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Welcome back to the Rate of Change with York Wealth Management.

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The Rate of Change is a podcast which explores the ever shifting momentum of financial markets

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through the eyes of some of the brightest minds in wealth management.

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I'm your host Murdoch Gaddy and in today's broadcast we're speaking with Grant Hackett,

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the CEO of Generation Development Group.

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Prior to Grant's corporate career, he was a multiple Olympic champion representing Australia

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in swimming and has held numerous world records.

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We dive into detail about Grant's formative years, what lessons of life he's carried

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over from his Olympic career into the world of financial markets, the challenges he has

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faced and how he has overcome them.

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Grant discusses Generation Development Group's two core businesses.

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Firstly, Generation Life, which offers clients and advisors access to two key services being

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investment bonds and retirement income products.

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Secondly, the Strategic Investment Arm, in which GDG owns a 49% stake in Longsec.

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Longsec is a leading provider of investment research, portfolio construction and consulting

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services in Australia.

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For me, I found Grant's thoughts on how important it is to surround yourself with great people,

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mentors, coaches both in the pool and in the investing world to be so insightful.

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I was also intrigued by how GDG's search for long term tax effective investment structures

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to support the management and transfer of intergenerational wealth quite interesting,

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especially now with the changes to superannuation being at the forefront of people's minds.

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So before we get into the podcast, I'd like also like to encourage you to listen to the

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disclaimer at the end of this cast and to keep your feedback coming.

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You can reach me at mgatty at ywm.com.au.

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With that being said, I hope you enjoyed this conversation as much as I did.

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So sit back, relax and enjoy.

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Grant Hackett, welcome to the rate of change with York Wealth Management.

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Thanks very much for having me Murdoch.

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It's great to have you on.

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I'm looking forward to running through a few things today, sport and business.

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It's a bit of fun.

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Someone's got to do it.

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Many of you may be familiar with Grant and his many accolades in the pool, but many of

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you may not be familiar with his achievements out of the pool.

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So Grant, why don't we kick things off and tell everyone a little bit about yourself,

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about your formative years and what lessons of life you have carried over into the world

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of finance.

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Look for me, I mean, yeah, just I guess a brief overview of my life.

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Got into the pool when I was very young because my brother got beaten in a surf race by a

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couple of girls and wanted to do swimming lessons and therefore I just tagged along with

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him.

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He was six and a half years older than me.

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He went off to the Uncle Toby Super Series, the Ironman Series with the likes of Trevor

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Handy for a few years.

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I went into the pool lanes, wanted to go to the Sydney Olympics and that sort of became

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a dream for me.

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Went through my swimming career, always made sure I was studying at the time.

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I was doing commerce law at uni post high school.

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I grew up on the Gold Coast and then transitioned into finance after 13 years on the national

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swim team and three Olympic games.

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Always keen on business, finance.

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Like I said, I was studying, went into my master's degree after sport, after being in

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Westpac for a few years.

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Yeah, that's kind of been, I guess, the evolution of me.

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Fast forward probably 15, 16 years later now since I finished my sporting career and now

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I'm CEO of a business called Generation Life.

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I also run our listed entity which is called Generation Development Group and we've got

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two businesses that sit underneath that, one being Lonsec and the other one being the Life

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Company.

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So yeah, it's been a fun journey.

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Loving everything that I'm doing.

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Married, fourth child on the way in August as well.

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So yeah, life's full of...

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Congratulations.

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Thank you.

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Thank you.

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Very excited.

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So what challenges did you face in the transition out of the pool into the world of financial

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markets and how did you overcome them?

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Yeah, I guess some of the challenges, I mean, they're vast, right?

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They're many, they're little ones, they're big ones.

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I think for me, coming out of the pool into the business world, it's a massive transition

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because the first thing that you realize is that you were kind of like almost the global

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CEO of what you did.

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You were the best of the world of what you did and for a long time.

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And then all of a sudden you go into Colin's street on a Monday morning and you're not

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the best at the table.

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When I was first going into banking and finance and that realization came around pretty quickly

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and then I got to, I guess, a point through that process where I thought, well, I can

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either just try and stay in sport for the rest of my life or I could really focus here

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and bed down and do something different, which is what I really wanted to do and what I was

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passionate about.

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So I just put my head down and focused on that, but it's a big transition.

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It's hard emotionally going through all of that.

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It's a transition of identity as well.

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The thing about sport is if you've been doing it from such a young age, I started when I

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was four when I was swimming.

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Everyone knew you as an athlete.

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That's how you were identified.

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You walk down the street.

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People know you as the swimmer or the Olympian.

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And so, you know, to be able to train and they still do today, but then you transition

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out of sport and all that's left behind you and all the accolades that obviously come

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with that.

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And then, of course, you go through life in a very different way through your formative

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years.

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You're not going out and partying.

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You're not doing the normal things.

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You're actually going training at, you know, quarter to five in the morning.

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You're missing all the sort of things at high school that you'd normally be doing or going

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into university and having the fun experience.

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For me, I was doing most of my university studies on a plane traveling around the world

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competing.

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You know, our sport, we compete or race for 49 weeks of the year and have three weeks

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off.

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That's the way it works for me from about the age of 15 or 16 all the way to age 28.

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So, yeah, there's heaps of challenges that come with that.

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But the one thing that I really learned through the pool was that high performance structure.

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Being around a bunch of athletes that were all trying to be the best of what they did

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and not only the athletes, but the coaches, they're all trying to be the best at what

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they did, too.

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And the management we had around the team, you know, your physio, your massage, your

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nutritionist, everyone was there focused on being the very, very best.

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And so from that point of view, it was great because you learned that psychology and that

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psychology was really embedded in you around high performance and doing whatever it took

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to get the outcomes you're looking for, regardless of the adversity or challenges that you might

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have had through your way.

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And I swum the Olympics with a partially collapsed lung in 2004 because I had pneumonia at the

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start of the year and blocked my lung for so long with mucus that it was actually sitting

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in a ball, the bottom half of my left lobe.

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So, you know, all those sorts of things teach you a lot for business.

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And then when you go into business, you've got to obviously learn the skills of what

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you're doing and the dynamics of that market, your products and how to run the teams effectively

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and all the things that come along with that.

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But in terms of the overarching principles of success, they're exactly the same, regardless

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of what field you're in.

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And I think that's the fortunate thing that I had through sport and going through those

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adversities.

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I definitely had a different question asked, but I really want to come back to the psychology

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of this because I've got a lot of friends as we were discussing off air that, you know,

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sport either made it or didn't make it or something equivalent.

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But the one thing that everyone discusses that I've known they've gone into property

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or finance or something equivalent like yourself, it's kind of having to retrain.

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I'm sorry, how do I say this?

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An athlete's body is the tool, right?

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But now essentially your mind is the tool.

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And you said it correctly that I think the process is exactly the same.

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You get up, you did the same thing over and over again and essentially builds, right?

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But how did you find and you mentioned coaches before.

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So was there anyone specifically that helped you with that particular transition, essentially,

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you know, taking your tool from being your body to just your mind when essentially your

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mind, as you said correctly, you're preparing yourself psychologically to go through these

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battles and come out the other side when essentially now it's just all your mind.

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Yeah, it's funny.

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I understand what you're saying, but I almost slightly disagree with it in some respects

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because it's definitely more swayed towards the mental aspect and the aptitude side, obviously,

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when you go into business versus the physical side.

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But I think they're all important in all fields.

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The balance and sport, of course, it's mostly physical, but you have to have a certain level

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of aptitude strategically to do what you need to be able to overcome the pressure, the stress,

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the nervousness and everything that you've got to go through.

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So it's not just, you know, sort of straightforward physical preparation.

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So the psychology is very important in that.

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Obviously, that balance then shifts when it comes into business and trying to be successful

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in a different field.

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So I do think that the physical attributes are really important, like good sleep, good

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nutrition, not drinking too much, all those things that you should do to make sure that

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you're actually in the best mental state to be able to execute and deliver and deliver

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consistently.

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Consistency is the most important thing.

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Being able to show up every single day and have those day to day disciplines that actually

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lead to the success and sort of parting you against the rest of the field.

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So yeah, I mean, as much as you have to go through a rebalancing of that sort of mental,

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emotional and physical kind of approach towards whatever you're doing, at the end of the day,

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you do need all three.

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In terms of that transition that you just spoke to Murdoch, sort of coming out of the

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pool, I actually wish I used a lot more psychologists through my career because it's one thing where

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I could have probably sharpened up a little bit more in terms of my approach.

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I thought it was a weakness, if I'm being totally honest.

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I thought if you needed someone to be able to help you out like that, that was a weakness.

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That was me through my teen years.

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And that's me not having enough worldly experience to appreciate that I'm training every other

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muscle.

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Let's train that muscle to the absolute maximum as well.

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And I wish I did more of that because I've done a lot more of that since my sporting

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career just to understand who I am, what makes me tick, what drives me, how do I have to

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get the balance in my life, what are my strengths, what are my weaknesses, et cetera, to be able

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to refine all that around myself.

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But there's certain aspects that we all look back on where I thought, you know what, I

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probably thought I was a bit too good there through my sporting career.

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And I probably could have even been better if I adopted some of these things and actually

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had a bit more of an open mind to it.

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So I think as I get older, I kind of sit more on the edge of my seat and question myself

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more and more and get more curious because I could have done that better back then.

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And that's probably some of the challenges when you have success at such a young age.

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You think you've got the formula mastered, but really you're just starting out.

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Isn't that the joys of being young and the lessons of experience?

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Correct, correct.

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When you're young, of course, you think you know it all.

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And the older you get, the more you realize you know nothing.

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We all need a Yoda in our life to essentially show us the pathway or Mr. Miyagi.

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Well let's talk about generation life, right?

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So for many people that aren't familiar with generation life, as you were saying before,

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it's broken up into the generation development group and then essentially the services and

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entities underneath.

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Do you want to give a bit of color around how that works and operates?

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Yeah, sure.

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So really exciting business that I got involved with back in 2017.

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So we first kicked off that back then.

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It was named a different business.

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We changed it to generation development group, which is a listed entity, GDG.

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We then had the life company that's underneath it that we renamed and rebranded Generation

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Life, which had one product at the time called an investment bomb, which is an after tax

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paying structure with a maximum tax rate of 30%.

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However, the average tax rates for a lot of our funds sit between 12 and 15%.

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So that was a product we knew that would be hugely popular because in 2017, that's where

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those initial big changes in superannuation took place.

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And we wanted to be able to capture a lot of those flows that necessarily wouldn't

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be going to the superstructure anymore or we used as an alternative.

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On the other side, back in what was it when we completed the deal with Lonsec, we bought

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37% of Lonsec.

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So Lonsec is a qualitative research firm, but also asset management firm through SMA

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in the MDA space.

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And we saw a great opportunity there post-Royal Commission where the portfolio construction

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probably wasn't going to be done directly by practices or dealer groups anymore.

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They're probably going to go to more independence like a Lonsec business.

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So when we bought that business, it was still researching a lot of products, probably about

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12 or 1300.

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It's closer to 1700 plus today, but it had 659 million worth of funds under management.

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Fast forward less than three years later, it's now sitting at 8.2 billion.

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So it's grown significantly and we've taken that equity stake from 37 up to 49.2%.

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So yeah, so you sort of look at us as three businesses, listed entity, life insurance

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company, generation life, and then the research business, Lonsec Holdings.

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It's almost like a FinTech essentially.

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It's a research entity.

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It's not really advisor driven, is it?

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It's essentially like SMAs or ETFs, essentially risk adjusted portfolios.

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And then you have that community and then they're looking where to go and where to allocate.

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Is that how that Lonsec business has been restructured?

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Yeah, it's obviously driven by advisors, comes through the platforms, through the dealings

231
00:14:00,320 --> 00:14:03,040
with the groups and they help with the portfolio construction.

232
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I've got several different types of portfolios there that you can choose from in the SMA

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space.

234
00:14:09,160 --> 00:14:12,640
Obviously, they've got the MBA space, which is even more tailored, probably for more sort

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of highly affluent, high net worth individuals.

236
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So yeah, I mean, and that business has done extremely well.

237
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Then we sort of flip back on the life company side with the investment bond.

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We've gone from when we, back in 2017, it was sitting a touch probably under 700 million

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00:14:27,640 --> 00:14:28,640
in funds under management.

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Fast forward to today, that's 2.5 billion.

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And we've introduced a new product, which is an investment linked lifetime annuity called

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Life Income.

243
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That's the first of its kind.

244
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So many of those baby boomers obviously going into retirement, longevity risk, sequencing

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risk being significant things.

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So we thought what a great way to address that market instead of just having the traditional

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lifetime annuities that are fixed interest linked.

248
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Let's have an investment linked product that you can switch around with different investment

249
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options, but know that you never get to run out of money because it's an annuity stream.

250
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So yeah, we kind of look at ourselves as a bit of a disruptor in the product space.

251
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So we're always looking for new opportunities, growing markets, and then trying to be able

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to address that market with best in class products and strategies.

253
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Yeah.

254
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And especially adapt to the changes with what the government likes to throw at us.

255
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So specifically, and a lot of people are familiar with what's happening with Super.

256
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I think this is a very good pivot into this particular conversation.

257
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So do you want to give a bit of clarity around the changes in Super, what this means and

258
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why that insurance bond may be a good option for people looking to allocate outside of

259
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the Super framework, but still want similar benefits to what they're receiving in Super?

260
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Yeah.

261
00:15:40,560 --> 00:15:44,240
I mean, it all took us by surprise, I think a couple of months ago.

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They were talking about potential changes in Super and trying to define what is Super

263
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all about?

264
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What does a dignified retirement actually look like and what's an equitable retirement

265
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look like?

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And then all of a sudden they came out and they said, for balances above 3 million, it's

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going to have an extra 15% tax.

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So effectively doubling the tax that's already there for those amounts that exist today.

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00:16:05,760 --> 00:16:09,120
And also it doesn't matter if those gains are realized or unrealized, they're going

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to be taxed anyway.

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And that $3 million threshold is not going to be indexed.

272
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And they said, this is only going to affect half a percent of the entire population.

273
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So 99.5% of people aren't affected.

274
00:16:21,600 --> 00:16:24,240
It's only going to be 80,000 people.

275
00:16:24,240 --> 00:16:30,000
And this is a material change because this obviously changes Super and the use for it

276
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and how people viewed Super too.

277
00:16:32,160 --> 00:16:36,640
So even though it might only affect 80,000 people today, obviously not being indexed,

278
00:16:36,640 --> 00:16:41,000
that'll creep up quite a bit more over the next few years.

279
00:16:41,000 --> 00:16:46,040
But at the end of the day, people that were just putting money inside Super, putting it

280
00:16:46,040 --> 00:16:52,200
in assets that were kind of sort of land banking or direct property and stuff like that, now

281
00:16:52,200 --> 00:16:56,120
the fact that you're going to be taxed on those assets, whether they're realized or

282
00:16:56,120 --> 00:16:59,000
not, you're not necessarily going to have the cash flow.

283
00:16:59,000 --> 00:17:01,880
People are going to be looking for alternative structures.

284
00:17:01,880 --> 00:17:06,440
And it's when really the investment bond structure starts to come into its own, particularly

285
00:17:06,440 --> 00:17:11,400
for balances above that, where effectively for a lot of our funds, our tax rate is less

286
00:17:11,400 --> 00:17:12,400
now.

287
00:17:12,400 --> 00:17:15,840
We have greater state planning features because we've got binding nominations.

288
00:17:15,840 --> 00:17:20,360
So therefore you can determine how and when your funds will be transferred.

289
00:17:20,360 --> 00:17:24,680
So a lot of our wind flows are just for estate planning purposes, not for the tax arbitrage

290
00:17:24,680 --> 00:17:26,160
that exists in there.

291
00:17:26,160 --> 00:17:27,760
And it's also credit to protect too.

292
00:17:27,760 --> 00:17:31,800
So a lot of people utilize trust structures, of course, to make sure they protect their

293
00:17:31,800 --> 00:17:32,800
assets.

294
00:17:32,800 --> 00:17:34,680
You can do all three things inside a trust.

295
00:17:34,680 --> 00:17:38,920
You can do estate planning, you can get your tax arbitrage and you can get your asset protection.

296
00:17:38,920 --> 00:17:43,640
So we're really starting to come into our own and we're trying to develop more features

297
00:17:43,640 --> 00:17:48,840
all the time for the advisors and their clients that use it because we see from an estate

298
00:17:48,840 --> 00:17:52,640
planning point of view, the complexities and blended families or people wanting to bypass

299
00:17:52,640 --> 00:17:56,800
a generation because their kids might be divorced and they still want to look after the grandchildren

300
00:17:56,800 --> 00:18:00,120
and they're not worried about how the money will flow out if we'll actually get to the

301
00:18:00,120 --> 00:18:01,120
beneficiaries.

302
00:18:01,120 --> 00:18:04,240
So we're solving a lot of common problems for families.

303
00:18:04,240 --> 00:18:08,560
And we're looking at legislative change and looking at, well, how do we actually become

304
00:18:08,560 --> 00:18:13,640
part of the solution around this and help people support in their wealth management

305
00:18:13,640 --> 00:18:19,360
and wealth accumulation and being able to distribute their funds how and when they'd

306
00:18:19,360 --> 00:18:21,280
like to.

307
00:18:21,280 --> 00:18:26,320
So there's been a number of changes in Super, but essentially, can you give me a bit of

308
00:18:26,320 --> 00:18:27,320
color around that?

309
00:18:27,320 --> 00:18:29,960
So the investment bond is within the Life Act, right?

310
00:18:29,960 --> 00:18:34,080
So some people might be going, okay, there's lots of changes in Super.

311
00:18:34,080 --> 00:18:37,840
We're looking at potentially trying to benefit in a different vehicle and different structure

312
00:18:37,840 --> 00:18:39,540
that's in the Life Act.

313
00:18:39,540 --> 00:18:41,320
What if there's changes in the Life Act?

314
00:18:41,320 --> 00:18:48,320
If I move from A to B and then there's a change, what do you think is going to happen there?

315
00:18:48,320 --> 00:18:54,000
I think from our perspective, I mean, none of us can predict exactly what's going to

316
00:18:54,000 --> 00:18:55,000
happen in the future.

317
00:18:55,000 --> 00:18:57,120
We'd love to be able to have that crystal ball.

318
00:18:57,120 --> 00:19:01,840
But really, when you look at the legislative risk around our product, it would seem relatively

319
00:19:01,840 --> 00:19:02,840
low.

320
00:19:02,840 --> 00:19:06,840
We've had one change in the last 22 years, which linked us to the corporate tax rate,

321
00:19:06,840 --> 00:19:09,480
the headline tax rate of 30%.

322
00:19:09,480 --> 00:19:13,040
In terms of, I guess, the overall industry, you've got to look at the size of the pie.

323
00:19:13,040 --> 00:19:16,440
And we sort of sit in that 12 to $14 billion pie.

324
00:19:16,440 --> 00:19:22,840
And you look at superannuation, and that's a $3.5 trillion pool of money that you've

325
00:19:22,840 --> 00:19:27,800
only got to tweak slightly to be able to make a significant amount of revenue off, which

326
00:19:27,800 --> 00:19:31,600
the government is obviously looking for, given how much our debt has grown over recent years.

327
00:19:31,600 --> 00:19:36,040
So and the fact that we're trying to actually get back into surplus in the budget.

328
00:19:36,040 --> 00:19:39,280
Also when you look at the other potential reforms that were in place, you know, we remember

329
00:19:39,280 --> 00:19:44,440
the federal election back in 2019 when Shorten was going for election and Chris Bowen was

330
00:19:44,440 --> 00:19:46,640
looking to be the treasurer.

331
00:19:46,640 --> 00:19:49,920
Some of the proposed changes that they had there was the franking credits inside super.

332
00:19:49,920 --> 00:19:54,720
So again, another change to super, there's increasing the highest marginal tax rates

333
00:19:54,720 --> 00:19:55,720
from 47 to 50.

334
00:19:55,720 --> 00:19:59,400
There was taxing trusts at the first dollar of distribution.

335
00:19:59,400 --> 00:20:01,060
There was looking at negative gearing.

336
00:20:01,060 --> 00:20:05,960
So there was a whole heap of other areas of the pie that are much more significant than

337
00:20:05,960 --> 00:20:08,480
investment bonds that they look at changing.

338
00:20:08,480 --> 00:20:12,440
So I think if they made a change to us, they wouldn't really drive much revenue out of

339
00:20:12,440 --> 00:20:14,760
it because it's not that big yet.

340
00:20:14,760 --> 00:20:17,920
Let's fast forward maybe, you know, in a decade or two's time.

341
00:20:17,920 --> 00:20:21,200
And if it was, you know, four or five hundred billion dollar industry, that could be a very

342
00:20:21,200 --> 00:20:24,560
different conversation, but it's just not in that realm yet.

343
00:20:24,560 --> 00:20:28,600
So we see it as relatively low legislative risk and to change the life act, changing

344
00:20:28,600 --> 00:20:32,760
life insurance and, you know, all the products that sit within that category.

345
00:20:32,760 --> 00:20:34,800
That is a significant piece of work.

346
00:20:34,800 --> 00:20:40,440
And so we just can't see a government finding that attractive right now.

347
00:20:40,440 --> 00:20:43,480
And the other aspect, too, you've got to remember the money that comes here has had the money

348
00:20:43,480 --> 00:20:45,680
that the tax paid on it as well.

349
00:20:45,680 --> 00:20:50,320
So they've already been able to, I guess, clip the tickets, so to speak, on the on the

350
00:20:50,320 --> 00:20:51,320
way through.

351
00:20:51,320 --> 00:20:54,860
And then, you know, we're just a structure to be able to help people accumulate their

352
00:20:54,860 --> 00:20:56,680
wealth from there on.

353
00:20:56,680 --> 00:20:59,480
Well, let's let's talk about that.

354
00:20:59,480 --> 00:21:03,260
So it's a structure to help people accumulate from wealth from there on.

355
00:21:03,260 --> 00:21:07,640
Many people may be familiar with, you know, the the kids bond, so to speak, you know,

356
00:21:07,640 --> 00:21:10,680
putting the bond for the kids for education purposes.

357
00:21:10,680 --> 00:21:11,680
Right.

358
00:21:11,680 --> 00:21:16,520
But can you use that as an example to compare and contrast with the life insurance investment

359
00:21:16,520 --> 00:21:17,520
bond vehicle?

360
00:21:17,520 --> 00:21:18,520
Right.

361
00:21:18,520 --> 00:21:19,520
The differences.

362
00:21:19,520 --> 00:21:20,520
Yeah.

363
00:21:20,520 --> 00:21:22,080
So it's it's interesting.

364
00:21:22,080 --> 00:21:23,080
Yeah.

365
00:21:23,080 --> 00:21:26,240
With it, with an education bond, you know, people always looking ways to tax effectively

366
00:21:26,240 --> 00:21:29,640
save for their kids education, particularly if they're going to be sending to expensive

367
00:21:29,640 --> 00:21:30,640
private schools.

368
00:21:30,640 --> 00:21:37,760
So it's a great introduction into the category, I guess you could say of investment bonds.

369
00:21:37,760 --> 00:21:41,160
Really when I when I talk to people about an investment bond, as I say, just think of

370
00:21:41,160 --> 00:21:42,320
it as another legal structure.

371
00:21:42,320 --> 00:21:46,320
I mean, we all use different legal structures for different different things.

372
00:21:46,320 --> 00:21:50,280
You know, we use our own personal name when it comes to a principal place of residence.

373
00:21:50,280 --> 00:21:54,520
We obviously have a superannuation legal structure when it comes to our retirement, when people

374
00:21:54,520 --> 00:21:58,040
start to really accumulate wealth, they look at their trust structures or looking at bucket

375
00:21:58,040 --> 00:21:59,280
companies.

376
00:21:59,280 --> 00:22:02,240
Really just another legal structure to be able to invest through.

377
00:22:02,240 --> 00:22:07,860
So a lot of people initially will dip the toe in the water with a product that's a future

378
00:22:07,860 --> 00:22:13,960
savings plan, such as one of our child builder bonds, to be able to save for their kids high

379
00:22:13,960 --> 00:22:16,300
school, private school fees.

380
00:22:16,300 --> 00:22:19,760
And then on the other side, when people start earning significant amount of money through

381
00:22:19,760 --> 00:22:24,680
the pay as you go and get on a high marginal tax rate, but they've got discretionary surplus

382
00:22:24,680 --> 00:22:29,340
capital coming out of that, they'll they'll look at one of our other products like a life

383
00:22:29,340 --> 00:22:32,840
builder investment bond, where they'll invest through and be able to make a significant

384
00:22:32,840 --> 00:22:33,840
tax arbitrage.

385
00:22:33,840 --> 00:22:37,520
Or a lot of the time, if it's people on a lower marginal tax rate, they won't get bracket

386
00:22:37,520 --> 00:22:41,640
credit because they're not getting distributions from their investment every single year to

387
00:22:41,640 --> 00:22:44,120
put them up on a higher marginal tax rate as well.

388
00:22:44,120 --> 00:22:47,040
So yeah, there's a diversity of strategies.

389
00:22:47,040 --> 00:22:51,560
But at the end of the day, it's it's a very, very simple structure, because we're a tax

390
00:22:51,560 --> 00:22:55,240
paying structure, you choose your investments as you would normally.

391
00:22:55,240 --> 00:22:58,440
We've got all the major asset classes in there and multiple options within each.

392
00:22:58,440 --> 00:23:02,000
You can construct your own portfolio or just go into diversified options.

393
00:23:02,000 --> 00:23:07,120
So it's very, very easy once once you're able to understand and get your head around it

394
00:23:07,120 --> 00:23:09,620
and start investing.

395
00:23:09,620 --> 00:23:12,360
Really want to get into the investment menu, because that's the juicy bit.

396
00:23:12,360 --> 00:23:16,000
But I before we get there, can we just discuss the specific mechanics?

397
00:23:16,000 --> 00:23:17,000
Right.

398
00:23:17,000 --> 00:23:19,360
So, you know, you have to hold it for 10 years.

399
00:23:19,360 --> 00:23:23,400
And a question we get quite often is, what happens if I get out before 10 years?

400
00:23:23,400 --> 00:23:25,800
What happens if I pass away before 10 years?

401
00:23:25,800 --> 00:23:29,080
Just some of the mechanics would be great to dive into.

402
00:23:29,080 --> 00:23:34,760
Yeah, like any of these legal structures, there's certain rules that apply to it.

403
00:23:34,760 --> 00:23:37,800
So for us, a lot of tax benefits inside 10 years.

404
00:23:37,800 --> 00:23:42,160
So you maximize the tax benefits after 10 years because there's nothing to declare on

405
00:23:42,160 --> 00:23:47,020
your tax if you take a partial or full redemption, regardless of what that amount is, whether

406
00:23:47,020 --> 00:23:50,080
it's a dollar or, you know, 10 million dollars.

407
00:23:50,080 --> 00:23:53,720
So nothing to declare on your tax return as part of your overall income for that particular

408
00:23:53,720 --> 00:23:54,720
year.

409
00:23:54,720 --> 00:23:58,240
Inside 10 years, if you were to take, say, a partial redemption because you needed the

410
00:23:58,240 --> 00:24:03,200
cash flow, say it's a year five, you've obviously had five years of tax deferral.

411
00:24:03,200 --> 00:24:07,120
So you've been able to accumulate more paying a lower tax rate, because we all know tax

412
00:24:07,120 --> 00:24:10,400
is the biggest expense on any investment.

413
00:24:10,400 --> 00:24:11,600
So you've had that benefit.

414
00:24:11,600 --> 00:24:13,460
And also the fact that it's a portion.

415
00:24:13,460 --> 00:24:17,640
So the way the A2 looks at it, if you've taken a partial redemption, they look at a portion

416
00:24:17,640 --> 00:24:20,800
as capital and a possible as accessible income.

417
00:24:20,800 --> 00:24:25,800
And on the accessible income, you always receive a full 30 percent tax offset.

418
00:24:25,800 --> 00:24:30,360
Even if your tax rate inside the products only set at 11 or 12 percent, you always get

419
00:24:30,360 --> 00:24:31,720
that full 30 percent offset.

420
00:24:31,720 --> 00:24:37,960
So you can see inside the 10 year time frame, there's a lot of tax benefits post 10 years,

421
00:24:37,960 --> 00:24:39,960
you maximize those tax benefits.

422
00:24:39,960 --> 00:24:45,360
And if you were to pass away in the meantime, these are 100 percent tax free upon death,

423
00:24:45,360 --> 00:24:49,160
regardless of who the beneficiary is, a dependent or a non-dependent, doesn't matter.

424
00:24:49,160 --> 00:24:53,160
And if you've held it for five minutes or 50 years, the same rules apply.

425
00:24:53,160 --> 00:24:57,160
So that's why it's such an effective estate planning vehicle.

426
00:24:57,160 --> 00:25:01,920
Yeah, that's that's one of the things that really surprised me.

427
00:25:01,920 --> 00:25:05,360
Like I had a client in the 90s, and he said to me, you know, if something happens, you

428
00:25:05,360 --> 00:25:07,920
pass away, you know, my kids get it tax free.

429
00:25:07,920 --> 00:25:09,200
I'm like, what are you talking about?

430
00:25:09,200 --> 00:25:10,880
Let's have a conversation many years ago.

431
00:25:10,880 --> 00:25:15,960
But then when we are dug into it, I was just quite stunned about, you know, a tool for

432
00:25:15,960 --> 00:25:19,840
transition of wealth, like, you know, that preparation before, because, you know, we've

433
00:25:19,840 --> 00:25:23,400
all had, you know, family pass away and grandparents, et cetera.

434
00:25:23,400 --> 00:25:28,640
And if you don't do that, potentially the taxes are huge in that particular thing.

435
00:25:28,640 --> 00:25:33,720
But that preparation beforehand, I just found kind of blew my mind that this tool was available

436
00:25:33,720 --> 00:25:35,720
and not many people know about it.

437
00:25:35,720 --> 00:25:37,920
Any thoughts around that?

438
00:25:37,920 --> 00:25:39,840
It's it's quite remarkable.

439
00:25:39,840 --> 00:25:44,600
Well, I think, you know, what people say, what I don't know more about this, if it's

440
00:25:44,600 --> 00:25:48,560
such a great structure and it's like, well, the other structures have been sort of too

441
00:25:48,560 --> 00:25:53,520
good for too long, almost, you know, people just used superannuation as the vehicle to

442
00:25:53,520 --> 00:25:54,520
accumulate their wealth.

443
00:25:54,520 --> 00:25:57,800
And most of the money, obviously, in the country sits with the baby boomers.

444
00:25:57,800 --> 00:26:02,040
You know, they've got a lot of the real estate, the big super balances, they're all sort of

445
00:26:02,040 --> 00:26:03,320
heading into retirement now.

446
00:26:03,320 --> 00:26:05,720
They've had, you know, sort of 40 years of working life.

447
00:26:05,720 --> 00:26:09,600
And you look at that and then there was no caps in super.

448
00:26:09,600 --> 00:26:11,640
We could put as much money as you wanted to in there.

449
00:26:11,640 --> 00:26:16,160
You know, back in the 2000s, sometime you could put that extra million dollars in there

450
00:26:16,160 --> 00:26:17,160
too.

451
00:26:17,160 --> 00:26:20,440
So there was all these incentives to accumulate your wealth in one particular area.

452
00:26:20,440 --> 00:26:22,920
And that kind of party has stopped now.

453
00:26:22,920 --> 00:26:25,200
And they're like, whoa, whoa, whoa, this is going to a little bit too big.

454
00:26:25,200 --> 00:26:27,780
The tax incentives are a little bit too generous.

455
00:26:27,780 --> 00:26:30,040
And we've got to start putting the brakes on this.

456
00:26:30,040 --> 00:26:33,320
And look, we've always been outside of super because you've got full liquidity, access

457
00:26:33,320 --> 00:26:34,360
your funds at any time.

458
00:26:34,360 --> 00:26:36,800
We've always been a great vehicle and it's always been very popular.

459
00:26:36,800 --> 00:26:41,160
And in fact, this was the quarter of the size of superannuation once until they made all

460
00:26:41,160 --> 00:26:46,360
those attractive super changes and the super guarantees came in back in 1992.

461
00:26:46,360 --> 00:26:51,840
So I think this sort of product structure has just done a full circle and where it's

462
00:26:51,840 --> 00:26:56,000
our job as being number one in market share and inflows in this space and being the biggest

463
00:26:56,000 --> 00:26:59,680
innovator is to go out there and educate the market on this.

464
00:26:59,680 --> 00:27:01,240
And we're very, very clear.

465
00:27:01,240 --> 00:27:02,960
We can see a lot of strategies.

466
00:27:02,960 --> 00:27:08,600
We deal with close to 2000 advisors on an annualized basis now and their clients.

467
00:27:08,600 --> 00:27:12,000
And we've got tens of thousands of customers.

468
00:27:12,000 --> 00:27:15,640
And we're always looking at new strategies all the time for financial advisors.

469
00:27:15,640 --> 00:27:19,480
And we're the first ones to say, hey, no, what you're looking for and the outcome that

470
00:27:19,480 --> 00:27:22,880
you're trying to get this strategy or the investment bond doesn't work.

471
00:27:22,880 --> 00:27:24,440
Or in this one, it does work.

472
00:27:24,440 --> 00:27:25,440
It's fantastic.

473
00:27:25,440 --> 00:27:27,040
It's way better than the alternative.

474
00:27:27,040 --> 00:27:30,600
And we show all the numbers and crunch all the numbers around that through our distribution

475
00:27:30,600 --> 00:27:32,000
team and our technical team.

476
00:27:32,000 --> 00:27:37,800
So from that point of view, it's just the other structures have just been so attractive.

477
00:27:37,800 --> 00:27:40,240
But now times have changed.

478
00:27:40,240 --> 00:27:44,520
And we're seeing a lot of legislative change, not just in recent times, but over the past

479
00:27:44,520 --> 00:27:47,400
few years.

480
00:27:47,400 --> 00:27:51,640
And then this is where clients say to me that this structure sounds fantastic.

481
00:27:51,640 --> 00:27:56,260
But what investment options can I choose from, which we were discussing before?

482
00:27:56,260 --> 00:28:00,160
So what is available?

483
00:28:00,160 --> 00:28:02,600
How often does that get updated?

484
00:28:02,600 --> 00:28:05,960
And the reason why I say this is like any fund manager is like a great empire.

485
00:28:05,960 --> 00:28:08,920
It rises for a long period of time, then something changes.

486
00:28:08,920 --> 00:28:10,920
And then essentially you get the drift.

487
00:28:10,920 --> 00:28:15,440
So a lot of investors, I think now for myself, the people that we look after are thinking

488
00:28:15,440 --> 00:28:16,880
more tactically these days.

489
00:28:16,880 --> 00:28:18,840
Like the ability of this.

490
00:28:18,840 --> 00:28:21,400
We've never seen anything like this current market in the past five years.

491
00:28:21,400 --> 00:28:27,560
It's gone from peak Goldilocks boom, March 2020 pumping money into essentially a completely

492
00:28:27,560 --> 00:28:29,880
drying up potential credit crips recession.

493
00:28:29,880 --> 00:28:34,080
So essentially the capacity to move like I would love more than anything to use a strategic

494
00:28:34,080 --> 00:28:36,000
portfolio and let it go for 30 years.

495
00:28:36,000 --> 00:28:40,880
But I'm finding that people were talking to kind of want a bit more flexibility.

496
00:28:40,880 --> 00:28:46,880
So I suppose long winded question, but what choices are available that clients can invest

497
00:28:46,880 --> 00:28:47,880
in?

498
00:28:47,880 --> 00:28:52,880
And secondly, what's the process to potentially add more things onto the menu?

499
00:28:52,880 --> 00:28:55,420
Yeah, good question.

500
00:28:55,420 --> 00:29:00,520
So for us, when I first joined the firm, we had 33 options on the investment menu covering

501
00:29:00,520 --> 00:29:02,040
most of the asset classes.

502
00:29:02,040 --> 00:29:07,760
Fast forward to today, we've got 65 options that sit on the investment menu.

503
00:29:07,760 --> 00:29:10,720
We've got, you know, model portfolios on there.

504
00:29:10,720 --> 00:29:13,160
We've got tax effective options on there.

505
00:29:13,160 --> 00:29:16,560
We've got a thing called the tax optimized series that we've worked with a lot of the

506
00:29:16,560 --> 00:29:21,320
major fund managers that allows us to use our full tax rules and actually lower our

507
00:29:21,320 --> 00:29:23,980
effective tax rates quite materially.

508
00:29:23,980 --> 00:29:26,040
And we're always looking at new strategies all the time.

509
00:29:26,040 --> 00:29:32,120
So basically, we try and offer, you know, to be very simplistic about the menu is we

510
00:29:32,120 --> 00:29:35,880
try and offer all the asset classes or we try and make it easier and offer you diversified

511
00:29:35,880 --> 00:29:39,360
options in there if that's what you want to do, you know, going to your conservative up

512
00:29:39,360 --> 00:29:41,400
to your high growth funds.

513
00:29:41,400 --> 00:29:45,960
Or we look at, you know, the other aspect of the menu and go, OK, how do we how do we

514
00:29:45,960 --> 00:29:47,680
actually make it more tax optimized?

515
00:29:47,680 --> 00:29:49,560
We're an after tax paying structure.

516
00:29:49,560 --> 00:29:51,640
And we really invested heavily in that that area.

517
00:29:51,640 --> 00:29:58,000
So 20 out of our 65 options sit in what we call the tax optimizer tax aware series, which

518
00:29:58,000 --> 00:30:02,040
have an effective tax rate that generally sit below 15 percent below the headline rate

519
00:30:02,040 --> 00:30:05,240
of superannuation, regardless of whatever your marginal tax rate is.

520
00:30:05,240 --> 00:30:08,680
So and you've got plenty to choose from there.

521
00:30:08,680 --> 00:30:12,760
The other aspect of the menu, too, is we've got to make sure that these are high quality

522
00:30:12,760 --> 00:30:17,680
fund managers that we do a lot of qualitative and quantitative research on and that there's

523
00:30:17,680 --> 00:30:20,240
financial advisor and client demand there as well.

524
00:30:20,240 --> 00:30:25,040
So we make sure we work with the industry to compile an investment menu that works.

525
00:30:25,040 --> 00:30:26,520
And we're always assessing it.

526
00:30:26,520 --> 00:30:30,880
We've got a full investment team, a full product team here that oversee the menu.

527
00:30:30,880 --> 00:30:35,560
We've got an investment committee that oversees that menu that both has internal and external

528
00:30:35,560 --> 00:30:40,640
people that sit on that committee will update the menu when we need to will add to the menu

529
00:30:40,640 --> 00:30:41,640
when we'll need to.

530
00:30:41,640 --> 00:30:45,520
We realize that financial markets, to your points, Murdoch is very dynamic and changing

531
00:30:45,520 --> 00:30:46,520
all the time.

532
00:30:46,520 --> 00:30:48,280
And we've got to make sure that we're doing that.

533
00:30:48,280 --> 00:30:52,240
If we call ourselves innovators, that's something that we need to be conscious of.

534
00:30:52,240 --> 00:30:56,080
And we've also got to make sure that we're very much a scale business.

535
00:30:56,080 --> 00:30:58,640
We've got to see these funds.

536
00:30:58,640 --> 00:31:02,160
They've got to be popular for financial advisor amongst financial advisors and their clients

537
00:31:02,160 --> 00:31:03,160
as well.

538
00:31:03,160 --> 00:31:08,120
There's got to be that certain level of demand there because then we can do more tax optimization

539
00:31:08,120 --> 00:31:09,120
around it.

540
00:31:09,120 --> 00:31:14,160
We can help support more around those funds to be able to deliver the best outcomes for

541
00:31:14,160 --> 00:31:16,160
the clients, too.

542
00:31:16,160 --> 00:31:20,000
So you said this is heavily demand driven, which I really quite like.

543
00:31:20,000 --> 00:31:25,040
So if an advisor or an investor comes up and says that we're looking at this particular

544
00:31:25,040 --> 00:31:27,240
vehicle, we'd like to allocate a particular amount of money.

545
00:31:27,240 --> 00:31:32,000
What's actually the process and how long does it take for you to consider a particular investment

546
00:31:32,000 --> 00:31:36,480
vehicle and then for that to be added to the menu?

547
00:31:36,480 --> 00:31:42,240
Usually for us, if there was someone who wanted their own investment options sitting on our

548
00:31:42,240 --> 00:31:46,120
investment menu, it's a little bit of a process behind it because we have to go to APRA.

549
00:31:46,120 --> 00:31:48,080
We're regulated by APRA being a life company.

550
00:31:48,080 --> 00:31:52,960
So we have to go get a thing called the benefit fund, which is where we see every single investment

551
00:31:52,960 --> 00:31:54,240
has its own benefit fund.

552
00:31:54,240 --> 00:31:58,000
What I call a benefit fund, it's a trust structure for a life company is effectively how you

553
00:31:58,000 --> 00:31:59,080
would think of it.

554
00:31:59,080 --> 00:32:02,520
So they all sit individually in their own benefit funds, which we get approval for MAPR

555
00:32:02,520 --> 00:32:03,520
on to do.

556
00:32:03,520 --> 00:32:05,000
And then we put it on the investment menu.

557
00:32:05,000 --> 00:32:08,820
And usually getting to scale for us per investment option is about $50 million.

558
00:32:08,820 --> 00:32:11,080
So it's quite a significant amount of money.

559
00:32:11,080 --> 00:32:15,480
But when you look at it, you've got billions of dollars sitting on the menu.

560
00:32:15,480 --> 00:32:17,440
You're able to do it when you've got enough demand there.

561
00:32:17,440 --> 00:32:24,800
So from that point of view, if we start talking through our distribution team, these new investment

562
00:32:24,800 --> 00:32:27,040
options are becoming quite popular.

563
00:32:27,040 --> 00:32:28,720
They've got good research ratings around them.

564
00:32:28,720 --> 00:32:30,680
They've got a good stable team.

565
00:32:30,680 --> 00:32:32,680
There's no staldrift amongst their strategy.

566
00:32:32,680 --> 00:32:35,380
That fund manager is sticking to what they said that they would do.

567
00:32:35,380 --> 00:32:39,800
So we make sure we go through a strict due diligence process to make sure that that investment

568
00:32:39,800 --> 00:32:42,100
option is doing everything it's supposed to be doing.

569
00:32:42,100 --> 00:32:43,880
So we don't just put anything on there.

570
00:32:43,880 --> 00:32:45,720
We do our homework on it.

571
00:32:45,720 --> 00:32:51,360
And look, if it was for a single financial practice or for a single dealer group, we

572
00:32:51,360 --> 00:32:56,000
realize that if they've got enough funds under management themselves that they'll be able

573
00:32:56,000 --> 00:33:00,720
to get to scale, we will enter into some sort of negotiation with them to potentially look

574
00:33:00,720 --> 00:33:03,040
at putting that on the investment menu for them.

575
00:33:03,040 --> 00:33:05,440
But we might necessarily put it on a main menu.

576
00:33:05,440 --> 00:33:09,400
We might sit at what we call below the line for a supplementary PDS that's just for their

577
00:33:09,400 --> 00:33:14,000
client base as long as we sort to get to that scale so we could run it properly.

578
00:33:14,000 --> 00:33:17,160
Because as you can imagine, there's a lot of resourcing that goes around these things.

579
00:33:17,160 --> 00:33:18,680
We're an after-tax paying product.

580
00:33:18,680 --> 00:33:21,260
We've got actuaries that sit around it.

581
00:33:21,260 --> 00:33:24,400
We've got a product team that sits around this, an investment team that sits around

582
00:33:24,400 --> 00:33:25,400
this.

583
00:33:25,400 --> 00:33:27,680
We've got all our administration and back office teams as well.

584
00:33:27,680 --> 00:33:30,960
So we basically do the management from end to end.

585
00:33:30,960 --> 00:33:35,520
So we've got to make sure that there's enough money in there to be able to satisfy the costs

586
00:33:35,520 --> 00:33:37,400
that sit around those things.

587
00:33:37,400 --> 00:33:40,600
So what is the main inquiries you're finding come from the interest?

588
00:33:40,600 --> 00:33:45,840
Do you find us mainly coming from the advisor community or the estate planners or people

589
00:33:45,840 --> 00:33:46,840
coming directly?

590
00:33:46,840 --> 00:33:49,160
Where do they find out about this process?

591
00:33:49,160 --> 00:33:50,720
How it works?

592
00:33:50,720 --> 00:33:51,720
Yeah.

593
00:33:51,720 --> 00:33:54,080
So it's funny, just to give you the breakdown of that.

594
00:33:54,080 --> 00:33:58,800
So 92% of our inflows do come through financial advisors.

595
00:33:58,800 --> 00:34:03,000
To the point that we were making before, it's not that the structure, the legal structure

596
00:34:03,000 --> 00:34:07,680
of an investment bond is not known about as mainstream as superannuation for argument's

597
00:34:07,680 --> 00:34:08,680
sake.

598
00:34:08,680 --> 00:34:11,640
It's not that many people could tell you much about superannuation and how all the rules

599
00:34:11,640 --> 00:34:15,640
works and the nuances, but they know about it because it's in the media all the time.

600
00:34:15,640 --> 00:34:20,320
That's the big difference, I think, between us and something like super.

601
00:34:20,320 --> 00:34:28,000
In terms of the demand and the way it's driven, we're always working with the financial advisors

602
00:34:28,000 --> 00:34:32,960
in terms of what they want to see on the investment menu in terms of those inflows.

603
00:34:32,960 --> 00:34:37,440
If we can educate them at the same time, you're usually educating one or 200 clients.

604
00:34:37,440 --> 00:34:43,880
So for us, a lot of our business is constructed to be able to support financial advisors and

605
00:34:43,880 --> 00:34:47,840
their practices because they're the ones at the end of the day giving the holistic advice.

606
00:34:47,840 --> 00:34:52,080
And look for our other product, our investment linked lifetime annuity called Life Income,

607
00:34:52,080 --> 00:34:56,800
we only distribute that through financial advisors because going into retirement, and

608
00:34:56,800 --> 00:34:59,840
this is just a firm belief, it's just so complex.

609
00:34:59,840 --> 00:35:03,760
You've got to consider everything from how is my income going to last?

610
00:35:03,760 --> 00:35:07,320
How am I going to leave a legacy from an estate planning point of view?

611
00:35:07,320 --> 00:35:10,320
How am I going to get more access to the age pension?

612
00:35:10,320 --> 00:35:13,040
All these sorts of things, how long am I going to live for?

613
00:35:13,040 --> 00:35:15,440
All these sorts of things that you've got to consider.

614
00:35:15,440 --> 00:35:20,880
And one of the other aspects, we did $639 million worth of inflows last year.

615
00:35:20,880 --> 00:35:26,120
And funnily enough, 55% of that was actually for estate planning purposes.

616
00:35:26,120 --> 00:35:30,200
So the tax arbitrage or alternative to super wasn't the big driver of the farm flow that

617
00:35:30,200 --> 00:35:31,200
year.

618
00:35:31,200 --> 00:35:37,160
It was actually estate planning is the primary use where coming into 2025, once we see these

619
00:35:37,160 --> 00:35:41,400
changes implemented around superannuation, that could flip on its head and we could see

620
00:35:41,400 --> 00:35:45,680
a lot of money coming outside of super once people are in pension phase and able to take

621
00:35:45,680 --> 00:35:51,360
it out and coming into it to a structure like the investment bond.

622
00:35:51,360 --> 00:35:57,560
So let's talk more about the income earner.

623
00:35:57,560 --> 00:36:00,880
We've done quite a bit on the generation life of the investment product.

624
00:36:00,880 --> 00:36:05,640
Any more color you want to give around that particular product, how it works?

625
00:36:05,640 --> 00:36:09,640
If you put in a million dollars, how does it actually operate?

626
00:36:09,640 --> 00:36:12,920
How do you say this is the payments that are coming out?

627
00:36:12,920 --> 00:36:15,680
How does it actually work on the income?

628
00:36:15,680 --> 00:36:21,860
So the way the lifetime annuity, life income works is basically when you've looked at it,

629
00:36:21,860 --> 00:36:26,080
just to give a short history lesson on these products, annuity products have been around

630
00:36:26,080 --> 00:36:29,680
the world forever, very popular in different regions of the world.

631
00:36:29,680 --> 00:36:32,320
Here in Australia, we've mainly just had traditional lifetime annuities.

632
00:36:32,320 --> 00:36:35,880
And the reason that was the case, and they would just fix interest linked products.

633
00:36:35,880 --> 00:36:42,280
So not a great return over the last decade, given how low interest rates have been.

634
00:36:42,280 --> 00:36:46,480
But people liked them because they gave you additional access to the age pension, because

635
00:36:46,480 --> 00:36:51,320
that capital that you would be put in there is discounted on your net assets.

636
00:36:51,320 --> 00:36:55,440
So therefore it gives you an uplift in age pension because of the way the assets test

637
00:36:55,440 --> 00:36:56,440
work.

638
00:36:56,440 --> 00:37:01,000
So they were very popular because of that, but the return profile wasn't great because

639
00:37:01,000 --> 00:37:05,120
like I said, they'll fix interest linked products and the government legislation only allowed

640
00:37:05,120 --> 00:37:07,020
it to be fixed interest products.

641
00:37:07,020 --> 00:37:11,680
They then introduced the innovative income strengths back in 2017.

642
00:37:11,680 --> 00:37:15,840
Now this meant you could actually have a lifetime annuity that could have income that could

643
00:37:15,840 --> 00:37:20,680
rise and fall from one year to the next, which meant it could be investment linked.

644
00:37:20,680 --> 00:37:25,480
And generally investments grow a lot more than what fixed interest products do over

645
00:37:25,480 --> 00:37:26,480
time.

646
00:37:26,480 --> 00:37:30,320
You look at all the different asset classes over the last hundred years and global equities,

647
00:37:30,320 --> 00:37:33,320
Australian equities, et cetera, et cetera.

648
00:37:33,320 --> 00:37:35,340
Equities have always grown a lot more.

649
00:37:35,340 --> 00:37:40,220
So this presented a great opportunity for a product manufacturer like us to be able

650
00:37:40,220 --> 00:37:44,660
to introduce a product that's got guaranteed income for life.

651
00:37:44,660 --> 00:37:50,600
So our product is 100% reinsured with Hanover Re, which is a double A minus credit rating,

652
00:37:50,600 --> 00:37:52,400
the same as that big four banks.

653
00:37:52,400 --> 00:37:53,500
So that's the first thing.

654
00:37:53,500 --> 00:37:56,880
So no matter how long you live for, you're always going to be paid at income.

655
00:37:56,880 --> 00:38:01,420
Just say you invest a couple of hundred thousand dollars into it, you'll receive depending

656
00:38:01,420 --> 00:38:06,880
on how old you are and whether you're male or female, that'll determine your starting

657
00:38:06,880 --> 00:38:09,820
income for that first year of that investment.

658
00:38:09,820 --> 00:38:13,320
And from there on, your income is linked to the unit price.

659
00:38:13,320 --> 00:38:16,800
So if it grows from a dollar to a dollar, 10 net unit products, your income obviously

660
00:38:16,800 --> 00:38:19,840
increases by 10% the following year.

661
00:38:19,840 --> 00:38:21,520
And then that's basically the way it works.

662
00:38:21,520 --> 00:38:25,760
But what the flexibility of our product is so good around compared to the traditional

663
00:38:25,760 --> 00:38:29,240
lifetime annuities is you can change at any point in time.

664
00:38:29,240 --> 00:38:34,420
So if you want to keep it the same as your superannuation or your pension in terms of

665
00:38:34,420 --> 00:38:38,380
a balanced fund that you might be investing in, you can invest in a balanced fund for

666
00:38:38,380 --> 00:38:39,760
your lifetime annuity.

667
00:38:39,760 --> 00:38:42,720
If you go, you know what, I've got enough sitting in my account based pension.

668
00:38:42,720 --> 00:38:45,820
I actually want to have a bit more growth in my lifetime annuity.

669
00:38:45,820 --> 00:38:49,360
You can go into a high growth product or if the opposite's happening, you want to be more

670
00:38:49,360 --> 00:38:52,640
conservative, you can go into more of a fixed interest product, but you can switch out of

671
00:38:52,640 --> 00:38:54,080
that at any point in time too.

672
00:38:54,080 --> 00:38:57,220
So we've got a product that guarantees income for life.

673
00:38:57,220 --> 00:38:59,280
It gets you that discount on the assets test.

674
00:38:59,280 --> 00:39:02,660
So therefore you can access age pension for a lot of the clients depending on what their

675
00:39:02,660 --> 00:39:04,580
financial means looks like.

676
00:39:04,580 --> 00:39:08,140
But the flexibility of it is remarkable in the fact that you've got investment choice

677
00:39:08,140 --> 00:39:09,700
that you can switch in at any time.

678
00:39:09,700 --> 00:39:13,700
So yeah, it's been really, really exciting to bring such an innovative product to the

679
00:39:13,700 --> 00:39:14,700
market.

680
00:39:14,700 --> 00:39:15,700
We don't call it the silver bullet.

681
00:39:15,700 --> 00:39:18,660
We say this helps with longevity risk and sequencing risk.

682
00:39:18,660 --> 00:39:22,740
And of course, sequencing risk mean when markets fall off a cliff like the GFC.

683
00:39:22,740 --> 00:39:25,940
So when you're account based pension and you're forced to take a combination of capital and

684
00:39:25,940 --> 00:39:30,080
income that year and it declines quite quickly, that you know you still got to have income

685
00:39:30,080 --> 00:39:32,420
for the rest of your life because you've got this product in place.

686
00:39:32,420 --> 00:39:39,600
So yeah, we just see these types of products sort of forming part of the puzzle for retirement

687
00:39:39,600 --> 00:39:42,580
to be able to address all your needs and enjoy your retirement.

688
00:39:42,580 --> 00:39:46,300
A lot of people go into retirement and don't spend their money because they don't know

689
00:39:46,300 --> 00:39:47,300
how long they're going to live for.

690
00:39:47,300 --> 00:39:49,780
And they're afraid they're going to run out or they're afraid their medical bills are

691
00:39:49,780 --> 00:39:52,380
going to be ridiculous as they start getting older.

692
00:39:52,380 --> 00:39:57,700
Where we can say with confidence to say, hey, if you allocate a portion of your retirement

693
00:39:57,700 --> 00:40:00,500
savings to a product like this, you know you're not going to run out of money.

694
00:40:00,500 --> 00:40:04,240
So why don't you enjoy the part of retirement that you can when you're physically healthy

695
00:40:04,240 --> 00:40:07,500
enough to be able to go and travel and tick off all the bucket lists.

696
00:40:07,500 --> 00:40:10,780
And in the back half, know that you've got the security of a guaranteed income for life

697
00:40:10,780 --> 00:40:15,140
and you can pay for the necessities that you need to live the lifestyle and standard of

698
00:40:15,140 --> 00:40:16,380
living that you'd like to have.

699
00:40:16,380 --> 00:40:20,580
So yeah, I get super excited about this sort of stuff and our innovations because I just

700
00:40:20,580 --> 00:40:25,100
think they're changing people's lives and the way we can live retirement here in this

701
00:40:25,100 --> 00:40:26,100
country.

702
00:40:26,100 --> 00:40:29,980
Nothing better than peace of mind in this very, very expensive economy we're currently

703
00:40:29,980 --> 00:40:30,980
dwelling in.

704
00:40:30,980 --> 00:40:36,460
So you touched on that before.

705
00:40:36,460 --> 00:40:39,020
Let's discuss what's the future essentially in this space.

706
00:40:39,020 --> 00:40:43,020
My understanding of the business is you've got GDG, which is essentially the umbrella

707
00:40:43,020 --> 00:40:48,020
and then you're an innovative company which looks for essentially the right structure

708
00:40:48,020 --> 00:40:51,460
to essentially help and evolve with what's coming down the park.

709
00:40:51,460 --> 00:40:58,260
So where do you think the future is for GDG and what's next?

710
00:40:58,260 --> 00:41:04,660
We've got not to go too deep in a strategy given we're a listed company.

711
00:41:04,660 --> 00:41:08,260
We really look at, if I was looking from an acquisition point of view, if I'm just talking

712
00:41:08,260 --> 00:41:13,660
from a GDG perspective, we kind of look at three or four key elements when we're looking

713
00:41:13,660 --> 00:41:14,660
at acquisitions.

714
00:41:14,660 --> 00:41:18,620
One, we like investments that are barriers to entry.

715
00:41:18,620 --> 00:41:19,860
So how do you get a life license?

716
00:41:19,860 --> 00:41:23,020
A research business takes 30 years to build up.

717
00:41:23,020 --> 00:41:24,700
So high barrier to entry.

718
00:41:24,700 --> 00:41:26,300
Good legislative tailwinds.

719
00:41:26,300 --> 00:41:30,100
So we're looking at what is the thematic, what is the government looking to do, what's

720
00:41:30,100 --> 00:41:33,540
the state of the economy, what's the demographic shift?

721
00:41:33,540 --> 00:41:37,540
Baby boomers obviously going into retirement, post-retirement assets doubling from 800 billion

722
00:41:37,540 --> 00:41:42,420
to basically 1.5 trillion by 2030 in the next six and a half years.

723
00:41:42,420 --> 00:41:48,120
So what are the legislative tailwinds and what's actually going on more broadly in terms

724
00:41:48,120 --> 00:41:50,900
of any demographic shift that we're seeing?

725
00:41:50,900 --> 00:41:54,660
The other aspects, reoccurring revenue and great growth opportunities.

726
00:41:54,660 --> 00:41:59,540
So that's what we look for when we're looking at potential acquisitions as a group.

727
00:41:59,540 --> 00:42:03,300
In terms of products, when I sort of take it down to a step level and to both of the

728
00:42:03,300 --> 00:42:07,740
businesses that we oversee is that we're really looking at products that are innovative in

729
00:42:07,740 --> 00:42:08,740
the space.

730
00:42:08,740 --> 00:42:09,940
So it could be an old industry.

731
00:42:09,940 --> 00:42:13,660
It could be anything from traditional lifetime annuities.

732
00:42:13,660 --> 00:42:14,660
It could be life insurance.

733
00:42:14,660 --> 00:42:17,220
I'm not saying we're doing anything like that in that space.

734
00:42:17,220 --> 00:42:19,940
It could be the investment bond, which has been around for a very long time.

735
00:42:19,940 --> 00:42:25,260
We're going, well, how do we actually innovate in this product category to adapt it to what's

736
00:42:25,260 --> 00:42:26,420
required today?

737
00:42:26,420 --> 00:42:31,980
Because we feel like the construct and the basic bones of this product is really, really

738
00:42:31,980 --> 00:42:34,080
good, but there's just been no innovation.

739
00:42:34,080 --> 00:42:38,500
So how do we actually come to the space, disrupt it a little bit, bring it up to speed where

740
00:42:38,500 --> 00:42:41,380
we see markets actually shifting and going?

741
00:42:41,380 --> 00:42:44,020
And we're looking at stuff like that all the time.

742
00:42:44,020 --> 00:42:50,380
We're always going through sort of think tanks or due diligence with different products and

743
00:42:50,380 --> 00:42:55,260
seeing what we can do, testing it with financial advisors, talking to financial advisors where

744
00:42:55,260 --> 00:42:59,140
I'm always out there too talking to the coal face, understanding what's going on.

745
00:42:59,140 --> 00:43:00,140
What are their problems?

746
00:43:00,140 --> 00:43:01,140
What are their challenges?

747
00:43:01,140 --> 00:43:04,340
How do we better address and adapt those, whether that's a small or a large innovation,

748
00:43:04,340 --> 00:43:07,020
such as a new product like the life income product.

749
00:43:07,020 --> 00:43:11,820
So yeah, there's always plenty of opportunities coming around the corner, but it's just a

750
00:43:11,820 --> 00:43:13,560
matter of picking the right one.

751
00:43:13,560 --> 00:43:16,100
And also becoming that brand too.

752
00:43:16,100 --> 00:43:19,740
We've really started to become a brand that people do see as an innovator.

753
00:43:19,740 --> 00:43:24,180
Last year, the AFR BOS Awards, we were the seventh most innovative company in the country

754
00:43:24,180 --> 00:43:25,180
there.

755
00:43:25,180 --> 00:43:28,860
So because of our new lifetime annuity product life income.

756
00:43:28,860 --> 00:43:32,780
So those sorts of things get us really, really excited.

757
00:43:32,780 --> 00:43:35,260
And we just love working with the coal face too.

758
00:43:35,260 --> 00:43:40,500
We love being able to build products and strategies that people will use and see a lot of benefits

759
00:43:40,500 --> 00:43:41,500
out of.

760
00:43:41,500 --> 00:43:43,740
That drives our entire team.

761
00:43:43,740 --> 00:43:49,860
Is the focus predominantly just nationally in Australia or does what you're doing and

762
00:43:49,860 --> 00:43:53,300
looking to achieve can be done offshore internationally?

763
00:43:53,300 --> 00:44:00,700
Look, it's too difficult with the legislation changes in other countries.

764
00:44:00,700 --> 00:44:04,260
Well, I mean, it's predominantly in Australia.

765
00:44:04,260 --> 00:44:09,940
Obviously, when you're talking things like Life Act legislation, superannuation, obviously

766
00:44:09,940 --> 00:44:12,380
it's all here in this country.

767
00:44:12,380 --> 00:44:14,220
It doesn't mean from a GDG point of view.

768
00:44:14,220 --> 00:44:19,580
If I step up one from the operational businesses into the holding company, are there other

769
00:44:19,580 --> 00:44:22,140
investments offshore that we would potentially look at?

770
00:44:22,140 --> 00:44:23,140
Absolutely.

771
00:44:23,140 --> 00:44:25,020
If I'm talking from a group point of view.

772
00:44:25,020 --> 00:44:31,860
There's been one business that we owned called Ascalon that had minority stakes and multiple

773
00:44:31,860 --> 00:44:36,940
hedge fund managers that were based here in Sydney, Hong Kong and Singapore.

774
00:44:36,940 --> 00:44:41,660
So we had that business for a while that we originally purchased off Westpac.

775
00:44:41,660 --> 00:44:47,940
So we're always looking at different opportunities where, like I said, we sort of see those three

776
00:44:47,940 --> 00:44:52,100
or four characteristics that we're looking for around high barriers, reoccurring revenue,

777
00:44:52,100 --> 00:44:56,180
great growth prospects or opportunities there and legislative tailwinds.

778
00:44:56,180 --> 00:45:00,980
That doesn't mean it's isolated just to Australia, but most likely the stuff that we will purchase

779
00:45:00,980 --> 00:45:01,980
will be here.

780
00:45:01,980 --> 00:45:05,860
And in terms of products that we're doing with the existing companies, they're certainly

781
00:45:05,860 --> 00:45:06,860
here in Australia.

782
00:45:06,860 --> 00:45:07,860
Yeah, right.

783
00:45:07,860 --> 00:45:08,860
That's been really interesting.

784
00:45:08,860 --> 00:45:14,140
Is there any thoughts you want to leave our listeners with, like anything that comes to

785
00:45:14,140 --> 00:45:18,420
mind?

786
00:45:18,420 --> 00:45:22,780
The one thing that I always like to share, you know, when I'm having a chat in a podcast

787
00:45:22,780 --> 00:45:27,020
and you're sort of talking to a variety of people is, you know, when you're thinking

788
00:45:27,020 --> 00:45:33,060
about your finances, I always think it's just so important like sport, like in business,

789
00:45:33,060 --> 00:45:36,380
when you have a mentor, in sport, you have a coach, when you're trying to build your

790
00:45:36,380 --> 00:45:40,540
wealth and you're trying to look at your retirement and have the best retirement and lifestyle

791
00:45:40,540 --> 00:45:44,940
possible, you need a coach or a financial advisor in there too.

792
00:45:44,940 --> 00:45:47,860
You know, it doesn't matter if you're one of the best athletes in the world.

793
00:45:47,860 --> 00:45:49,460
Michael Jordan had a coach.

794
00:45:49,460 --> 00:45:51,220
So you can always be better.

795
00:45:51,220 --> 00:45:53,740
It's always great to have someone who keeps you accountable.

796
00:45:53,740 --> 00:45:57,020
It's always have someone there who's at the coalface of all of these new products that

797
00:45:57,020 --> 00:46:00,660
we've been talking about over the course of this conversation to be able to steer you

798
00:46:00,660 --> 00:46:04,740
in the right direction, to meet your objectives and keep you really, really accountable if

799
00:46:04,740 --> 00:46:08,420
you're in that phase of wealth accumulation, to save and for your retirement or wanting

800
00:46:08,420 --> 00:46:11,220
to pay off your house or wanting to send your kids to private schools.

801
00:46:11,220 --> 00:46:12,980
It's just good to have someone in your corner.

802
00:46:12,980 --> 00:46:18,220
So yeah, whenever I'm sitting down talking to people, we're big, big firm believers of

803
00:46:18,220 --> 00:46:22,820
having great financial advice around you and pulling on all those resources to meet your

804
00:46:22,820 --> 00:46:26,700
objectives and your emotional goals that you're trying to achieve throughout your life.

805
00:46:26,700 --> 00:46:30,020
So that's probably the only other thing I would add.

806
00:46:30,020 --> 00:46:32,180
As we currently see, everyone knows about super, right?

807
00:46:32,180 --> 00:46:33,700
As you said, it's everywhere.

808
00:46:33,700 --> 00:46:38,260
But if people want to learn more about generational life, the structures you offer, the specific

809
00:46:38,260 --> 00:46:45,940
products, what's their best path to learn more about what you guys and girls do?

810
00:46:45,940 --> 00:46:46,940
Well it's easy.

811
00:46:46,940 --> 00:46:51,940
I mean, you can either jump on our website and then contact one of our team members,

812
00:46:51,940 --> 00:46:54,460
contact our client services.

813
00:46:54,460 --> 00:46:59,220
And like I said, we always encourage people, go talk to your financial advisor, go into

814
00:46:59,220 --> 00:47:04,100
the referral from one of your friends that's had success with a good financial advisor,

815
00:47:04,100 --> 00:47:08,460
go and have a chat to them, talk about these sorts of products, and then get the financial

816
00:47:08,460 --> 00:47:11,620
advisor to reach out at us, test it with us.

817
00:47:11,620 --> 00:47:12,620
What are your objectives?

818
00:47:12,620 --> 00:47:13,620
What are you trying to achieve?

819
00:47:13,620 --> 00:47:16,980
Well, help me with the strategy to be able to try and deliver that outcome.

820
00:47:16,980 --> 00:47:18,860
And yeah, take it from there.

821
00:47:18,860 --> 00:47:24,340
We often find, when I go back on this business back in 2017, we were working with about 450

822
00:47:24,340 --> 00:47:26,020
advisors on an annualized basis.

823
00:47:26,020 --> 00:47:29,460
And like I said, that's gone up almost five times now.

824
00:47:29,460 --> 00:47:35,380
So the reputation through the great sales team and marketing team, product team, and

825
00:47:35,380 --> 00:47:39,500
investment team that we have has really, really grown quite significantly.

826
00:47:39,500 --> 00:47:43,660
And like I said, the opportunities to be able to utilize this structure have as well.

827
00:47:43,660 --> 00:47:48,820
So yeah, certainly look at it whether we called ourselves, I'll just leave this last point,

828
00:47:48,820 --> 00:47:53,880
we called ourselves Generation Life because there is a proposition for each generation.

829
00:47:53,880 --> 00:47:58,300
So whether it's just a newborn child that you're trying to do a savings plan for a child

830
00:47:58,300 --> 00:48:03,020
builder to save for private school fees one day, whether it's someone for estate planning

831
00:48:03,020 --> 00:48:07,900
on the other end trying to distribute to lots of wealth, complicated family situation, or

832
00:48:07,900 --> 00:48:11,100
it's someone right in the middle of their working career and a high marginal tax rate

833
00:48:11,100 --> 00:48:16,260
of 47% wanting to invest but not pay all that tax.

834
00:48:16,260 --> 00:48:17,540
We've got a solution for you.

835
00:48:17,540 --> 00:48:20,300
So yeah, that's what Generation Life's about.

836
00:48:20,300 --> 00:48:23,420
I often actually wonder that, like why a company is called a name.

837
00:48:23,420 --> 00:48:24,620
Like I run my own business as well.

838
00:48:24,620 --> 00:48:26,300
Like why I call it a specific name.

839
00:48:26,300 --> 00:48:29,780
Like I call my business, this podcast, the rate of change, because we're trying to find

840
00:48:29,780 --> 00:48:32,540
essentially the rate of change when market's going up.

841
00:48:32,540 --> 00:48:35,500
At two week period, we start losing money, it goes the other way.

842
00:48:35,500 --> 00:48:38,060
It's like the game's changing, where are we going next?

843
00:48:38,060 --> 00:48:42,340
It's the entire point of speaking to different people in the wealth management ecosystem.

844
00:48:42,340 --> 00:48:43,340
But yeah, right.

845
00:48:43,340 --> 00:48:44,660
So that's why Generation Life was called.

846
00:48:44,660 --> 00:48:49,180
It's the idea that we're trying to help someone in each particular generation and what might

847
00:48:49,180 --> 00:48:52,540
be coming in 50 years, 100 years is going to be completely different to the environment

848
00:48:52,540 --> 00:48:53,540
today.

849
00:48:53,540 --> 00:48:54,540
Is that what you guys are doing?

850
00:48:54,540 --> 00:48:58,260
Is it actually, you're trying to find essentially the right vehicle for the right time and the

851
00:48:58,260 --> 00:49:02,180
right place for that specific generation so you're not tied to one specific thing as legislation

852
00:49:02,180 --> 00:49:03,180
changes?

853
00:49:03,180 --> 00:49:04,180
That's right.

854
00:49:04,180 --> 00:49:08,740
I mean, our product can be so tax effective from a structural point of view.

855
00:49:08,740 --> 00:49:12,880
You could actually set it up so you could just keep it for the next four or five generations

856
00:49:12,880 --> 00:49:15,600
if you wanted to inside our structure.

857
00:49:15,600 --> 00:49:19,460
So that's what you could do if you wanted to use it to that extreme.

858
00:49:19,460 --> 00:49:22,140
But yeah, we like simple names too.

859
00:49:22,140 --> 00:49:26,340
We're kind of simple in our approach to everything because in financial services, things are

860
00:49:26,340 --> 00:49:27,340
complicated enough.

861
00:49:27,340 --> 00:49:29,060
It feels like a different language to people.

862
00:49:29,060 --> 00:49:30,140
It's already intimidating.

863
00:49:30,140 --> 00:49:35,740
So simplicity, particularly when it comes to complicated structures, when you're talking

864
00:49:35,740 --> 00:49:40,940
super, talking trusts and companies and investment bonds, we just try and make everything simple

865
00:49:40,940 --> 00:49:45,020
and that includes the way we name everything because we want to be able to connect with

866
00:49:45,020 --> 00:49:46,380
the market as best we can.

867
00:49:46,380 --> 00:49:50,940
We didn't want to, when we did our rebranding, people come up with Latin names and all sorts

868
00:49:50,940 --> 00:49:54,540
of weird things and we actually just kept coming back to generation because we're like,

869
00:49:54,540 --> 00:49:56,260
yeah, we're a solution for each generation.

870
00:49:56,260 --> 00:49:57,300
So let's do that.

871
00:49:57,300 --> 00:49:59,480
And we've innovated like that over the years as well.

872
00:49:59,480 --> 00:50:04,940
So it's nice to be closely aligned to exactly what you want it to be.

873
00:50:04,940 --> 00:50:06,300
Well Grant, it's been a pleasure.

874
00:50:06,300 --> 00:50:07,300
I've learned a lot.

875
00:50:07,300 --> 00:50:11,780
I hope everyone else has as well and I would like to thank you for your time today.

876
00:50:11,780 --> 00:50:12,780
No worries.

877
00:50:12,780 --> 00:50:13,780
Thanks for having me on Murdoch.

878
00:50:13,780 --> 00:50:14,780
Enjoy the chat.

879
00:50:14,780 --> 00:50:15,780
Absolutely.

880
00:50:15,780 --> 00:50:25,260
Thanks, Em.

881
00:50:25,260 --> 00:50:29,220
Any views expressed in this recording do not represent a view of any other third party

882
00:50:29,220 --> 00:50:31,900
and other sole personal opinions of the speaker.

883
00:50:31,900 --> 00:50:35,900
Any reference to financial product does not constitute advice or recommendation and before

884
00:50:35,900 --> 00:50:39,900
any action, you should seek proper advice from your financial professional.

885
00:50:39,900 --> 00:50:46,740
Australian listeners should head to www.moneysmart.gov.au to find more information on obtaining financial

886
00:50:46,740 --> 00:50:47,740
advice.

887
00:50:47,740 --> 00:51:10,460
To get in touch with York, head to our website www.yorkwealth.com.au.