just how much money you have or how much money you make. So I actually don't think that's such a silly idea. I think it's quite a good idea.
So with you, you obviously are right across this whole thing of the wealth transfer that's going on in Australia, and one I know one of the themes that you constantly talk about is the feminization of wealth. Now, a cynical journalist like me will say, I think what he means there is there's going to be a lot of inheritance and wealth transfer and the actual area studies tell us that women last longer than men, and so that's
going to be a feminization of word. Is that is or is it more complex than that?
There are other factors at play. So fantastic women entrepreneurs it at the moment, so they're generating Welson in their own right. Divorced settlements play a part in this. But this huge great wealth transfer that it's already begun, is you mentioned three and a half trillion dollars is going to change hands over the next twenty years. Over the past twenty years, one and a half trillion has changed hands. So this is growing and there is you're right about
the science. Baby boomers who are aged sixty to seventy eight now of next twenty years are going to be passing. The statistics show that they tended to marry younger women, and women have a longer life expectancy. Two thirds of that three and a half trillion dollars that's going to change hands is going to go to surviving spouses, and
there's lots of gob smacking statistics about this. In the UK, they've predicted that women will control sixty percent of family wealth and then the next few year and at some point in their lives women in the UK eighty percent of them will be the sole controllers of the family wealth. In the US, by twenty thirty, they're suggesting that nearly sixty five percent of US family wealth will be controlled by the women.
What does that mean? What does it signal then for the wealth industry or for anyone in the wealth in the business of making money. What what does it signal for the future?
Well? I think there's a couple of really interesting aspects of that, one of which is the way women invest can be quite different to the way men invest. So there's a lot of focus on purpose and impact investing with WIMP a lot of studies have shown, so I think that's going to change the investment round in a lot of respects. And the other thing I think is the whole advice industry needs to be quite focused on this.
There's research came out of Schroeders in the United Kingdom that up to seventy percent of women who are surviving spouses who have been ignored for decades, all of a sudden they're the point of interest from their financial advice firms and they don't like it, and they're moving to advisers to a different advisor within the next twelve months.
So what that really means is that US needs to be a strong focus on people that advise these families, needs to be a strong focus on engagement, and engaging at the point of death of the husband is too late.
That's really interesting. It's funny, folks that we often have Jackie Clark, for instance, is a regular on the show, and other female advisors. We have several that we talked through all the time. But when I look at the numbers, do you know that only about one in five financial advisors in Australia are female. Actually, it's a really interesting one. We'd come back to that very soon in a week or two, when we get one of our advisors back on the show. Okay, we'll take a short break when
we'll be back in a moment. Hello, and welcome back to The Australian's Money Puzzle podcast. I'm James Kirby Wells, editor at The Australian talking to Ray Tubman. Now, Ray, one of the things you were talking about in your world and you're giving these it's interesting. So you're in that sort of you're in that sort of junction between
the advisors and wealthy Australians and the mass affluent. I suppose we could call them and we were talking earlier about the sophisticated investors in highness worth investors of which you are on yourself do once someone gets over the line, and many of our listeners would aspire to get over the line to become a sophisticated investor, to be allowed to do to get into those funds that you can't get into a viewer, an every day investor of qualifis,
once you're over that line, should you think differently? Should you in what way at its best would it make a difference to get that try a qualification.
It's interesting the getting over the line enables you to get in products that you wouldn't normally. But where there's reward, there's risk. So for me, every time I would hand over a sophisticated Investor's certificate, I would want to make sure absolutely that I understand the product. So I always have a philosophy of never investing in a product I
don't understand, because some of them are quite complex. But me and myself, I still use a financial advisor hello piece who looks after my interests, who gives me because that's their job, and I rely on his recommendations and advice. And at the end of the day, you've got to be prepared that where the reward is also risk.
It has been reported regularly that sophisticate advisers often get bid in and the first thing they do is they go into IPOs pre IPO because they're off because the startbroker signs them up says you should be sophisticated, and then the stuff often calls and goes, guess what, You're sophisticated now, and I've got a beautiful little IPO for you. Statistically, the majority of these do not make money for people.
That's often an area. Is there an area that you thought you couldn't be bothered with even though you're now entitled to get in there, And is there an area that you think people would be rewarded in examining.
So there's lots of really interesting private market funds and products available as IPOs, etc. I personally have gone into venture funds. Of course it's tech, and at least if I can understand the philosophy behind how they're investing, then I can either go with the sort of the objectives of the fund or not. So I tend to invest in areas that I'm familiar with and same into private companies.
I invest into private companies, but I've got to really do my due diligence, and I treat some of these with due caution and never invest money that I can't afford to lose. If so, I think maratter As was the tech or the team. I think the team's highly important.
Coming from a tech background, I know that some people just are good and they pick the market and they do the right things in and distributing their products to market got to be both for me, It's got to be I can see the purpose of what they're trying to deliver and the upheaval they intend to cause into the market they're going into, but also that people have got runs on the board. Of course, Frankly, it's a it's a difficult thing. A lot of startups fail, right Exactly.
It was a rhetorical question because I was going to ask you if you came across something and the technology was fabulous, and you know what's fabulous, and you said to yourself, this is fantastic. These people really have something. But then you say, this team is a mess. These people are going to just they're never going to get across the line. Does that stop you investing?
Yes, it would, as blood splatters everywhere in history of tech companies that had great tech, but they text one thing. Execution and commercialization is a completely other thing, and kind of needs to be a sweet combination of both to really gain success.
Just one last thing on the sophisticated investor front, they are often also approached after IPOs. The next sort of alleged treasure trust that is put in front of newly qualified or newly minted sophisticated investors is property opportunities development. Invariably where they're off the plan regularly. How do you view property as a sophisticated investor.
As you become a sophistical investor, I guess there's a lot more opportunities around property and I personally always run a healthy skepticism of property development that I know you're right they are in they do target sophisticated investors. Once you get that sophistical investor status, there's lots of very good manage property funds available in the private market space, and where you put down a capital commitment and you
contribute as required. They're run by managers who have got a track record, and I think that's an important thing to look at, record of success and they've been around a while. I tend to avoid those that are new on the scene personally. Obviously, with high net worths there's more money that is investible, strong focus on commercial properties not just residentials, and where you're looking at long term
yields that can be quite attractive as well. So I think there's in that space there becomes lots of interesting options.
And just how did you find them? Did you find them through an advisor? Yeah, I look, I do.
I know I'm in a number of property funds and they've been vetted. It's like getting electrical work done for me. I don't want to tamper with the switchboard a loot. Somebody that knows what they're doing can advise me, and then I review myself that I'm really dependent. I like to depend on my advisor, and they cost money, but they can also make money in avoid losing money.
Interesting listeners, we are talking about the cost of advice on average, if it seemed to be a five thousand a year or so on a running basis, But and that would be the case, particularly for sophisticated advisors, it could be higher than that, or they could have several advisors, or they could talk to their advisors a lot more than you do, certainly more than once a year, let me tell you. But it's interesting at the point that reymakes, and it's often led to me by sophisticators and a
high work investors, that advice is good. Advice is more than worth it. And if it saves you, particularly if it saves you from losing money, then you can rock it out very fast. If you save if you could have lost fifty grand, then you paid five thousand to find out that was going to be a last mithing situation. You've got to think it's worth it. All right, we'll take a short break. We'll be back to some questions. Hello,
Welcome back to the Australians Money Puzzle podcast. I'm James Kirby talking to Ray Tupman from airwellth That is h EI or Wealth the Software House, which offers a platform for financial advisors interacting with wealthy investors in Australia. I have a question from Jake. Why do we have to spend the money in our super to buy our first home? There is a large number of young people guaranteed via the bank of Mom and Dad. Why can't we use our own super? It's a guaranteur with the bank. Jake,
you are really onto something. This issue of can you use your super tovie house isn't going to go away. And I'll tell you something. There's very sort of call them simple black and white sort of proposes up at the moment, for instance, that to just take money out of your super and buy a house where there is
more sophisticated innovations coming down the line. And I know people that are working on ways to get super, the equity from Super into the whole market and I think there will be a break on this soon, So I'm just wondering every UH has any thoughts on this one.
It's an interesting one. I actually think that would be really desirable. We've obviously got a huge issue with affordability of housing at the moment. You know, I've written stats at about two thirds of people are relying on their inheritance to get into the property market. I think though, you know, our regulators really have focused on super innuation being having the sole purpose of providing his income in retirement.
So I think that means that there need to be quite a bit of regulation around any such scheme, probably with dictated interest rates. But it seemed like a sensible option. We've all got equity in our super and significant equity in a lot of cases, and that would seem to be one of the tools that we could use to beat this housing affordability crisis.
Okay, thank you for that. Jake will come back to that subject again, because I'm right across it and I'm following it all the time. And remember, folks, this has never advised its information. Now there's two questions from Dave and one from Chris. They are related and basically they are both are read. Dave's really captures the issue. Surely there's a tipping point, he says, when a self managed
super fund becomes a no brainer. When my industry is super is charging a fixed percentage of zero point seventy five percent on my superbalance, it seems to me an SMSF using it, index fund or ETF would obviously be better. I know there's some setup costs for it seems there will be some change, some change left over or am
I missing something? Dave? Okay, Dave, here's the thing you're super I expect or in many cases anyway, many people in big funds with super you can take an ETF option inside the super funds, so you don't necessarily have
to leave the fund. If you could switch inside the fund to ETF, to a retirement product or a retirement option which is heavily underpinned by ETF, and on that basis, the race, or at least what the commission being charged or the charge basically should come down considerably from where it is at the moment. At no fine supervibe. That would be the first thing that comes to my mind. Never advice here, just information on the broader question of ETFs.
And index funds. So many people are so confident about passive investing and you can beat the fund managers. Blah blah blah. I wonder do you think that way? Ray Taubman, have your sought two businesses and rocking on the third one and being a staphistical investor of some breath.
Yeah, I think ETFs are a great thing in market linked ETFs?
How important are they to you?
Though I tend to I still tend to go into funds rather than atfs, not entirely, but I do use ETFs. I have a view that it's not so much about the costs, it's about the returns. So I think every investment should be dictated on what you expect in returns, because if you get significant returns, then the costs become negligible. I think on the topic of I think if you're worried about chargers, that it purely on charges, then do we is a point and people will argue what that
point is, whether it's three hundred grand or whatever. Where strictly speaking, you can run a self managed super phone, get your audits done, get your accounting done, and have less charges above a certain point. And beauty of self managed superphones is that you don't have to do it yourself. You can still have an advisor that advises you your investments. It sounds to me like you're a judicious risk taker. I've taken a few risks and I've found on a
fear over the years. But just talk was just yes, expand on that. And so you come to the end and some worked and some didn't work. And I don't want to prejudge what you're going to say, but I imagine what do you come to it from this? So I think the total wins outweigh the losses. And I've had personal learnings every time I've lost, because you sit there like a naughty per be in the corner and think what do I do wrong on that one? So it's always good to learn from your mistakes. And you
know you take that as future knowledge, don't you. And that's why I guess I am quite diligent about what I review in any investment I take.
And you go back and you look back on the when they don't work out, you also review them. You don't just walk away.
Absolutely a psychos software development process that every time you do a release, you have a retrospective over what you've done, and you take learnings from what you've done wrong. And for I still make mistakes, but hopefully less than what I would have made ten years ago.
Very interesting. I witnessed Karen Elson, of course, who became a billionaire at stage off the back of the Platinum Funds Group, and there was an analyst. They were talking about picking stocks, and the analyst mentioned how they had certain stocks hadn't worcked out, and they had finished with
them and basically gone off and done other things. And I remember him picking up this analyst on a point and saying that he was very disappointed that the analyst hadn't gone back and studied what had gone wrong with the investment that had failed. That you would learn as much from what you what doesn't work out as what does. It's interesting and interesting that you would poor less come in from the same angle. Terrific, but Gray, thank you
very much for talking to us today. Very interesting. Ray Tubman of the air Wells Group, nice to have you on the show. Thank you, James, lovely to be here, and thank you folks for listening. Let's have some more emails if we would plenty on property at the moment, so let's have some that are on the broader world of investing the money puzzle at the Australian dot com dot Au talk you soon. Four