April 24, 2025 • 34 mins
You can spend half a lifetime working and investing only to hit a financial earthquake with a divorce. But there are ways to ensure the best possible outcome.
Financial adviser Nathan Fradley joins James Kirby, Associate Editor - Wealth in this episode.
In today's episode, we cover:
- What you must know about divorce and money
- The issue of 'valuations'
- How crypto accounts are increasingly relevant to settlements
- How a couple can find the best way to split
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. I hope you've managed to
have a few days off over these rolling holidays Easter
and that day and everything else. And often at holiday
times we do something slightly different, which we will today,
but it is not in the nature of light entertainment.
(00:31):
If you want to figure out how to start your
classic car collection or how to build a wine collection,
we have done that. Have a look in the archive
that's waiting for you. Today. We're going to look at
the issue which I have seen so many times, literally
dictate the lifelong financial fortunes of an enormous amount of people.
(00:56):
And it's not super and it's not your house. It's divorced.
And I have a financial advisor who is a specialist
in the area. He's an independent financial advisor. He's been
on the show before. His name is Nathan Fradley from
Nathan Fradley Advice. And we're going to put you through.
We're going to put you through, We're going to take
you through this issue today. I want you, Nathan.
Speaker 2 (01:17):
I'm great, thanks having me back on.
Speaker 1 (01:19):
Delighted to have you back on Okay, It's something that
we can all pay enormous attention to building an investment
portfolio and optimizing our cash and everything else, interplay between
pensions and super whatever, which we talk about every day
(01:40):
on this show. We don't talk about divorce, And the
fact is that so many times people with their financial
world cut in half or more than that. So can
I ask you, and you deal in this area, and
you've built a reputation in this area, what are the
hidden traps? What are the outstandings mistakes that people from
(02:05):
either side other marriage make in this area financially, if.
Speaker 3 (02:11):
We're looking at it during the divorce process, I'd say
divorce is probably the hardest thing that most people will
go through in their entire life. It's definitely the most expensive.
To your point, it is an empire killer from that realm.
But because it is lost and it's grief, people tend
(02:32):
to lose some of the rationality in the decision making.
They get stuck in sometimes a sense of justice. Sometimes
they are concept of I get my day in court.
Sometimes just someone gets in a third party gets in
an ear of one party. So I'd say that when
we're doing the financial aspect of a divorce process or
(02:55):
any separation, focusing on rational outcomes and what life is
going to be like afterwards instead of getting stuck on
what life could have been like or what happened. Generally
costs fifty percent less money and legal fees than six
months off the divorce proceedings. So I think when we
(03:15):
get great success in divorce process, most people think divorce.
Speaker 2 (03:19):
They go, what's the set percentage?
Speaker 3 (03:20):
How much do I get if they've lived with me
for two years?
Speaker 2 (03:23):
What's the rule? There are no rules.
Speaker 1 (03:26):
There are no rules.
Speaker 3 (03:27):
Did you say in the sense of there's no hard
and fast and there's certain dates and court time frames
that need to be met and must be separated for
twelve months to get divorced and things like that. But
in terms of financial split, a divorce has a divorce
aspect of it, the legal aspect of set breaking that marriage.
It's also got a financial or property settlement, and then
if there's children, that's a child aspect, So the financial
(03:49):
aspect is separate from the divorces.
Speaker 1 (03:51):
So yeah, we always think of divorce as lawyers right
on both sides, not financial advisors, and that is that
the reality too.
Speaker 3 (03:59):
Yeah, what I'm doing in this space is very new,
and financial advisors historically when they've gotten involved, they get
involved after settlement things are done.
Speaker 2 (04:07):
I've now got this pool of money.
Speaker 3 (04:08):
What do I do?
Speaker 2 (04:09):
But when we look at the.
Speaker 3 (04:10):
Really successful processes, two people who decide they're not going
to continue in a relationship together before lawyers get involved,
although you should always get them involved at some point
before they're even involved, you can have discussions which can
then turn into mediations, which can then turn into lawyer
led mediations before a court tells you this is the outcome.
Speaker 1 (04:33):
That would require. I expect this would for balance, This
would require both parties having an advisor, and that would
require whatever way you cut it, it would demand a
certain amount of cash. Yeah.
Speaker 3 (04:48):
Yes, So there's actually a form of separation called collaborative
divorce where you have two lawyers, a communication specialist that's
usually like a psychologist, and a financial neutral And it's
a fantastic process for the right people, but when you
have four professionals in the room, it can be increasingly expensive.
Speaker 1 (05:08):
And is the financial persons supposed to carve it out
fairly financially between the two people getting divorced.
Speaker 2 (05:15):
In collaborative divorces.
Speaker 3 (05:16):
Their job is to equalize understanding, to ensure that there's
nothing missed that could be substantially detrimental in a separation.
So it's like catching things before they go wrong. But
they will never give advice to either party individually, even
after the divorce. They'll always refer out from that position there.
So there's one way that people can do it. But
(05:37):
in the work that I do, it's more working with
I often work with the financially disempowered person in the
relationship because often is the case that one person, as
we do with most jobs in relationships, one person takes.
Speaker 1 (05:48):
Up the job.
Speaker 2 (05:49):
I'll do the cooking, you do the washing.
Speaker 3 (05:51):
I'll take care of the budgeting, and you can take
care of managing the kids, time tables, whatever it might be,
and we divide labor, and that can be proper madic.
If there's anything I'd say to never have to get
advice from me unto force, I would say is if
you can have an equal understanding of what's happening with money,
one person can manage the day to day, but if
(06:12):
you both fully understand what's going on, it can decrease
so many or decrease the chance of things going on
because there is a greater level of clarity.
Speaker 1 (06:21):
It sounds to me what you're saying to our listeners,
and to some extent we will just say that there.
What you're saying is one person can manage the money
if they want, but both parties should look after themselves
by being across what's happening with their money. How much
(06:46):
is our mortgage, how much do we actually make together?
How many bank accounts do we have, how much is
in them? Can you give us some examples when you
say making sure everything's accounted for? Is? Are you talking
about stuff like money? Literally secret colms, people having money
talked away that the other partner didn't do.
Speaker 3 (07:03):
It?
Speaker 1 (07:04):
Was that common? Can you give you some examples.
Speaker 2 (07:06):
That can happen?
Speaker 3 (07:07):
But I find that happens when things have started going
wrong already. So if you've got a couple who'll across
the decisions, he's a really easy tell. If I'm the
person who manages the money and I'm making sure our
plans are on track and we're investing, we're doing all
these things, and the other person comes to me and says, hey,
let's go on this holiday, or the kids got this excursion,
(07:28):
or I want to buy this thing, or and you're
always saying no, that says that the other person doesn't
have a good handle on the situation, because if you
both understand it, it's not a decision of I'm not
the no guy, I'm not the one that's always asking
for things. It's we both understand the situation and the
context of what we can and can't afford. So that's
(07:49):
a really early indicator that if you us feel like
I wish we could do more, but I'm always feel
like we're saying no because we're trying to plan for the.
Speaker 2 (07:55):
Future, but they just don't get it. Because they don't
get it.
Speaker 1 (07:58):
I wonder my hunch is that the disastrous couple is
the couple where neither actually pay attention to the money.
Have you come across divorce proceedings where both parties were
appalling in terms of that they just didn't pay any attention.
Speaker 3 (08:16):
Or they a little bit of dangerous information. They did
little things, but not everything. I thought you were taking
care of that. No, I thought you were taking care
of that. I was doing this thing, but I wasn't
doing that thing. And yeah, it's often the case where
the person who comes to me starts learning about how
things are done.
Speaker 2 (08:32):
Why did we even do it that way? That doesn't make.
Speaker 3 (08:35):
Any sense at all, because granted their former partner was
doing the best they could in the knowledge that they had,
but they may not have known what to do. It
may have just been thrustle them. You're good with money
because you saved a bit more before we go together.
Speaker 1 (08:47):
So you've got money because you're an accountant and whatever,
I'm a portrait artist or whatever. Okay, So what about
when you have people in that situation? The home, which
in the Australian in every country matters, but in Australia
is enhanced because it's also, on top of being a home,
(09:10):
on top of having an elevated value VISI v. History
and other countries, it also is a tax protected vehicle.
So when there's a divorce, is it the case again
I'm just exploring here, Is it the case that the
person who does not get the house but gets other
assets has a much more complex future than the person
(09:36):
who got the house.
Speaker 2 (09:38):
Maybe?
Speaker 3 (09:39):
And so this sort of falls into one of the
old urban legends around around separation that if I keep
the house, I'll be better off. And there's plenty of
reasons for that, not having to base damp duty when
you purchase a new house, which is often missed in
separation agreements. Yeah, finding housing. You keep the house. Now
I've got to go and find somewhere to live, find
somewhere to rent. I got it's been near the kids.
(10:01):
I've got to do that, like all those kinds of things.
And then obviously the capital gains implications, I'll take the investments, you.
Speaker 2 (10:06):
Take the house.
Speaker 3 (10:07):
What happens in time, But I think what when we
look at that The root of that problem is actually
stems from not just what is the split or how
do we divide assets now? But looking forward, And this
is where I think financial advice is going to start
playing a lot more of a role as people see
the benefit of this is when if you look at
i'll take fifty percent, or.
Speaker 2 (10:27):
I'll keep the house. You keep this.
Speaker 3 (10:28):
That's great until we realize that the person who's kept
the house, who was a lower income earner, hasn't really
been able to earn that much, can't afford to maintain
the mortgage, can't afford the upkeep on the property, can't
and then two years they sell it anyway, so that
family asset is gone.
Speaker 2 (10:44):
So this is where when we're looking.
Speaker 3 (10:45):
At at a separation and trying to decide what's the
best way to split assets.
Speaker 2 (10:50):
And when I do this work.
Speaker 3 (10:51):
I'm representing one party is looking at it and saying, yes,
this might be where you want to be now, but
where do you want to be in the medium longer term?
Speaker 2 (10:58):
Can you even.
Speaker 3 (10:58):
Afford to keep this place? And how does that fit
into your broader lifestyle? The kids are sixteen and seventeen,
you want to be in the area for schooling for
the next two years than what or these sort of
factors start coming in. But yeah, there is definitely a
lot of advantages to the family home. There's also a
lot of cultural connection to it. As you said, the
great Australian dream of owning your own home or owning
(11:19):
someone else's is run so strongly in our blood. Keeping
that property sometimes can feel like something I want to
keep the house. I found the house, I put all
the work into the house, I painted the house. There's
this emotional connection to something that may not be in
the best interest to retain.
Speaker 1 (11:36):
So it's not necessarily the case then that the complexity
is all upon the person who got other things other
than the home.
Speaker 3 (11:45):
Yeah, I'm finding more that keeping the home is not
just not viable for either party, which is becoming increased
in the common that so much of the wealth is
in the home that the amount of debt the retainer
would have to take on either they can't get it
or they could can't maintain it, which just makes no sense.
That seeming that's coming up a lot more than it
used to.
Speaker 1 (12:03):
Okay, can you give us two seconds on super and
how it works, because it's still important now.
Speaker 3 (12:09):
Yeah, with superinnuation, there's really the common question again, can
we combine our super And there's sorts of things where
people in a relationship you can't. There's a couple of
rules around contribution splitting things like that, but there is
a rule around splitting of super innovation in a separation
and it forms part of the whole arrangement. So there's
no hard and fast you get half my super or
(12:30):
you'll come to an agreement that says this is how
we're splitting up the assets, and those assets will be
made of this much super, this much cash, this house.
Speaker 2 (12:38):
That sort of stuff.
Speaker 3 (12:39):
And then when that happens, there's a form, a family
law form that most super funds will have that rolls
the money from one fund to another. It's a relatively
straightforward process of these days from an administrative perspective.
Speaker 2 (12:51):
But getting to.
Speaker 3 (12:51):
That point, sometimes you get people who are very short
term in they're thinking, I want at least possible super
because I want is much.
Speaker 2 (12:58):
Money in my bank account.
Speaker 3 (12:59):
Other times they'll be focusing on that super Again, it
really plays back to how they're going to maintain their
life and moving forward, and is super the best place
for it if they don't take the super how they're
going to get money to retire?
Speaker 2 (13:10):
All that kind of stuff.
Speaker 1 (13:11):
Okay, is there any variation when it comes to self
managed super funds? Let's see mom and Dad are the
SERF match super fund.
Speaker 2 (13:22):
The two trustees a really fun one.
Speaker 3 (13:25):
Actually, I just did SPT points for advisers on this
recently because back in what's again, when you look at
the dynamics of relationships, we have a self managed super
fund because the person who was running the money is
it was a good idea. Maybe their business premises is
owned inside of the fund.
Speaker 1 (13:40):
So the same issue emergen as I imagine the person
really runs it.
Speaker 3 (13:44):
Yeah, but what you again have is the amplified effect
that all trustees have to know how to run the fund.
Speaker 2 (13:49):
And have full responsibility for it.
Speaker 3 (13:51):
And you've also then got to be acting in the trustees'
best interest and or best financial interest, and.
Speaker 2 (13:57):
They have divoting life goals.
Speaker 3 (13:59):
So it might makes sense to retain the fund right now,
but because of business premises is in it, you can't
split it and almost into things. But people repartner lives
change direction, maybe they just don't get along, and maintaining
that connection can be really hard. I've seen cases where
partners have taken limited power of attorney over their form
of spouse's power to trust, the obligations, and that's just
(14:21):
a nightmare of disaster. Wedding to happen self maniership of
fund becomes a lot more.
Speaker 1 (14:26):
Complicated, more complicated understand and tell me what if it
was the case that they wanted to split and they
wanted to split everything and the core of the self
maner super fund was a business premises because they used
to have a shop or whatever. Do you have to
sell the property at market value and split it is
that what.
Speaker 3 (14:43):
Happened again would come back to how you decided to
divide up the assets, whether the balances were segmented, in
the first place, there's no have tos.
Speaker 2 (14:51):
But in regards to the divorce process.
Speaker 3 (14:53):
But from a super fund perspective, it has to be
arms length transactions, market value.
Speaker 2 (14:58):
Everything has to be above boarder clients.
Speaker 3 (15:00):
So there's no give from a family or perspective, and
that your super responsibilities to struss they are the same.
Speaker 1 (15:05):
Responsible and the fund must get the value market value
for the asset whatever it is, including that whatever you
had in it, including a business premises. Okay, really interesting,
absolutely absorbing. Let's come back and we're going to cover
folks how to divorce in the best possible financial fashion.
Back in a moment. Hello and welcome back to the
(15:38):
Australian's Money Puzzle podcast. Okay, today we are talking about
divorce and money, the best way that you or you
and your partner can divorce financially. And I have Nathan
Fradley on the show, who is specializes in this is
(16:00):
really across it and I'm going to ask him now
about the best how to do this the best way financially.
What are your mean what are your mean lessons, Neathan
from years of working in this area.
Speaker 3 (16:15):
I'm going to be vague on the legal side of it.
Because I'm not a lawyer, but the financial advisor supports
the lawyer in this process. But what I've seen work
really well. Firstly, working with professionals will make your life easier.
People fear divorce lawyers or financial plans because of cost,
but inevitably, by working with professionals things to done more efficiently.
(16:39):
You're getting your unbiased or your biased to you advice.
It saves you money the end of the day, because
what can happen is it falls around. But I think
that getting the right advice is really important and that
sets you up, which is a bit of gimmy for me.
But I'd say in terms of when you're looking at
yourself and how you're going through this, it's going to
be awful for everyone in the situation the longer you
(17:01):
can stay rational look at things not just on I
mentioned before one face value. Now, but what does this
mean for me at the end after this is done,
what does life look like because I'm starting again and
understand that it's going to be okay. That decreases the
temperature in the room in the separation, and know that
you'll be all right and then work through I think
(17:22):
that's really important. And then this is going to be
harder to say. It's easier to say than do, but
assuming best intent with your partner will be helpful a
lot of the time, especially working with the more less
sophisticated person in the relationship. The former partner will do
things and because it's for twenty years, they've just done
(17:44):
things with money, and the now awakened part is.
Speaker 2 (17:47):
Going, why do they do that? Why do they do that?
Are they hiding money? Are they hiding assets of things?
Speaker 3 (17:52):
And a lot of my job in this instance is explaining,
you know, this is how this works, this is what
they're trying to do. I can see how this has
played out the way it has and unless they're going
for that or this will come out in the whitewash
because of the disclosure of assets. That again decreases the temperature.
The lower the temperature, the comma we are, the camera
we are, the easier the process can be, and the
(18:13):
more we can focus on the things that we actually
want to fight about instead of fighting about everything.
Speaker 1 (18:18):
I expect you have what goes without saying that if
the person the partner on the other side has a
lawyer and an advisor and you only have a lawyer
it sounds to me like you should have an advisor.
I think that sounds like basic logic in terms of
the balance of power. The other thing I would ask
you is what about priorities? When you're sitting there with
the client and you're saying, Okay, here we go. This
(18:41):
is a divorce. Again, my client is a very sophisticated operator,
but is not interested and has never been financial. The
person on the other side is a similar person, but
their life has been in finance and they are innately
well disposed towards getting the best financial outcome. So when
(19:04):
you're looking at your client, the non financial one basically
who never asked what they were signing over the years,
are often didn't ask what's your priorities? What do you
say to yourself? What are my priorities for my client?
Is it accommodation, is it cash, flu is it.
Speaker 2 (19:21):
Super all of those things?
Speaker 3 (19:24):
So I think the number one priority is understanding your
point about just signing things. It's a classic example of
trust that distributes to both parties, and the person just
signs it every year and all of a sudden they're going,
what am I signing? I don't actually understand what's happening.
I think getting across and understanding the current state of
play is really important because that helps them make a
(19:45):
better decision. That can be as simple as the budget,
which you just mentioned, but is crucial. Where does that
money actually go? I can't believe we spent that much.
But also, now that we're separating, we're probably going to
run two households. How long can we afford.
Speaker 2 (20:01):
To do that for?
Speaker 3 (20:02):
We've got these kids fees, We've got these medical costs
at this sort of stuff that piles in.
Speaker 2 (20:07):
Who's covering what? How is it paid for?
Speaker 3 (20:09):
Keeping that as clean as possible and as transparent as
possible again decrease the temperature, but also allows a cleaner
process at the end of the day because it really
gives evidence to what the needs are of individuals, and
I suppose then helps us frame the outcome. What are
things going to be at the end of the day.
Because there's a difference between winning a divorce and winning
(20:32):
a divorce there is I'm going for seventy percent, I'm
going for blood, or there is a fair and equitable
arrangement that we come to, which means that I'm going
to end up in a situation where I can move
on and be okay.
Speaker 1 (20:44):
Can you give me an example when you say someone's
going for blood, Can you give me an example of
the low hanging fruit for the arch aggressor.
Speaker 2 (20:54):
Valuations?
Speaker 1 (20:55):
Evaluations?
Speaker 3 (20:56):
Evaluations is, yeah, I have a pointed a value are Oh,
this is a I've used before, And it turns out
there's been some communication about the nature of this obscure
business that they had, or they might have farm land or.
Speaker 2 (21:09):
Something like that.
Speaker 3 (21:09):
Whether it's a business or there's an asset that's hard
to value that's illiquid, that's a massive area for I
suppose play, and also a dynamic of understanding that a
person who bought it for a certain reason may not
have told the other party what the potential opportunities in
this business. Maybe they're in the business and it hasn't
quite clicked over that winning point, so it's not really
(21:32):
much of a business. Don't worry about that one. I
think it's going under any way, these sorts of things.
The accounting side of it, it's a little bit easier
because of forensic accounts and what have you to uncover.
But I think the nature of businesses or certain investments
and assets is a low hanging fur the more aggressive one.
Speaker 1 (21:49):
That's really interesting and oldmore plays back to your original
point at the start of getting advisors in before the settlement,
because the settlement assumes the evaluation. We're correct, Yeah, so
what what happens? So let's say so let's say the
dispute emergers, and what happens is that the partner said
(22:09):
such and such a business was worth X, and the
evaluation is clearly comically low. What do you do?
Speaker 3 (22:19):
My job in that situation sits more of a supportive position.
What are the lawyers will tend to do is send
letters back and forth in various tones, depending on the
style of lawyer they are, whether they are more litigious
or more cooperative, and they will come to an agreement
of an independent valuer that the clients agree to spend
(22:39):
money on. There could be one that's one hundred thousand dollars,
there could be one that's ten thousand dollars, and that
sort of thing plays out, and then that is valuation
you end up going off. Also, the timeframe evaluation is important.
If we've got an existing business and we've separated on
the first of April, that we might use that as
the date where all valuations are done too, because we
(23:00):
don't want firstly, this separation is going to be impacting
the business, and we don't want any nefarious or potential
nefarious activity of moving money or profits around and things
like that, or even just the suspicion of that doesn't
help anyone. And then it also means that the person
who is who runs that business isn't feeling, oh, I
might just sandbag my financials and go slow for the
next two years so that I don't have to give
(23:21):
as much away. It just takes off the table. But yeah,
it's getting the right valuers in. And valuers are amazing
what they do, a meta variety of them in different specialties.
Speaker 1 (23:31):
What do you mean amazingly varied in their talents?
Speaker 3 (23:34):
Just that the angles that valuers take these are largely
people who work in M and A. They don't just
look at it and go, oh, this is a business
of X style, therefore it's worth X times eap it
or revenue or something. They'll look at it from multiple angles.
They do cash flow, they'll do forecasting. The reports that
you get from valuations can be really good, and then
that can give an indication of whether something seems reasonable.
(23:57):
What my job is then to look at and go
if is this, if this has seemed reasonable, what would
this mean for the client?
Speaker 2 (24:04):
Do they keep fighting? Is this enough?
Speaker 3 (24:07):
Do that?
Speaker 2 (24:07):
Yeah?
Speaker 3 (24:07):
That's where I come in of if this was the
outcome we got, what would that mean for you? Do
you want to keep fighting for another two years? Or
do you take this and go?
Speaker 1 (24:16):
You're something like an expert witness there. Yeah, yeah, okay,
I can I ask you one last thing on this
issue about money being touped away a secret accounts, sir
and all that sort of thing. Is the tax system
and financial system sufficiently transparent now that you would be
confident that you have a clear picture of the money
held in accounts by both parties?
Speaker 3 (24:38):
I would like to think so. But USB stics with crypto.
Whilet's exists, sometimes people have lost them genuinely.
Speaker 1 (24:49):
I think that's I never thought of that. Crypto rights
increasingly common, I'm sure.
Speaker 3 (24:55):
Yeah, yeah, I think I would like to have confidence
that people disclose sets disclosed international holdings do the right thing.
But I'm sure there is examples of that not being
the case.
Speaker 1 (25:07):
But yeah, and of course, once upon a time whatever
Swiss accounts. So we're only for the very very wealthy.
You know, I can open a Swiss account in ten minutes.
I could open a Swiss account when the minute we
finished this show, I could have it done in twenty minutes. Yes, okay, terrific,
Very interesting, Nathan. I think we might hold it there
and go to questions, and I expect we may get
some questions off the back of today's show specifically, but
(25:30):
let's see all right back in a moment. Hello, Welcome
back to the Australians Money Puzzitive podcast James Kirkby with
Nathan Fradley. Wasn't that interesting, folks? On how divorce the
financial the financials of divorce. I hope it was useful
(25:51):
to youth the show wanted to do for some time. Hey, Nathan,
just before on the questions that are of course not
necessarily enough about divorce, they are this week's questions. You're
a financial advisor the government we're in the middle of
an election. There was also some promises about financial advice
being reformed and straightened out. Here we are with only
a short period to go before the election. Did they
(26:14):
make any progress? Do you think on financial advice and
how it works for as far as most people are concerned?
In terms of simplifying it, in terms of widening the
availability of advice to everybody.
Speaker 3 (26:27):
I think that they did some things. Some changes happened,
but nothing I would say that moved the needle enough.
There was one experience exemption for education standards, which came
in so late that I think a lot of people
who had the experience, who didn't do the education would
have left the industry already.
Speaker 2 (26:47):
And they proposed a piece of legislation.
Speaker 3 (26:49):
Then they didn't go down very well, so they changed
the acronym and re launched it, and then they launched
a half version of that right beforehand. But if I
went the full term the industries largely it's changed, It's evolved,
but not at the end of any substantial show.
Speaker 1 (27:07):
At the end of the day, this is all about
how much financial advice costs, and if it costs five
thousand a year or so to have an annual review
of your advice. These are industry figures when we're talking
about specific projects. Unfortunately, divorce being the issue of djuur,
here any guidelines to what it would cost people to
(27:28):
use an advisor.
Speaker 3 (27:30):
In the situation my I cank my face sit somewhere
around seven and a half to thirty depending.
Speaker 1 (27:38):
We'll leave it at that. We'll assume that is a
sort of industry standard, and that is quite a ranger
give us.
Speaker 2 (27:42):
It's much more than the standard.
Speaker 1 (27:44):
Or I see, Pat asks, do you think the big
super funds like A or T being now? I think
the number two fund, because of course it was the
combination of Sun Super and q C will return a
positive or negative return at the end of this year
and the next. I be better off putting my money
in a bank term deposit Number one. Pat, We don't
give advice number two. We are not going to talk
(28:06):
about whether that particular fund art will give you a
positive or negative return. But we're happy to talk about
whether all the funds, the big funds, the Austrian super
Uni super Art and all the usual suspects, Host plus
aware on they go, will they give a positive or
negative return at the end of this year and the next.
Nobody knows, Pat, Sorry, nobody knows the future. Even on
(28:28):
this show. We don't know the future. But the second
part of your question, would I be better off putting
my money in a bank deposit? Nathan, I come into
you and I say I'm in industry fund or retail
fund number four. They've had some really good years and
it looks pretty bad this last few months. I see
that they will be lucky to pull off a positive
return this year. Should I put my money in a
(28:50):
term bank deposit? In other words, should I go to cash?
What do you say?
Speaker 3 (28:56):
My answer, which I'm sure is frustrating, is it largely
depends on who you are, what your situation is.
Speaker 1 (29:00):
What did it ever make sense to order cash.
Speaker 3 (29:03):
If maybe you needed the money in the next twelve
months and you any loss of capital would mean you
couldn't achieve what you needed to achieve, or the thought
of losing any money kept you awake at night. But
trying to time the perfect day to do that, as
we've known with recent volatility, let alone normal volatility, is
impossible and you will get it wrong.
Speaker 1 (29:25):
Okay, but it's worth anning. We've had the worst day
on the share market since COVID, and we've had the
best day since COVID on the share market in recent weeks.
In fact, it happened inside a week. These are wild times.
And the other thing I think that's important to anyone
considering going to cash, going partially to cash, is that
(29:46):
the rates are dropping. You might tune into the show
with Liam Short, which was the last recorded show, where
he is explaining that though the RBA only official rates
by a quarter of percent, banks, don't you love it.
They've already cut in three times. They've put the equivalent
of three RBA quarter percent cuts in already to the
(30:06):
bank deposits. So they are dropping, my friends, unfortunately, just
when you want them, of course, to be an alternative
but all relevant, I hope for you, Pat all right, Luke, Well,
he just wants to make the point that I have
We had mentioned in the show that some people might
say in rocky markets, volatile markets like we're having, that
(30:27):
they are frustrated with big super funds and feel powerless,
and that perhaps it would be time to have a
self managed superfund. And I don't know if this is
a coincidence, but self managed super funds are about to
record their best year for a long best year ever,
forty thousand commencements apparently on the way. And so Luke says,
(30:49):
a self managed super fund is completely unnecessary for listed assets,
and I'm not sure how you could justify it for
this purpose, especially a portfolio of exchange traded funds. The
additional layer of costs adds up. Even an industry super
fund allows you to select your investments, and as thet
(31:11):
allocations the reasoning provided of market volunteerity is no reason
to go to a self managed super fund. I don't know.
It depends who you are and your level of confidence
in your level of understanding in the markets. I do
take the point though, it's fair enough, isn't it. But
luc is saying that you can have ANYTF option now
(31:33):
in big industry funds more unless you can say okay,
So if you had ten ETFs in an industry super fund,
you do wonder why you would have a super fund,
a self manageable fund that just had ten ETFs, and
comparing one against the other, you wonder whether it be
worth the effort.
Speaker 3 (31:48):
I think it's my general philosophy so that I can
do it simpler, easier, or with less riskquy wouldn't I?
And so if the ETFs that you're wanting to invest
in you want some control, you want to take out
of it at some level. If they're available and you
can put the weight in them that you'd like to,
because that's often a limiting factor, then and you can
do it at a cheaper cost, with less responsibility and
(32:10):
less administration.
Speaker 2 (32:11):
Why wouldn't you.
Speaker 3 (32:12):
I think where people have ETF portfolio that aren't available
on these menus, Remember they are restricted, they're going to
take a more conservative view on what they can add
because they're on the hook for allowing their members.
Speaker 1 (32:24):
So they've got to be there's very much the sort
of bread and butter vanilla.
Speaker 3 (32:29):
And they're going to put caps. I think there's often
a complaint that maybe the cap on a Goald ETF
is too low.
Speaker 1 (32:35):
You're talking about industry funds.
Speaker 2 (32:36):
Now, yeah, industry funds.
Speaker 3 (32:37):
Yeah, they're going to say you can only put up
to twenty percent of your money in this particular ETF
because of the risk grading we've given it.
Speaker 2 (32:43):
And that might be a reason.
Speaker 3 (32:45):
I think one of the big super funds was in
the news recently for commentary around crypto ETFs and why
they wouldn't allow people to invest in them. And if
you can't do what you want to do and it
makes sense to do, and you're taking control of it
and responsibility for it, and you understand and the responsibilities
of a self manishiper fund the work involved, then that's
when you start looking at that as an option.
Speaker 1 (33:05):
Okay, very good, all right, I can see your I
can see how your balanced demeanor is useful in the
job you don Yeah, yeah, yeah, thank you very much
for being on the show today. Great to talk to
you again. It was a very interesting single subject show
that we should have done a long time ago. It
(33:26):
was only when I saw, when I thought about it
and I thought about you, that you do that. I said,
this is the time to do it. This is when
there is actually something of a lull between these at
this time of the year. Very good to step out
and have a look at something like that. Okay, hey,
thank you Nathan Fradley. Great to have you on the show.
Thanks Jev, and thank you everybody for listening. Remember the
(33:47):
email the money Puzzle at the Australian dot com dot au.
Today's show was produced by Leah Sammaglu Talk to you soon,
SA The Fool
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. I hope you've managed to
have a few days off over these rolling holidays Easter
and that day and everything else. And often at holiday
times we do something slightly different, which we will today,
but it is not in the nature of light entertainment.
(00:31):
If you want to figure out how to start your
classic car collection or how to build a wine collection,
we have done that. Have a look in the archive
that's waiting for you. Today. We're going to look at
the issue which I have seen so many times, literally
dictate the lifelong financial fortunes of an enormous amount of people.
(00:56):
And it's not super and it's not your house. It's divorced.
And I have a financial advisor who is a specialist
in the area. He's an independent financial advisor. He's been
on the show before. His name is Nathan Fradley from
Nathan Fradley Advice. And we're going to put you through.
We're going to put you through, We're going to take
you through this issue today. I want you, Nathan.
Speaker 2 (01:17):
I'm great, thanks having me back on.
Speaker 1 (01:19):
Delighted to have you back on Okay, It's something that
we can all pay enormous attention to building an investment
portfolio and optimizing our cash and everything else, interplay between
pensions and super whatever, which we talk about every day
(01:40):
on this show. We don't talk about divorce, And the
fact is that so many times people with their financial
world cut in half or more than that. So can
I ask you, and you deal in this area, and
you've built a reputation in this area, what are the
hidden traps? What are the outstandings mistakes that people from
(02:05):
either side other marriage make in this area financially, if.
Speaker 3 (02:11):
We're looking at it during the divorce process, I'd say
divorce is probably the hardest thing that most people will
go through in their entire life. It's definitely the most expensive.
To your point, it is an empire killer from that realm.
But because it is lost and it's grief, people tend
(02:32):
to lose some of the rationality in the decision making.
They get stuck in sometimes a sense of justice. Sometimes
they are concept of I get my day in court.
Sometimes just someone gets in a third party gets in
an ear of one party. So I'd say that when
we're doing the financial aspect of a divorce process or
(02:55):
any separation, focusing on rational outcomes and what life is
going to be like afterwards instead of getting stuck on
what life could have been like or what happened. Generally
costs fifty percent less money and legal fees than six
months off the divorce proceedings. So I think when we
(03:15):
get great success in divorce process, most people think divorce.
Speaker 2 (03:19):
They go, what's the set percentage?
Speaker 3 (03:20):
How much do I get if they've lived with me
for two years?
Speaker 2 (03:23):
What's the rule? There are no rules.
Speaker 1 (03:26):
There are no rules.
Speaker 3 (03:27):
Did you say in the sense of there's no hard
and fast and there's certain dates and court time frames
that need to be met and must be separated for
twelve months to get divorced and things like that. But
in terms of financial split, a divorce has a divorce
aspect of it, the legal aspect of set breaking that marriage.
It's also got a financial or property settlement, and then
if there's children, that's a child aspect, So the financial
(03:49):
aspect is separate from the divorces.
Speaker 1 (03:51):
So yeah, we always think of divorce as lawyers right
on both sides, not financial advisors, and that is that
the reality too.
Speaker 3 (03:59):
Yeah, what I'm doing in this space is very new,
and financial advisors historically when they've gotten involved, they get
involved after settlement things are done.
Speaker 2 (04:07):
I've now got this pool of money.
Speaker 3 (04:08):
What do I do?
Speaker 2 (04:09):
But when we look at the.
Speaker 3 (04:10):
Really successful processes, two people who decide they're not going
to continue in a relationship together before lawyers get involved,
although you should always get them involved at some point
before they're even involved, you can have discussions which can
then turn into mediations, which can then turn into lawyer
led mediations before a court tells you this is the outcome.
Speaker 1 (04:33):
That would require. I expect this would for balance, This
would require both parties having an advisor, and that would
require whatever way you cut it, it would demand a
certain amount of cash. Yeah.
Speaker 3 (04:48):
Yes, So there's actually a form of separation called collaborative
divorce where you have two lawyers, a communication specialist that's
usually like a psychologist, and a financial neutral And it's
a fantastic process for the right people, but when you
have four professionals in the room, it can be increasingly expensive.
Speaker 1 (05:08):
And is the financial persons supposed to carve it out
fairly financially between the two people getting divorced.
Speaker 2 (05:15):
In collaborative divorces.
Speaker 3 (05:16):
Their job is to equalize understanding, to ensure that there's
nothing missed that could be substantially detrimental in a separation.
So it's like catching things before they go wrong. But
they will never give advice to either party individually, even
after the divorce. They'll always refer out from that position there.
So there's one way that people can do it. But
(05:37):
in the work that I do, it's more working with
I often work with the financially disempowered person in the
relationship because often is the case that one person, as
we do with most jobs in relationships, one person takes.
Speaker 1 (05:48):
Up the job.
Speaker 2 (05:49):
I'll do the cooking, you do the washing.
Speaker 3 (05:51):
I'll take care of the budgeting, and you can take
care of managing the kids, time tables, whatever it might be,
and we divide labor, and that can be proper madic.
If there's anything I'd say to never have to get
advice from me unto force, I would say is if
you can have an equal understanding of what's happening with money,
one person can manage the day to day, but if
(06:12):
you both fully understand what's going on, it can decrease
so many or decrease the chance of things going on
because there is a greater level of clarity.
Speaker 1 (06:21):
It sounds to me what you're saying to our listeners,
and to some extent we will just say that there.
What you're saying is one person can manage the money
if they want, but both parties should look after themselves
by being across what's happening with their money. How much
(06:46):
is our mortgage, how much do we actually make together?
How many bank accounts do we have, how much is
in them? Can you give us some examples when you
say making sure everything's accounted for? Is? Are you talking
about stuff like money? Literally secret colms, people having money
talked away that the other partner didn't do.
Speaker 3 (07:03):
It?
Speaker 1 (07:04):
Was that common? Can you give you some examples.
Speaker 2 (07:06):
That can happen?
Speaker 3 (07:07):
But I find that happens when things have started going
wrong already. So if you've got a couple who'll across
the decisions, he's a really easy tell. If I'm the
person who manages the money and I'm making sure our
plans are on track and we're investing, we're doing all
these things, and the other person comes to me and says, hey,
let's go on this holiday, or the kids got this excursion,
(07:28):
or I want to buy this thing, or and you're
always saying no, that says that the other person doesn't
have a good handle on the situation, because if you
both understand it, it's not a decision of I'm not
the no guy, I'm not the one that's always asking
for things. It's we both understand the situation and the
context of what we can and can't afford. So that's
(07:49):
a really early indicator that if you us feel like
I wish we could do more, but I'm always feel
like we're saying no because we're trying to plan for the.
Speaker 2 (07:55):
Future, but they just don't get it. Because they don't
get it.
Speaker 1 (07:58):
I wonder my hunch is that the disastrous couple is
the couple where neither actually pay attention to the money.
Have you come across divorce proceedings where both parties were
appalling in terms of that they just didn't pay any attention.
Speaker 3 (08:16):
Or they a little bit of dangerous information. They did
little things, but not everything. I thought you were taking
care of that. No, I thought you were taking care
of that. I was doing this thing, but I wasn't
doing that thing. And yeah, it's often the case where
the person who comes to me starts learning about how
things are done.
Speaker 2 (08:32):
Why did we even do it that way? That doesn't make.
Speaker 3 (08:35):
Any sense at all, because granted their former partner was
doing the best they could in the knowledge that they had,
but they may not have known what to do. It
may have just been thrustle them. You're good with money
because you saved a bit more before we go together.
Speaker 1 (08:47):
So you've got money because you're an accountant and whatever,
I'm a portrait artist or whatever. Okay, So what about
when you have people in that situation? The home, which
in the Australian in every country matters, but in Australia
is enhanced because it's also, on top of being a home,
(09:10):
on top of having an elevated value VISI v. History
and other countries, it also is a tax protected vehicle.
So when there's a divorce, is it the case again
I'm just exploring here, Is it the case that the
person who does not get the house but gets other
assets has a much more complex future than the person
(09:36):
who got the house.
Speaker 2 (09:38):
Maybe?
Speaker 3 (09:39):
And so this sort of falls into one of the
old urban legends around around separation that if I keep
the house, I'll be better off. And there's plenty of
reasons for that, not having to base damp duty when
you purchase a new house, which is often missed in
separation agreements. Yeah, finding housing. You keep the house. Now
I've got to go and find somewhere to live, find
somewhere to rent. I got it's been near the kids.
(10:01):
I've got to do that, like all those kinds of things.
And then obviously the capital gains implications, I'll take the investments, you.
Speaker 2 (10:06):
Take the house.
Speaker 3 (10:07):
What happens in time, But I think what when we
look at that The root of that problem is actually
stems from not just what is the split or how
do we divide assets now? But looking forward, And this
is where I think financial advice is going to start
playing a lot more of a role as people see
the benefit of this is when if you look at
i'll take fifty percent, or.
Speaker 2 (10:27):
I'll keep the house. You keep this.
Speaker 3 (10:28):
That's great until we realize that the person who's kept
the house, who was a lower income earner, hasn't really
been able to earn that much, can't afford to maintain
the mortgage, can't afford the upkeep on the property, can't
and then two years they sell it anyway, so that
family asset is gone.
Speaker 2 (10:44):
So this is where when we're looking.
Speaker 3 (10:45):
At at a separation and trying to decide what's the
best way to split assets.
Speaker 2 (10:50):
And when I do this work.
Speaker 3 (10:51):
I'm representing one party is looking at it and saying, yes,
this might be where you want to be now, but
where do you want to be in the medium longer term?
Speaker 2 (10:58):
Can you even.
Speaker 3 (10:58):
Afford to keep this place? And how does that fit
into your broader lifestyle? The kids are sixteen and seventeen,
you want to be in the area for schooling for
the next two years than what or these sort of
factors start coming in. But yeah, there is definitely a
lot of advantages to the family home. There's also a
lot of cultural connection to it. As you said, the
great Australian dream of owning your own home or owning
(11:19):
someone else's is run so strongly in our blood. Keeping
that property sometimes can feel like something I want to
keep the house. I found the house, I put all
the work into the house, I painted the house. There's
this emotional connection to something that may not be in
the best interest to retain.
Speaker 1 (11:36):
So it's not necessarily the case then that the complexity
is all upon the person who got other things other
than the home.
Speaker 3 (11:45):
Yeah, I'm finding more that keeping the home is not
just not viable for either party, which is becoming increased
in the common that so much of the wealth is
in the home that the amount of debt the retainer
would have to take on either they can't get it
or they could can't maintain it, which just makes no sense.
That seeming that's coming up a lot more than it
used to.
Speaker 1 (12:03):
Okay, can you give us two seconds on super and
how it works, because it's still important now.
Speaker 3 (12:09):
Yeah, with superinnuation, there's really the common question again, can
we combine our super And there's sorts of things where
people in a relationship you can't. There's a couple of
rules around contribution splitting things like that, but there is
a rule around splitting of super innovation in a separation
and it forms part of the whole arrangement. So there's
no hard and fast you get half my super or
(12:30):
you'll come to an agreement that says this is how
we're splitting up the assets, and those assets will be
made of this much super, this much cash, this house.
Speaker 2 (12:38):
That sort of stuff.
Speaker 3 (12:39):
And then when that happens, there's a form, a family
law form that most super funds will have that rolls
the money from one fund to another. It's a relatively
straightforward process of these days from an administrative perspective.
Speaker 2 (12:51):
But getting to.
Speaker 3 (12:51):
That point, sometimes you get people who are very short
term in they're thinking, I want at least possible super
because I want is much.
Speaker 2 (12:58):
Money in my bank account.
Speaker 3 (12:59):
Other times they'll be focusing on that super Again, it
really plays back to how they're going to maintain their
life and moving forward, and is super the best place
for it if they don't take the super how they're
going to get money to retire?
Speaker 2 (13:10):
All that kind of stuff.
Speaker 1 (13:11):
Okay, is there any variation when it comes to self
managed super funds? Let's see mom and Dad are the
SERF match super fund.
Speaker 2 (13:22):
The two trustees a really fun one.
Speaker 3 (13:25):
Actually, I just did SPT points for advisers on this
recently because back in what's again, when you look at
the dynamics of relationships, we have a self managed super
fund because the person who was running the money is
it was a good idea. Maybe their business premises is
owned inside of the fund.
Speaker 1 (13:40):
So the same issue emergen as I imagine the person
really runs it.
Speaker 3 (13:44):
Yeah, but what you again have is the amplified effect
that all trustees have to know how to run the fund.
Speaker 2 (13:49):
And have full responsibility for it.
Speaker 3 (13:51):
And you've also then got to be acting in the trustees'
best interest and or best financial interest, and.
Speaker 2 (13:57):
They have divoting life goals.
Speaker 3 (13:59):
So it might makes sense to retain the fund right now,
but because of business premises is in it, you can't
split it and almost into things. But people repartner lives
change direction, maybe they just don't get along, and maintaining
that connection can be really hard. I've seen cases where
partners have taken limited power of attorney over their form
of spouse's power to trust, the obligations, and that's just
(14:21):
a nightmare of disaster. Wedding to happen self maniership of
fund becomes a lot more.
Speaker 1 (14:26):
Complicated, more complicated understand and tell me what if it
was the case that they wanted to split and they
wanted to split everything and the core of the self
maner super fund was a business premises because they used
to have a shop or whatever. Do you have to
sell the property at market value and split it is
that what.
Speaker 3 (14:43):
Happened again would come back to how you decided to
divide up the assets, whether the balances were segmented, in
the first place, there's no have tos.
Speaker 2 (14:51):
But in regards to the divorce process.
Speaker 3 (14:53):
But from a super fund perspective, it has to be
arms length transactions, market value.
Speaker 2 (14:58):
Everything has to be above boarder clients.
Speaker 3 (15:00):
So there's no give from a family or perspective, and
that your super responsibilities to struss they are the same.
Speaker 1 (15:05):
Responsible and the fund must get the value market value
for the asset whatever it is, including that whatever you
had in it, including a business premises. Okay, really interesting,
absolutely absorbing. Let's come back and we're going to cover
folks how to divorce in the best possible financial fashion.
Back in a moment. Hello and welcome back to the
(15:38):
Australian's Money Puzzle podcast. Okay, today we are talking about
divorce and money, the best way that you or you
and your partner can divorce financially. And I have Nathan
Fradley on the show, who is specializes in this is
(16:00):
really across it and I'm going to ask him now
about the best how to do this the best way financially.
What are your mean what are your mean lessons, Neathan
from years of working in this area.
Speaker 3 (16:15):
I'm going to be vague on the legal side of it.
Because I'm not a lawyer, but the financial advisor supports
the lawyer in this process. But what I've seen work
really well. Firstly, working with professionals will make your life easier.
People fear divorce lawyers or financial plans because of cost,
but inevitably, by working with professionals things to done more efficiently.
(16:39):
You're getting your unbiased or your biased to you advice.
It saves you money the end of the day, because
what can happen is it falls around. But I think
that getting the right advice is really important and that
sets you up, which is a bit of gimmy for me.
But I'd say in terms of when you're looking at
yourself and how you're going through this, it's going to
be awful for everyone in the situation the longer you
(17:01):
can stay rational look at things not just on I
mentioned before one face value. Now, but what does this
mean for me at the end after this is done,
what does life look like because I'm starting again and
understand that it's going to be okay. That decreases the
temperature in the room in the separation, and know that
you'll be all right and then work through I think
(17:22):
that's really important. And then this is going to be
harder to say. It's easier to say than do, but
assuming best intent with your partner will be helpful a
lot of the time, especially working with the more less
sophisticated person in the relationship. The former partner will do
things and because it's for twenty years, they've just done
(17:44):
things with money, and the now awakened part is.
Speaker 2 (17:47):
Going, why do they do that? Why do they do that?
Are they hiding money? Are they hiding assets of things?
Speaker 3 (17:52):
And a lot of my job in this instance is explaining,
you know, this is how this works, this is what
they're trying to do. I can see how this has
played out the way it has and unless they're going
for that or this will come out in the whitewash
because of the disclosure of assets. That again decreases the temperature.
The lower the temperature, the comma we are, the camera
we are, the easier the process can be, and the
(18:13):
more we can focus on the things that we actually
want to fight about instead of fighting about everything.
Speaker 1 (18:18):
I expect you have what goes without saying that if
the person the partner on the other side has a
lawyer and an advisor and you only have a lawyer
it sounds to me like you should have an advisor.
I think that sounds like basic logic in terms of
the balance of power. The other thing I would ask
you is what about priorities? When you're sitting there with
the client and you're saying, Okay, here we go. This
(18:41):
is a divorce. Again, my client is a very sophisticated operator,
but is not interested and has never been financial. The
person on the other side is a similar person, but
their life has been in finance and they are innately
well disposed towards getting the best financial outcome. So when
(19:04):
you're looking at your client, the non financial one basically
who never asked what they were signing over the years,
are often didn't ask what's your priorities? What do you
say to yourself? What are my priorities for my client?
Is it accommodation, is it cash, flu is it.
Speaker 2 (19:21):
Super all of those things?
Speaker 3 (19:24):
So I think the number one priority is understanding your
point about just signing things. It's a classic example of
trust that distributes to both parties, and the person just
signs it every year and all of a sudden they're going,
what am I signing? I don't actually understand what's happening.
I think getting across and understanding the current state of
play is really important because that helps them make a
(19:45):
better decision. That can be as simple as the budget,
which you just mentioned, but is crucial. Where does that
money actually go? I can't believe we spent that much.
But also, now that we're separating, we're probably going to
run two households. How long can we afford.
Speaker 2 (20:01):
To do that for?
Speaker 3 (20:02):
We've got these kids fees, We've got these medical costs
at this sort of stuff that piles in.
Speaker 2 (20:07):
Who's covering what? How is it paid for?
Speaker 3 (20:09):
Keeping that as clean as possible and as transparent as
possible again decrease the temperature, but also allows a cleaner
process at the end of the day because it really
gives evidence to what the needs are of individuals, and
I suppose then helps us frame the outcome. What are
things going to be at the end of the day.
Because there's a difference between winning a divorce and winning
(20:32):
a divorce there is I'm going for seventy percent, I'm
going for blood, or there is a fair and equitable
arrangement that we come to, which means that I'm going
to end up in a situation where I can move
on and be okay.
Speaker 1 (20:44):
Can you give me an example when you say someone's
going for blood, Can you give me an example of
the low hanging fruit for the arch aggressor.
Speaker 2 (20:54):
Valuations?
Speaker 1 (20:55):
Evaluations?
Speaker 3 (20:56):
Evaluations is, yeah, I have a pointed a value are Oh,
this is a I've used before, And it turns out
there's been some communication about the nature of this obscure
business that they had, or they might have farm land or.
Speaker 2 (21:09):
Something like that.
Speaker 3 (21:09):
Whether it's a business or there's an asset that's hard
to value that's illiquid, that's a massive area for I
suppose play, and also a dynamic of understanding that a
person who bought it for a certain reason may not
have told the other party what the potential opportunities in
this business. Maybe they're in the business and it hasn't
quite clicked over that winning point, so it's not really
(21:32):
much of a business. Don't worry about that one. I
think it's going under any way, these sorts of things.
The accounting side of it, it's a little bit easier
because of forensic accounts and what have you to uncover.
But I think the nature of businesses or certain investments
and assets is a low hanging fur the more aggressive one.
Speaker 1 (21:49):
That's really interesting and oldmore plays back to your original
point at the start of getting advisors in before the settlement,
because the settlement assumes the evaluation. We're correct, Yeah, so
what what happens? So let's say so let's say the
dispute emergers, and what happens is that the partner said
(22:09):
such and such a business was worth X, and the
evaluation is clearly comically low. What do you do?
Speaker 3 (22:19):
My job in that situation sits more of a supportive position.
What are the lawyers will tend to do is send
letters back and forth in various tones, depending on the
style of lawyer they are, whether they are more litigious
or more cooperative, and they will come to an agreement
of an independent valuer that the clients agree to spend
(22:39):
money on. There could be one that's one hundred thousand dollars,
there could be one that's ten thousand dollars, and that
sort of thing plays out, and then that is valuation
you end up going off. Also, the timeframe evaluation is important.
If we've got an existing business and we've separated on
the first of April, that we might use that as
the date where all valuations are done too, because we
(23:00):
don't want firstly, this separation is going to be impacting
the business, and we don't want any nefarious or potential
nefarious activity of moving money or profits around and things
like that, or even just the suspicion of that doesn't
help anyone. And then it also means that the person
who is who runs that business isn't feeling, oh, I
might just sandbag my financials and go slow for the
next two years so that I don't have to give
(23:21):
as much away. It just takes off the table. But yeah,
it's getting the right valuers in. And valuers are amazing
what they do, a meta variety of them in different specialties.
Speaker 1 (23:31):
What do you mean amazingly varied in their talents?
Speaker 3 (23:34):
Just that the angles that valuers take these are largely
people who work in M and A. They don't just
look at it and go, oh, this is a business
of X style, therefore it's worth X times eap it
or revenue or something. They'll look at it from multiple angles.
They do cash flow, they'll do forecasting. The reports that
you get from valuations can be really good, and then
that can give an indication of whether something seems reasonable.
(23:57):
What my job is then to look at and go
if is this, if this has seemed reasonable, what would
this mean for the client?
Speaker 2 (24:04):
Do they keep fighting? Is this enough?
Speaker 3 (24:07):
Do that?
Speaker 2 (24:07):
Yeah?
Speaker 3 (24:07):
That's where I come in of if this was the
outcome we got, what would that mean for you? Do
you want to keep fighting for another two years? Or
do you take this and go?
Speaker 1 (24:16):
You're something like an expert witness there. Yeah, yeah, okay,
I can I ask you one last thing on this
issue about money being touped away a secret accounts, sir
and all that sort of thing. Is the tax system
and financial system sufficiently transparent now that you would be
confident that you have a clear picture of the money
held in accounts by both parties?
Speaker 3 (24:38):
I would like to think so. But USB stics with crypto.
Whilet's exists, sometimes people have lost them genuinely.
Speaker 1 (24:49):
I think that's I never thought of that. Crypto rights
increasingly common, I'm sure.
Speaker 3 (24:55):
Yeah, yeah, I think I would like to have confidence
that people disclose sets disclosed international holdings do the right thing.
But I'm sure there is examples of that not being
the case.
Speaker 1 (25:07):
But yeah, and of course, once upon a time whatever
Swiss accounts. So we're only for the very very wealthy.
You know, I can open a Swiss account in ten minutes.
I could open a Swiss account when the minute we
finished this show, I could have it done in twenty minutes. Yes, okay, terrific,
Very interesting, Nathan. I think we might hold it there
and go to questions, and I expect we may get
some questions off the back of today's show specifically, but
(25:30):
let's see all right back in a moment. Hello, Welcome
back to the Australians Money Puzzitive podcast James Kirkby with
Nathan Fradley. Wasn't that interesting, folks? On how divorce the
financial the financials of divorce. I hope it was useful
(25:51):
to youth the show wanted to do for some time. Hey, Nathan,
just before on the questions that are of course not
necessarily enough about divorce, they are this week's questions. You're
a financial advisor the government we're in the middle of
an election. There was also some promises about financial advice
being reformed and straightened out. Here we are with only
a short period to go before the election. Did they
(26:14):
make any progress? Do you think on financial advice and
how it works for as far as most people are concerned?
In terms of simplifying it, in terms of widening the
availability of advice to everybody.
Speaker 3 (26:27):
I think that they did some things. Some changes happened,
but nothing I would say that moved the needle enough.
There was one experience exemption for education standards, which came
in so late that I think a lot of people
who had the experience, who didn't do the education would
have left the industry already.
Speaker 2 (26:47):
And they proposed a piece of legislation.
Speaker 3 (26:49):
Then they didn't go down very well, so they changed
the acronym and re launched it, and then they launched
a half version of that right beforehand. But if I
went the full term the industries largely it's changed, It's evolved,
but not at the end of any substantial show.
Speaker 1 (27:07):
At the end of the day, this is all about
how much financial advice costs, and if it costs five
thousand a year or so to have an annual review
of your advice. These are industry figures when we're talking
about specific projects. Unfortunately, divorce being the issue of djuur,
here any guidelines to what it would cost people to
(27:28):
use an advisor.
Speaker 3 (27:30):
In the situation my I cank my face sit somewhere
around seven and a half to thirty depending.
Speaker 1 (27:38):
We'll leave it at that. We'll assume that is a
sort of industry standard, and that is quite a ranger
give us.
Speaker 2 (27:42):
It's much more than the standard.
Speaker 1 (27:44):
Or I see, Pat asks, do you think the big
super funds like A or T being now? I think
the number two fund, because of course it was the
combination of Sun Super and q C will return a
positive or negative return at the end of this year
and the next. I be better off putting my money
in a bank term deposit Number one. Pat, We don't
give advice number two. We are not going to talk
(28:06):
about whether that particular fund art will give you a
positive or negative return. But we're happy to talk about
whether all the funds, the big funds, the Austrian super
Uni super Art and all the usual suspects, Host plus
aware on they go, will they give a positive or
negative return at the end of this year and the next.
Nobody knows, Pat, Sorry, nobody knows the future. Even on
(28:28):
this show. We don't know the future. But the second
part of your question, would I be better off putting
my money in a bank deposit? Nathan, I come into
you and I say I'm in industry fund or retail
fund number four. They've had some really good years and
it looks pretty bad this last few months. I see
that they will be lucky to pull off a positive
return this year. Should I put my money in a
(28:50):
term bank deposit? In other words, should I go to cash?
What do you say?
Speaker 3 (28:56):
My answer, which I'm sure is frustrating, is it largely
depends on who you are, what your situation is.
Speaker 1 (29:00):
What did it ever make sense to order cash.
Speaker 3 (29:03):
If maybe you needed the money in the next twelve
months and you any loss of capital would mean you
couldn't achieve what you needed to achieve, or the thought
of losing any money kept you awake at night. But
trying to time the perfect day to do that, as
we've known with recent volatility, let alone normal volatility, is
impossible and you will get it wrong.
Speaker 1 (29:25):
Okay, but it's worth anning. We've had the worst day
on the share market since COVID, and we've had the
best day since COVID on the share market in recent weeks.
In fact, it happened inside a week. These are wild times.
And the other thing I think that's important to anyone
considering going to cash, going partially to cash, is that
(29:46):
the rates are dropping. You might tune into the show
with Liam Short, which was the last recorded show, where
he is explaining that though the RBA only official rates
by a quarter of percent, banks, don't you love it.
They've already cut in three times. They've put the equivalent
of three RBA quarter percent cuts in already to the
(30:06):
bank deposits. So they are dropping, my friends, unfortunately, just
when you want them, of course, to be an alternative
but all relevant, I hope for you, Pat all right, Luke, Well,
he just wants to make the point that I have
We had mentioned in the show that some people might
say in rocky markets, volatile markets like we're having, that
(30:27):
they are frustrated with big super funds and feel powerless,
and that perhaps it would be time to have a
self managed superfund. And I don't know if this is
a coincidence, but self managed super funds are about to
record their best year for a long best year ever,
forty thousand commencements apparently on the way. And so Luke says,
(30:49):
a self managed super fund is completely unnecessary for listed assets,
and I'm not sure how you could justify it for
this purpose, especially a portfolio of exchange traded funds. The
additional layer of costs adds up. Even an industry super
fund allows you to select your investments, and as thet
(31:11):
allocations the reasoning provided of market volunteerity is no reason
to go to a self managed super fund. I don't know.
It depends who you are and your level of confidence
in your level of understanding in the markets. I do
take the point though, it's fair enough, isn't it. But
luc is saying that you can have ANYTF option now
(31:33):
in big industry funds more unless you can say okay,
So if you had ten ETFs in an industry super fund,
you do wonder why you would have a super fund,
a self manageable fund that just had ten ETFs, and
comparing one against the other, you wonder whether it be
worth the effort.
Speaker 3 (31:48):
I think it's my general philosophy so that I can
do it simpler, easier, or with less riskquy wouldn't I?
And so if the ETFs that you're wanting to invest
in you want some control, you want to take out
of it at some level. If they're available and you
can put the weight in them that you'd like to,
because that's often a limiting factor, then and you can
do it at a cheaper cost, with less responsibility and
(32:10):
less administration.
Speaker 2 (32:11):
Why wouldn't you.
Speaker 3 (32:12):
I think where people have ETF portfolio that aren't available
on these menus, Remember they are restricted, they're going to
take a more conservative view on what they can add
because they're on the hook for allowing their members.
Speaker 1 (32:24):
So they've got to be there's very much the sort
of bread and butter vanilla.
Speaker 3 (32:29):
And they're going to put caps. I think there's often
a complaint that maybe the cap on a Goald ETF
is too low.
Speaker 1 (32:35):
You're talking about industry funds.
Speaker 2 (32:36):
Now, yeah, industry funds.
Speaker 3 (32:37):
Yeah, they're going to say you can only put up
to twenty percent of your money in this particular ETF
because of the risk grading we've given it.
Speaker 2 (32:43):
And that might be a reason.
Speaker 3 (32:45):
I think one of the big super funds was in
the news recently for commentary around crypto ETFs and why
they wouldn't allow people to invest in them. And if
you can't do what you want to do and it
makes sense to do, and you're taking control of it
and responsibility for it, and you understand and the responsibilities
of a self manishiper fund the work involved, then that's
when you start looking at that as an option.
Speaker 1 (33:05):
Okay, very good, all right, I can see your I
can see how your balanced demeanor is useful in the
job you don Yeah, yeah, yeah, thank you very much
for being on the show today. Great to talk to
you again. It was a very interesting single subject show
that we should have done a long time ago. It
(33:26):
was only when I saw, when I thought about it
and I thought about you, that you do that. I said,
this is the time to do it. This is when
there is actually something of a lull between these at
this time of the year. Very good to step out
and have a look at something like that. Okay, hey,
thank you Nathan Fradley. Great to have you on the show.
Thanks Jev, and thank you everybody for listening. Remember the
(33:47):
email the money Puzzle at the Australian dot com dot au.
Today's show was produced by Leah Sammaglu Talk to you soon,
SA The Fool
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