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[00:00:00] Veronica: In this episode, we interrogate a quietly explosive trend. More Australians are hitting retirement, still carrying a home loan, and it's reshaping how households use [00:00:10] super access the age pension. And think about the family home, we're gonna unpack what the latest data shows. for example, the share of 55 to 64-year-old homeowners with [00:00:20] mortgages has climbed sharply while more than a quarter of lump sum soup withdrawals.

[00:00:24] Veronica: Go to housing related uses. So why the own it outright by 65, [00:00:30] assumption no longer holds, And also what it means for cashflow, risk and intergenerational plans.

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[00:01:13] Veronica: Our guest today is Harry Chima, a veteran retirement and wealth specialist with nearly three decades across planning, [00:01:20] asset consulting, and super product design, and co-author of the Growing Debt Burden of Retiring Australians. Scintillating topic,

[00:01:28] Veronica: Harry's gonna help us [00:01:30] separate signal from noise on later life housing debt, the real trade offs between extinguishing loans versus preserving super and the practical, sometimes uncomfortable ways households [00:01:40] can use their balance sheet to smooth consumption without resorting to magical thinking. So welcome Harry.

[00:01:45] Veronica: It's really great to meet you, and I think this is a very, very interesting topic. We're gonna [00:01:50] get some meat out of this.

[00:01:51] Harry: Thank you Veronica. Great to be here. Thanks, uh, you and Chris with invite.

[00:01:55] CB: we met a long time ago,but when you were building sort of one of the first robo [00:02:00] advice platforms, something called Clover, and you know, you can sort of explain where, you know, where that was in the journey, but how's that and got you to where you are now, right.

[00:02:07] CB: And dealing with this topic. It's interesting to sort of [00:02:10] see how you sort of landed here.

[00:02:11] Harry: Yeah, great question, Chris. Yeah, so we've probably known each other for like over 10 years, right? 'cause clover was. Sort of like we were building that in sort of 15, 16, and then we [00:02:20] might've like, launched publicly in 17. but yeah, so Vale was effectively yes, an a, a RoboAdvisor as they now call it, digital advice. But it was very much, um, [00:02:30] really built for millennials, because even back then. We realized that one of the biggest use cases for advice was, um, younger Australians locked out of the advice market, wanting to [00:02:40] know how to get on the journey, particularly to build a deposit for first home, right?

[00:02:44] Harry: And they were dealing with really low, high interest savings rates, which weren't really high at [00:02:50] all. And so this was an alternative. And the reason why we got into it was we realized that Australians were having to save longer and longer. Four years was expanding to six, was expanding to [00:03:00] eight, was expanding to 10.

[00:03:01] Harry: And we were like, all right. At that kind of timeframe, maybe you shouldn't just stick your money in a high interest savings account and hope for the best. So, long story short, [00:03:10] after, after we, we, um, sold Tova, I got back into, well, my first love, which is advice. I, I started life as a financial planner and now [00:03:20] I help super funds and other sort of institutions think about retirement, right?

[00:03:23] Harry: All the aspects of retirement. One of those that is coming into frame slowly but surely is [00:03:30] housing and the associated housing debt approaching retirement.

[00:03:33] Veronica: So what has changed? What are you noticing?

[00:03:35] Harry: A huge amount. So let, let's step right back, right. So when I started as a planner, like, [00:03:40] late nineties. The concept of of having a home loan approaching retirement is just nonexistent. I just never saw it. It never came up in conversations because the assumption [00:03:50] was that you would comfortably pay off your home by the age of 60, if not 65, and back then, like the age pension, you could get it at between like 60 and 62 depending on gender and [00:04:00] so forth.

[00:04:00] Harry: And so most Aussies were homeowners and had comfortably made that last payment to the bank before retiring. So that was, what, not even like 30 odd years [00:04:10] ago. Now the new data says that for the pre-retiree cohort, which I generally see is like 55 to 64, that's when you're really starting to sharpen up and think about [00:04:20] retirement. if you go back to 1990, I think the stats are like about, somewhere around 17 to 20% of them still had a mortgage at [00:04:30] retirement. So the minority later stats we've seen. It's more than one in two. I think it's like 54% of Aussies approaching retirement who are [00:04:40] homeowners still have some level of mortgage debt, on the house as they approach retirement.

[00:04:45] Veronica: So I've got a bit of a theory here because I would [00:04:50] imagine the simple. thinking would be to say, or logical thinking would say, well, as property prices go up, people have to go into more [00:05:00] debt in order to get into the property market, or, so they might get into the market later, so therefore they're carrying more debt.

[00:05:05] Veronica: They're, 30 years, make some older when they're at the end of their, um, mortgage. [00:05:10] Um, and so therefore they're more likely to be still. have a mortgage at retirement age. That's the sort of simple way of looking at this, but I suspect that also the [00:05:20] ease of access to finance, the relative, ability for people to refinance during the lifetime of having that property means that they're drilling down into the equity of their property, do other [00:05:30] things.

[00:05:30] Veronica: And so it's not as simple as they can't pay it off in time, This access to borrowing has changed the way we look at our homes. Would that be something that we need to be [00:05:40] talking about here?

[00:05:40] Harry: That is very much part of the issue. And also the other part is flat lining incomes, right? So real income growth. Really, I mean if you look at [00:05:50] the numbers, it has stagnated since the GFC. I mean, you can argue whether it's 2008, 2015, 16, when you look at the longer term trends, people's incomes just [00:06:00] haven't kept up.

[00:06:00] Harry: Right? So property and property wealth does a lot of heavy lifting in Australia. So there's probably a couple of things. So I studied banking, finance at uni, right? [00:06:10] So I had to go back and learn all the backstory. And definitely when you look at property, there's like two phases. One was probably in the Menzies era where, it was a policy to get Australians owning their own [00:06:20] houses. So historically wasn't the case, right? We were probably more like a mix of owners and renters. But the Menzie government literally said, look, I think it's really good for stability of the [00:06:30] population and also for the advancement that most Australians own their own. So hence the Greenfield, build out in Melbourne and Sydney and, and encouragement for people to get [00:06:40] out there and get the quarter acre block, blah, blah, blah. So fifties, sixties. Then the second phase is exactly what you mentioned, Veronica Financialization, which was an eighties thing. [00:06:50] So financial deregulation. That really was a sort of a Paul Keating Bob Hawke thing through the early eighties. New banks coming in from overseas. lots of restrictions [00:07:00] on lending. Which was eroded. So banks were literally like hamstrung in how much they could land to individuals for houses, and then that all sort of slowly went [00:07:10] away in the eighties. So yes, those two things definitely encourage people to aspire to home ownership, which I think is a generally a good thing. And I'll come to why later [00:07:20] on from a retirement perspective. And then the access to credit that definitely took off from the mid eighties, nineties onwards. so here we are today [00:07:30] within aggregate about 2.4 trillion of debt against residential housing in Australia.

[00:07:38] CB: I mean obviously, uh, people [00:07:40] getting, you're saying. Fifties, you're talking about the cohort here and you know they've got mortgages. Right. Whereas the, the big difference is 10, 20 years ago, very few of them had, you know, their home paid off and they were [00:07:50] well ahead of their mortgage and they were looking to top up their super and a lot of people didn't invest or their home was paid off.

[00:07:55] CB: Right. that's the best ROI you can get on your savings, but. You'd like to think [00:08:00] that the advice industry also potentially cause this, because they're like, oh, you know what? Don't pay your PA home off as fast. Invest, you know, get an investment property, put more money into your super. I [00:08:10] just don't think that's the case.

[00:08:11] CB: Right? the advisors have found it quite hard to pitch, you know, tell clients to pay their mortgages off slower. Right? Like, 'cause it's been so ingrained. So it's not only [00:08:20] upgraded, they've renovated, they've, you know, tried to enjoy life while pre-retirement.

[00:08:25] CB: So they've almost, she'll be right mate. Retirement will take care of itself, [00:08:30] and they haven't sort of given it the focus and dedication they needed. Like maybe their previous generation, like the, you know, the seventies and 80 year olds were save, save, save, save. [00:08:40] And they realized that then their parents didn't really enjoy life as they have a different view on it.

[00:08:45] CB: Right. Do you think that plays into it?

[00:08:47] Harry: That's an, that's a fair point. You know, [00:08:50] there's an element of that. We see it. I mean, even in my parents', generation, right? So they're, uh. oldest of the baby boomers. and they, yeah, coming outta that experience, world War ii, it's very much th th through save, [00:09:00] save, save, own your own home.

[00:09:01] Harry: It's the best insurance policy you can have in old age, paid off before you finish work, kind of job done right. Uh, whereas yes, I'm a Gen [00:09:10] XI suspect you guys are probably more on the millennial side of things, but we

[00:09:13] Harry: grew up.

[00:09:13] Veronica: you. But I'm fully Gen

[00:09:15] Harry: yeah, we, we, we more grew up more like the eighties, seventies, eighties babies, and it was [00:09:20] like, times are good and gen X was the first to really, embrace university education. So we were the first to also get hit with, hit with hex, but whatever. with that additional education and [00:09:30] skills, we, we wanted to go overseas, so we were the first to go. That's it. We're off to. London for the two year stint and we want to travel and blah, blah, blah. And we'll think about settling down the [00:09:40] partner, the house, the kids later on. So there is a generational impact. And then we just, yeah, we enjoy life and we, we like to do other things. so what has happened [00:09:50] is if you look at the stats, right, Australians generally, like stay in a home for like 10, nine to 11 years, depending on whether it's an apartment or a house. But yes, what Veronica [00:10:00] mentioned before, the use of refinancing potentially to support lifestyle, has definitely increased. So I know one of the, um, housing and Urban [00:10:10] Research Institute did, did a study a while back and they realized that actually quite a significant number of people. In this sort of, you know, middle age cohort where, increasing the mortgages without [00:10:20] moving and the only reason for that is yeah, that they're using it kind of like a virtual ATM potentially. And that's fine. It's just trade offs though, right? Then it's just like, well, what happens at the [00:10:30] back end? How do you make it work? What does that mean? You just have to think a bit more about it. rather than go, she'll be right mate.

[00:10:36] Veronica: So at the back end, what are people doing to make it work?

[00:10:39] Harry: [00:10:40] so you called it out before Veronica. Part of it is we are seeing definitely, depending on, on where you sit in the, demographics and wealth wise, there are a ru of middle Australians who are [00:10:50] homeowners because even whilst it's fallen about. 78 to 80% of Australians currently do get to the point of retirement as [00:11:00] homeowners. So that's good. problem is that a lot of them now are having to look for sources of capital to extinguish existing housing debt. Right. That seems to be a preference. we haven't got to a [00:11:10] sophistication, a level of sophistication where people say Maybe there's other ways of holding this debt, carrying this debt, converting this debt. But if they just wanna get rid of it, and a lot of Aussies do. [00:11:20] What are their options? And a lot of them are looking to super, that, that's clearly what we're seeing. And the latest data we have is that when you look at the lump sum withdrawals, [00:11:30] the actual movements outta super, I think it was like 27, 20 8% of that was literally used for, housing related purposes.

[00:11:38] Harry: As you say, like, paying off, debt [00:11:40] or doing a a reno potentially, but very much housing related.

[00:11:43] Veronica: the way my brain is was like, you know, when I downsize I wanna take my 300 grand or whatever it was, whatever I could do, and put that into [00:11:50] super. You are saying that the reverse is happening, people getting to retirement agent actually drawing down this super in order to either. draw down or pay down their mortgage.

[00:11:59] Veronica: But [00:12:00] is this also tidying? You said if they're not sophisticated. I'm not sure if that was your word, but, not looking at sophisticated alternatives. the fact that they've got themselves into this situation, is that because they don't [00:12:10] fully understand what's happening every time they refinance?

[00:12:12] Veronica: They don't actually get, like, they use it like an ATM and they actually don't realize, you know, we've got this lack of financial literacy that we sort of know that [00:12:20] we have this problem. Is it, manifesting itself.

[00:12:22] Harry: Possibly, I mean, but that's certainly the case that, a lack of financial literacy and just the way, compounding works, right? So both on the well [00:12:30] side, what your super balance is today versus what it is in 20 years. And obviously unfortunately also on the credit side, which is how do these amortization schedules work out of each payment you make?

[00:12:38] Harry: How much is going to [00:12:40] principle and how much is going to interest and how that changes over time. So because people don't understand that, they may think that they can pay off debt sooner than they actually [00:12:50] do. That's definitely, I think something that's a bit of a problem. But then also culturally, yes, the preference has been to be mortgage free [00:13:00] at the point of retirement. The question now is, is that a realistic goal for Gen X and definitely for millennials, [00:13:10] because what we know is even today with boomers, right? So it's boomers who are retiring today. Uh, we're out next, but at the minute it's still boomers. the median home owning boomer, [00:13:20] approaching retirement now still has more than 200,000 of mortgage debt.

[00:13:24] Harry: Outstanding. So it's chunky, right? You've gotta find a pretty big source of capital if you're just gonna [00:13:30] make 200,000 or $200,000 mortgage disappear. So it's a combination of all those things. Maybe lack of financial literacy, maybe [00:13:40] some. Not great advice along the way, and then just, the sheer way the, the math works, I guess through time.

[00:13:47] CB: I mean in your report, and I think it's an amazing report, which we'll [00:13:50] put in the show notes, but you've, you mentioned around divorce, that's another obviously a big thing that happened. You know, like we didn't stay with our partner forever now, but like there's a always a better option.

[00:13:58] CB: The grass could be [00:14:00] greener. You know, that obviously has a huge impact on financial wealth, right? for people. Um, so that's been a huge trend. I mean their parents are probably living too long, right? That's what their arguing. I thought mom and dad would die earlier. Right? Like, and I'd [00:14:10] get a huge inheritance.

[00:14:11] CB: Like, you know, you think about it, there's two people who I've definitely advised clients in this space in the 55 and, some you raise the conversation around inheritance [00:14:20] and they're like, oh no, I can't possibly talk about this. and it's so far down the line and. And they genuinely don't.

[00:14:26] CB: And then some are like, no, no, no, mom and dad are, do it all right. I reckon we'll [00:14:30] get about two mil, or whatever it is. and so then they're going, well, why give up so much today that I know that mom and dad aren't gonna spend it because they've, you know, they save the [00:14:40] pension and the house is worth five mil.

[00:14:41] CB: Like, so there is a bit of that going on, right? Like, and there's just a lot of pressure on them in society to spend money. Like it's just private [00:14:50] school fees gone through the roof.

[00:14:51] Harry: Yeah, you're right. For certain households, especially I guess middle Australia and up the spending pressures are enormous, right? So we know that the CPI number can only do [00:15:00] so much. When you look at different people, their spending is different. And you've nailed it, our private schooling, and I've actually just been through that myself.

[00:15:07] Harry: So yes, fully aware of that. it [00:15:10] is a burden, right? So This is a kind of a secondhand story, but I did hear that, the CEO of a major bank, I think was it last year or the year before, said that when [00:15:20] he goes around and kind of gets the vibe of, borrowers and so forth and some of the key clients, he says that now in certain cities, Sydney being the obvious one, [00:15:30] wealthy grandparents are actually stepping in to help support their kids with private schooling fees.

[00:15:34] Harry: No doubt about that.

[00:15:35] CB: Actually mortgages as well. because like they. you know, I, I [00:15:40] can't give you the cash now, but what I can do is pay your mortgage. and they can see that the kids have, you know, 'cause they've done so well outta property, they don't want the kids to move. They know that it's putting [00:15:50] a lot of pressure in their family and, you know, to keep everything's turning. particularly in the last four years, we've seen that the, that's been happening, not just cash, but regular [00:16:00] sort of payments. Um,do you, do you think though, like. Obviously as, as generation shift, what's comfortable for one generation might be comfortable for the [00:16:10] next uncomfortable, no debt at retirement comfortable for the the Gen X, or maybe a little bit uncomfortable. Do you think that the Gen Y like, well ultimately [00:16:20] I know I'm never gonna live in that property, in retirement. Why do I need to pay it off? Like, what's the point? Like I'll just sell it, and I'll find something else to live in. Do you think that's where we're heading to? Is that. People [00:16:30] being more and more comfortable with debt as generations go on, because it's just such a big part of life.

[00:16:34] CB: Whereas I say the Gen X generation as an example, were anti debt 'cause their parents drilled into [00:16:40] them that debt was bad. Like, and that's a huge change to the way that, you know, property works, I guess.

[00:16:45] Harry: I think you're right. I think millennials, there's a couple of parts to it, right? So, so they're even more [00:16:50] educated than Gen X and you know, and love to travel and so forth, but a lot of them I think are seeing property very. Differently. Some of them are just like locked out of the market and going, look, we're forever [00:17:00] renters or we're rent investors, right? So literally, I ha have a niece who is that? she doesn't own her own property, but she owns an investment property, you know, 20 something in good honor. [00:17:10] And she's, she's on the journey. But I think millennials are starting to see life a bit differently. And so maybe it is a case of, yes, we're stuck if we do get on the, ownership train, [00:17:20] whether as a, an investor. Or an owner or both. Then we kind of have to deal with debt for life. This is the change in the conversation. Right? So that's what we also looked [00:17:30] at in the paper. It's like, all right, well if that is the case, are there smarter ways of dealing with housing debt than taking your money outta [00:17:40] super and giving it back to the band?

[00:17:42] Harry: 'cause it almost swaps one problem for another. So that's kind of what we were trying to unpack. There's no doubt that holding onto the more who [00:17:50] super you can hold onto for longer the better. Because once again, compounding right? There's this thing called the 10 30 60 rule, which is that actually [00:18:00] when they look at the long-term numbers, about 10% of the total benefit of super comes from the contributions you made. 30% comes from the earnings on those [00:18:10] contributions. Before you retire, and about 60% comes from the earnings on the contributions after you retire. it's quite amazing the way the mats works, but you [00:18:20] know, you start with a sizable amount of super at the age of 60, and you can actually go the long distance if you manage it prudently. but if you take 200 [00:18:30] out of the 300 to pay off the bank, the mass just doesn't work anymore.

[00:18:33] Veronica: So, because there's lots of other knock on effects aren't there? I mean, apart from the fact that you are robbing your [00:18:40] ability for what your super balanced compound into your retirement, you go and if you decide to go and sell that house and downsize and you might actually pocket quite a bit of equity [00:18:50] and then.

[00:18:51] Veronica: You might be using the, the pension because you've eroded your super. Then with all that extra equity, you might be in a situation where now you've got more cash and you're not gonna get, you're not gonna [00:19:00] get the pension again. So it's a bit of a game, I guess, that people need to know the rules, when they're playing

[00:19:06] Harry: Agreed and, and interesting you mentioned downsizing, right? 'cause we looked at that. As a sort of [00:19:10] a breakout section in our report. Why a, why, why aren't Australias using downsizing more? And I think Veronica, you've hit, the nail on the head from middle Australia because basically they don't wanna release so [00:19:20] much equity that it impacts on their age pension 'cause it is so valuable. So actually who downsizing is working for right at the minute, and it's a, I think it's a Melbourne, Sydney thing, is the upper end of the [00:19:30] market in the leafy eastern suburbs. Houses that they've owned for 30, 40 years. Too many bedrooms. Kids don't need it anymore. Downsize it. Go to a brand [00:19:40] new purpose-built, you know, multi-dwelling, a beautiful apartment or something, in the same locale.

[00:19:45] Harry: 'cause a lot of people don't wanna move too far. They don't wanna be close to either their networks or their [00:19:50] kids to their, grandparent duties. Those people are, are, yeah, they, they're in a good shape. They can sell the, you know, five six better. Release 3, 4, 5 mil, [00:20:00] buy something in the one and a half, two and a half mil range.

[00:20:03] Harry: And then the, the difference, because they were never gonna get pension anyway, it's just all upside. that's what we see in the data. it's [00:20:10] great strategy, but for Middle Australia who still have dead outstanding as they're approaching retirement, it doesn't seem to be working out so well.

[00:20:19] Veronica: So what could [00:20:20] they be doing instead of robbing their suit or eroding their super

[00:20:23] Harry: So, so here's where we looked at, at, at this phenomenon, right? This, thing called, uh,home equity release and actually used to be a [00:20:30] thing up until the GFC actually we'd be surprised, but some of the major banks were involved. They all wrote home equity release loans, right? I won't mention them, but, some of the MA major names.

[00:20:39] Veronica: But you're [00:20:40] talking about reverse mortgages.

[00:20:41] Harry: mortgages primarily. Exactly. There, there's a few variants and there's even a government version, believe it or not. but if you look at commercial reverse mortgages, [00:20:50] that's exactly what it was. That there used to be a thriving market, then the GFC hit and they all had to pull out. But effectively, a reverse mortgage is just that you, take a mortgage out over a [00:21:00] property, so it's just like having a normal mortgage, but you just don't pay any cash flow.

[00:21:03] Harry: This is like zero cash flow. And the, the principle compounds with whatever rate of interest, [00:21:10] variable fix or whatever your, your commercial arrangement is. And then generally speaking, when you get rid of the property, either you're selling it to go into residential aged care or your kids are dealing with [00:21:20] your property, then you square up with the reverse mortgage provider then. and these days there's a thing called the no negative equity guarantee. So you can basically [00:21:30] never go into negative equity. If for some strange reason, interest rates and the property markets that move against you. So yeah, reverse mortgages, and variants thereof.

[00:21:39] Veronica: before [00:21:40] we continue this conversation, I'll I better make a declaration actually, because I have a consulting role with Longview. And Longview have a product called Home Flex, which is not a reverse [00:21:50] mortgage, but it is a,Product, if you wanna call it that.

[00:21:52] Veronica: for, and a lot of people in this sage bracket are looking to that as an alternative. So I will just put my hand up to say, and, and I advise 'em in terms of [00:22:00] the caliber of the properties that they might be bringing into the fund and might be sharing the equity ops. So that's my role. I'm not a sales person for fund.

[00:22:08] Harry: thank you. And likewise too. I, I should, [00:22:10] make note that the study we did last year, was supported by a home equity release provider. Home safe solutions. so yeah, they, they are a few [00:22:20] that, and, and thankfully they're coming back, right? Because as I said, after the GFC, a lot of institutions just had to pull out of the market.

[00:22:25] Harry: 'cause other things were on fire and they had to go back to core business. but now they're going, hang [00:22:30] on a sec, this is an issue. And, and so there are these innovative companies that are starting to realize that there are older Australians, uh, who need help. and they developing [00:22:40] solutions to help, which is, which is great.

[00:22:41] Veronica: So there are, there is a cost to this money, right? So you can't just tap into the equity in your home and then, and then go, oh, that's cool. I just pay it back when I'm ready to [00:22:50] move. You know, move out or sell it or whatever. You, you're gonna have to pay it. Some, one of the things about reverse mortgages, because you, oh, I love this.

[00:22:58] Veronica: You know, you got this concept of no [00:23:00] negative equity, basically, which sort of says that there's a risk previously, there's obviously a risk. You could actually owe the bank more money than the property's worth when you go to sell, right? That's an [00:23:10] enormous risk, and I know a lot of people, if you don't like debt, you definitely will feel uncomfortable having that.

[00:23:15] Veronica: liability or that, compounds, right, because that's tied to interest rate, [00:23:20] correct.

[00:23:20] Harry: There's an interest rate risk, exactly right. It's because you're not paying down the debt as you would in a traditional, amortize or principle and interest loan. it compounds, right? It, it [00:23:30] accrues. But the issue is over the time that you're gonna use that debt facility, might the value of your home. Increase at a faster [00:23:40] rate than the value of the deck. that's the bet. And no one can know because you don't know what your house is gonna do in your suburb relative to, you know, what Michelle Ock is [00:23:50] gonna say on any one, you know, RBA meeting day. So yeah. That, that's the thing, right? But, but overall, if you look historically, what, at least the last 26, [00:24:00] 27 years since 99, 2000. yeah, the, the, the housing market has had a pretty good run.

[00:24:07] Veronica: I'm on a personal mission to help more people make better [00:24:10] property decisions. You know, most people don't realize that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the [00:24:20] information that they need. And what I do is help people with tricky real estate problems, which offer masqueraders simple questions like, should I sell my investment property because the interest re payments are [00:24:30] hurting, or should I buy before I sell?

[00:24:32] Veronica: Or the other way around. You could connect with me and access all of the tools that I've created to help you make better property decisions at Veronica [00:24:40] Morgan dot com au. And there you'll find resources for first home buyers, details about my buyer's agent mentoring program. You could connect with my Sydney based property management and [00:24:50] buyer's agency teams, Australia wide vendor advocacy.

[00:24:53] Veronica: Or ask me for introduction to the small group of buyer agents that I would personally recommend across the country. That's [00:25:00] Veronica Morgan dot com au.

[00:25:01] Veronica: If you're considering a property move, which is buying your first time, upgrading, renovating, or investing, the team here at Alcove would love to help you think through your [00:25:10] decision and get the finance right.

[00:25:11] Veronica: Please go to cove.com au to reach out.

[00:25:14] Veronica: let's talk about sort of, you know, reverse mortgages slash equity release, those sorts [00:25:20] of things, you know, in a general sense why, if that's gonna be expensive and you don't really know what the cost of it's gonna be until you, you sell the property, [00:25:30] right? so how could somebody, I guess.

[00:25:35] Veronica: Accurately or with any sense of confidence way up. The [00:25:40] difference between drawing down this, their super, where they sort of get this sense of, oh, at least I won't have a debt, versus I'm actually gonna have a different debt and it's going up over time. The longer I [00:25:50] remain healthy, I've got this sort of, mm, this, this, I've gone and done the right thing.

[00:25:54] Veronica: I've paid my house off, right? And now, and all of a sudden then I'm back not having paid my [00:26:00] house off. Like how do people square that

[00:26:02] Harry: Yeah. And that, that's a really, really difficult Equation to do. Right. The, the maths on that would be difficult even for actuaries because you're making [00:26:10] massive assumptions about the rate of home growth, your particular house, your city, your state, whatever, relative to how your super fund might [00:26:20] perform over that same period, and then the, the earnings.

[00:26:22] Harry: So, so what we did was we took a far simpler approach, which is just to say right here, right now, today, what's the cashflow benefit? So at the back of the [00:26:30] study we did a super simple, case study where we looked at this hypothetical couple,John and, and Joan Citizen, and we just said they're approaching retirement, they're still working.

[00:26:38] Harry: So they're a Sydney couple. So they earn [00:26:40] say one 50, give or take so he's working full-time, she's working part-time as they wind down towards retirement and they have the typical mortgage outstanding, 230 there or thereabouts. [00:26:50] We ran some numbers and basically what we realized was that, based on, on a home loan taken, like say 10 years ago, their total sort of household [00:27:00] discretionary income they would've gotten like maybe six grand a month, give or take, right, because that was their income.

[00:27:05] Harry: But their home loan is probably somewhere in the twos, 2,300 a month, 2,500 a [00:27:10] month. Because don't forget, they took it out a while back and the house was worth less. So they have like $3,000 each month to spend on other things besides the mortgage, right? So then we just ran two different scenarios.

[00:27:19] Harry: One [00:27:20] which is take out the money from super and pay it off and therefore have, no debt, and then off you go. And that basically improved their [00:27:30] situation by about 40 odd percent because they didn't have that 2000 something a month that became zero. So obviously every, dollar that they could get in retirement from the [00:27:40] age pension and the balance of their super, they could keep and spend it was awesome.

[00:27:44] Harry: And then we looked at a different scenario, which is, well hang on to your super. Use a facility such as the ones we've [00:27:50] been talking about and use that to pay off the mortgage. Right? and then that's super maintained. That's zero cash flow out the door on a monthly [00:28:00] basis to the lender. And that actually pumped up the, take home cash flow, what they could spend by almost 70%.

[00:28:08] Harry: So they went, they went 40% [00:28:10] improvement by, taking the super, sending it off, and then, but 70% improvement by keeping their super and just flipping [00:28:20] the, so it's basically just don't forget, it's like a, a debt. Re-engineering changing one form of debt for another. But what they felt on a day-to-day basis was many, many more dollars [00:28:30] in their pocket.

[00:28:30] Harry: So I think that's one way of thinking about it. First level cash flow, and then the second, the second level, which is probably what your kids will be more interested in, [00:28:40] is what's gonna be left to them at the end of the day.

[00:28:43] Veronica: immediately I'm thinking to myself, if somebody has got themselves into a situation where they're into retirement with [00:28:50] debt on their home because they've overspent, they've o they've lived beyond their means all the time leading up to that point. If that's a reason that they've got themselves in that [00:29:00] situation, and then they're gonna go and do that, rather than tap into their super to pay down their mortgage, or continue to pay their mortgage out of.

[00:29:07] Veronica: Whatever their earnings are at the time, [00:29:10] then they're just gonna spend that extra 70%, you know what I mean? They're not actually gonna be better off, they're just gonna blow it

[00:29:17] CB: we had Brian Hart on this pod back in 2021. [00:29:20] Brian Harts basically got rid of all the, reverse mortgages. He set up a company called two B, which is now in Viva, and he was calling about this all the way back then.

[00:29:29] CB: He is [00:29:30] like, look, you know, there's, this is a product that we see huge growth in the banks had gone through all the responsible lending. It's, you know, de it went deregulation and it went re-regulation with, Royal Commission, [00:29:40] blah, blah, blah. Banks have now got issues with credit growth, right? So they can't keep growing their, because it's just house prices.

[00:29:45] CB: And, that's a big part of our economy, right? So they're gonna have to look at innovation. [00:29:50] And I think that we're gonna go full circle. I thought that, you know, I reckon the banks will, a, it is a lot of misunderstandings around lending to 55, 60, 65, 70 year olds. [00:30:00] Like there's a lot of people, oh, you can't borrow and you can't do this. Like it's not true. You can borrow on, you know, being retired, you can borrow on your super income. There's so many, [00:30:10] you can get 30 year loans at 65. Like there's, a lot of misunderstanding that banks wouldn't lend. And so I personally think that the banks are gonna go full circle on this [00:30:20] and lending to older Australians because there's so much debt available here and interest only terms are gonna start coming back and potentially the banks are gonna start [00:30:30] moving into these. Reverse mortgage is at, at decent rates because the risk to the bank's very minimal. Like, you know, if I could offer you a, let's say the loan house is worth [00:30:40] $3 million and there's a $500,000 debt on it, why do I worry about them having to pay that off? I know if they'd have got themselves into a position they could, you know, sell down.

[00:30:49] CB: and [00:30:50] I think you'll find that these reverse and even the, government have started offering a home equity release scheme. which you can get access to at really sharp rates, like [00:31:00] 3.95% cheaper than mortgages. and that I think is another sign. So I think, you know, people, older people, I know you're saying there's those downsizes that want to downsize, but if they miss that window [00:31:10] of, I'm comfortable to do it because I feel healthy and I feel like I can deal with change and I don't mind meeting new people and getting new neighbors, if they get past that [00:31:20] window and their desire to downsize, like nose dives and they just wanna stay in their home all the way through till death. And then we're living longer and longer, right? So like one, even if one [00:31:30] party dies, the surviving spouse could live it well into their nineties. and so I guess my takeaway is that, you know, this debt is just gonna be a part of what. [00:31:40] Retirement is. and I think there's gonna be more and more solutions that come that force people not to have to downsize, but they don't, or also don't have to take on product for the very high [00:31:50] interest rates. I feel like the competition in this market will ramp up because the exit strategies out, can you sell my home? Or I've got a bunch of money in super that I could always sell. [00:32:00] And so the bank's like, well, yeah, I'll lend you the money. is that sort of your take on

[00:32:02] Harry: Yeah, it's very likely that, the big institutions will look at the space again and go, you know what? the numbers are mind boggling. Because when you look at the [00:32:10] wealth, in Australia, At the household level, it is a hundred percent dominated by bricks and mortar. And when I say bricks, I mean some of the, some of the numbers are actually quite [00:32:20] comical when you look at it in, abstract because, for example, I'll give you these stats, which we had in our report in the year 2000. The total wealth of, of Australian households was [00:32:30] 2.5 trillion, of which housing was 1.6 trillion. The most recent numbers, the total net wealth [00:32:40] effectively of, households in Australia is 17.3 trillion. So 17 trillion of which housing now has just crossed over 12 trillion. [00:32:50] $12 trillion and you would know the medians. Sydney is what? 1.4 Brizi Melbourne are all in the nines basically now. And that's [00:33:00] dwellings, right?

[00:33:00] Harry: So that, that's the combo of, freestanding. And so, yes, you're right. would a bank stress about lending five, four, 500,000 to an older couple [00:33:10] when they know that, they're, they're good for assets of. You know, two, 3 million. so you're right. and I think especially Gen X and millennials to come, maybe we need to, [00:33:20] to, uh, reduce the constraint of what our parents thought us. The baby boomers and the, the pre pre-war babies, which is never, ever approached retirement [00:33:30] with any housing debt, right? Because the fact of the matter is, houses are expensive now in Australia and incomes haven't kept up. So, as Ellen Kohler said, his parents about four [00:33:40] times income, house price to income about four times when he bought it. His hers house here in Melbourne is about the same. Now, a millennial in Sydney is looking at about [00:33:50] 10 times I think. And, uh, Melbourne is maybe eight or nine times income. So with that, it's really, really hard to pay off over 30, 40 years, especially [00:34:00] if you change houses on, on a regular basis every 10 years. If you unfortunately experience a relationship breakdown, then both of you have to go swap yourselves out again. Or [00:34:10] if you do a Reno or any of those three.

[00:34:13] CB: you know, I know that, 12 trillion of housing market, of that 12 trillion and of the stats, a vast majority is held by people over the age of [00:34:20] 65. Right.

[00:34:21] Harry: Yep. It's

[00:34:21] Harry: about, I think it's about three, three of the 12, around about there.

[00:34:25] CB: probably, I don't know, that feels low to me, but I think that number is [00:34:30] huge. And there's always this belief that they're all gonna downsize and they're all just gonna flood the market with all these properties. And even these people who are in the 55 now, they're getting to retirement. By the time in 10 [00:34:40] years time, they get to retirement, they're back and they've still got a four or $500,000 mortgage. they might be able to get a 15 year interest only loan at, you know, at bank [00:34:50] rates. because like the crackdown in sort of the Royal Commission and the coming outta that investment boom will sort of, it's sort of slowly getting unwind, I feel, you know, like, and I [00:35:00] think if it's not the banks, it'll be the non-banks.

[00:35:01] CB: And the non-banks will get good market share and then the banks will be like, oh, actually we'll just start offering that in-house. and, and then they're basically, everyone's holding debt, right? So the, the young [00:35:10] person's holding debt and. you don't get forced just to sell 'cause you can't afford to hold debt.

[00:35:15] Harry: I think there's a preference for most screens to age in place anyway. Once again, we, we saw [00:35:20] that in our study. Like, you know, I can't remember the productivity commission, or one of 'em did, did a big study into reverse mortgages and older Australians and what they were doing. It was pretty clear even back then, [00:35:30] like 10 years ago, that Australians preferred to age in place because they're comfortable with their, you know, in their environment. They have support networks, they're built up in and around place, and [00:35:40] now. With packages available, you know, home care packages and so forth.

[00:35:44] Harry: It is possible, right? Depending on the house and, and a bit of retro fitting here and there. So, yes, definitely. [00:35:50] And then, and then you've got this massive asset. The problem with that is it, doesn't generate you cash, right? So you've got this beautiful house, which, you know, is, it's awesome in retirement, and it's one and a half, 2 million, whatever that [00:36:00] number is, but it's not giving you any cash. And then the, problem is if you still have a cash outflow. How do you manage that? So here's where I think mortgage brokers and other, like [00:36:10] mortgage advisors also have a role to play, to educate the client base, right? And whether it's their clients or their, their client parents or working [00:36:20] together as a team, like, well, what's the situation here? what do you do? What are your options? You know? Okay, so how does, how does this deck get re-engineered? To help out with net cash flow on a [00:36:30] monthly basis. All of those conversations I think will become more relevant and, there will definitely be more entrance to the market because that's just the way the SCRs [00:36:40] demographics are moving.

[00:36:41] CB: It's not incentivizer for the kids to get their parents out. Right. that's a, there's multiple children, often, you know, if mom or dad does [00:36:50] move out, then yeah, some cash is released, but. Maybe they're not gonna put it into a, good asset. you know, maybe they're not gonna get as much as they would get if they sell the, like, the full [00:37:00] property. So there's an incentive, you know, just to get, help their parents age in place rather than encouraging them to downsize, right? and 'cause they go, they're gonna have a better [00:37:10] inheritance one day as well, like on top of, they think that's best in their best personal interest as well.

[00:37:14] Harry: Yeah. I mean if you work, you, you're right. I know you talked about intergenerational like, arrangements and whatever, but if, [00:37:20] if you think about it as a family unit, intergenerationally. Yeah, do the numbers, but you may be right if, the kids work together with mom and dad to keep them in their own [00:37:30] house and then manage any debt and so forth. it's kind of like, you know, you play the long game and maybe it, it, it helps you out and then it helps your kids out down the line. I think, I think basically the bottom line is [00:37:40] we all realize that it's better to own a property in Australia than not own a property. So, as I said, we work in the retirement space.

[00:37:47] Harry: We know from the numbers. In [00:37:50] terms of income, poverty in retirement, fully home owning Australians, it's like 11%. It's hardly a, a, a thing. you put a mortgage onto that. So [00:38:00] incumbent, um, home owning Australians, it doubles into the twenties and the people who are in real strife are non-home owning [00:38:10] retirees. Of all of those women are by far the the most impacted because they have the least resources, the least super because of the super gender gap and the [00:38:20] number is an astonishing 78% of Australians, single female retirees who rent. in income [00:38:30] poverty, according to the Retin Institute, they did an awesome study last year.

[00:38:33] Harry: So yeah, you, if you own a home, then you, in Australia, you then kind of becomes like a team sport. I think these [00:38:40] days. Working at the numbers with your kids, working the numbers with your parents, uh, knowing the auctions for debt management and, thinking about it in that lens. And [00:38:50] working with a good mortgage broker who understands the ins and outs, I think that's just gonna become more common.

[00:38:55] Veronica: we've seen it in New South Wales. In fact, we've had guests on the podcast talking about the changes [00:39:00] to zoning across Sydney, for example. We know that in Melbourne there's some very similar things happening. and across the country we are gonna see more and more this, particularly in urban areas, you're gonna see more [00:39:10] and more supply of, you know, medium and high density living.

[00:39:13] Veronica: And I think. It'll be interesting to see how that changes this, conversation. Because apart from [00:39:20] the fact, you know, the cynical adult children sort of thinking, well I wanna keep mom and dad in the house. 'cause that's, assuming the house is a great asset that is really valuable. You know, they're just living in [00:39:30] normal suburbia.

[00:39:30] Veronica: They're not having those conversations, they're property is not actually worth that much money to give them all those lovely options. Right. So I would. Hazard. Middle Australia's not [00:39:40] necessarily having those conversations, but what they are having conversations are around, you know, I don't wanna move out of this house.

[00:39:46] Veronica: 'cause that means I have to move a long way away to be able to [00:39:50] downsize into a, you know, an apartment or a townhouse or a villa or something. And I'm losing all my connections. I'm losing all my friends, I'm losing the family, I'm losing my doctor, I'm losing the chemist I go to. I'm [00:40:00] losing all of these things that are familiar to me.

[00:40:02] Veronica: And with this sort of changing of, the density, Changes that are happening in a lot of our suburbs. These [00:40:10] options will come up for people to downsize, like you talked about, the eastern suburbs type person who sells the big expensive home because they're self-funded, and then now they're taking [00:40:20] advantage of these developments to buy really beautiful apartment in the same suburb or the next suburb.

[00:40:24] Veronica: That sort of thing's gonna start rolling out across the board. I would think that that's gonna have an impact on [00:40:30] the willingness of people to. To stay in place or whether or not they're gonna actually downsize. So that'll be quite interesting to see what impact that has on, on this, emerging [00:40:40] market of funding people into retirement.

[00:40:42] Harry: Good point. And it's city by city, I think, right? I mean, I was just in Sydney recently, just last weekend and, and definitely sit Sydney is [00:40:50] ahead of all other capital cities in urban infill and, building some, you know, quality, um, apartments and apartment blocks and people [00:41:00] moving. Being more comfortable uh, living in a multi-dwelling environment. Melbourne is, behind Sydney, but on the way, and I grew up in Adelaide and everyone there lives in a, like a detached house. The concept of an apartment is like, [00:41:10] what? And you see that in the numbers. That's why actually weirdly Adelaide looks like it's overtaken Melbourne for median dwelling price.

[00:41:16] Harry: But that's just because there are so few multi dwellings in [00:41:20] Adelaide relative to Melbourne, right? So that's like a bit of a fudge in the numbers. Yes, I think, more urban infill, more quality and, and more options in [00:41:30] that, you know, whatever, three to 15, 20 story apartment buildings and whatever would, definitely help.

[00:41:37] Harry: people would go, right. I may [00:41:40] now be prepared to, step away from my detached home. And live in something that, keeps me connected, but is, you know, sufficient quality and [00:41:50] amenity that, that I don't mind then making that decision. So I think, we'll see how it plays out in Sydney.

[00:41:54] Harry: 'cause I suspect, older people in Sydney will potentially have more choice before [00:42:00] similar people in Melbourne, Adelaide, and the other capital seas.

[00:42:03] CB: And they're not gonna Absolutely. Just as there, I think there's this sort of growth, which we haven't yet, I think in [00:42:10] detail, but a whole new style of development, right? Like it's not a retiree home that's sort of boring, it's sort of retiree living with, you know, that's actually much more targeted at, [00:42:20] that's sort of the pre-retiree to, you know, retiree.

[00:42:24] CB: You know, it's a whole new. Type of property that's probably gonna come as well, right? It's not just [00:42:30] come here when you know it's your last option. It's come here because you choose. This is a better way of living out my next 10, 20 years. It's with a lot of people that are like-minded, that are [00:42:40] still fit and healthy and it's in premium suburbs, like, so it's not aged care.

[00:42:43] CB: And I think that hasn't really been a market because those sort of people wanted to stay in their home. and you [00:42:50] know, there's a lot of people still wanting their parents Stay in the home because that is the place where people can all come to, right? Like the, the kids don't have a house, they've got a townhouse and the [00:43:00] grandkids have got apartments.

[00:43:01] CB: And so the family home is often the meeting point as well. And if that goes, like, it goes for the whole family. And that's, that's another thing [00:43:10] that I think, you know, keeps the home off the market and stops the person who probably should downsize to downsize.

[00:43:16] Harry: If this is true, right? It's, all of those things. It's like, memories and [00:43:20] it's like convenience. And it's where everyone gathers at Christmas, you know, it's like, yeah, we're doing the road trip back to visit the folks in whatever city you know, you grew up in and, and yet, you know, you've got your old bedroom.

[00:43:29] Harry: It's all of [00:43:30] those things that that's true. But, you know, from, from the, the point of view of the parents or the retirees, they've gotta make pragmatic choices because what we do know is. The cost of living in [00:43:40] retirement, right? Insurances. so rates, home and contents and all the other insurances that go with being a homeowner, that's been going up far, far higher than [00:43:50] inflation over the last few years.

[00:43:51] Harry: You just don't see it. and so they have to make pragmatic calls and then heating and cooling. Try heating and cooling a big old seventies house, with [00:44:00] multiple bedrooms, with a, with a good old fashioned, you know, ducted heating unit. Like, good luck with that in, Melbourne or Adelaide, Sydney winter. so yeah, so it, it's all those things that, that, [00:44:10] as I said, this cash flow is becoming like really front and center. So there's this asset, which is awesome, and if you can organize it, yeah, by all means, [00:44:20] stay in place, age in place. Deal with any debt, through some good advice or look at what's out there. if you are in a suburb, which gives you the ability to downsize, stay in that [00:44:30] suburb. It's a nice new flash thing and the kids, can still have a room or whatever, whoever's visiting, awesome. But yeah, every Australian will have to make their own choice. But I think the key [00:44:40] thing is, get some awareness, and start thinking about it sooner rather than later.

[00:44:43] Harry: Right. Better think about it. 55 than 65. Better to think about it at 65 than 70. And the last thing [00:44:50] you wanna do is, is be having what you hear of as this terrible, um,hospital, car park, conversations between siblings as something has happened and then mom and dad is like, and then we [00:45:00] can't stay there anymore and blah, blah blah.

[00:45:01] Harry: So it's kind of like thinking through all the different issues about aging and housing and housing debt [00:45:10] in the 21st century.

[00:45:11] Veronica: definitely is a changing landscape, there's no doubt about it. We've had a couple of conversations recently around the legalities and some of the options in terms of multi-generational living, but [00:45:20] also. the planning around that and, the simple fact that, you know, so many people leave it too late to give themselves more options, you know, in terms of deciding whether they're gonna [00:45:30] downsize or move or, whatever.

[00:45:31] Veronica: However, they, they sort of plan their way through this. It's the avoidance of planning often rather than. Active planning and sometimes even [00:45:40] staying in the home is a way of avoiding making these decisions. So it is not something that, you know, sometimes moving is a really smart thing to do and I, I look at my parents' [00:45:50] situation.

[00:45:50] Veronica: I look at a number of, uh, situations of people that we've dealt with over the years. We do quite a lot of indoor advisory for people that are moving into retirement, living in its various skies. [00:46:00] And it is really interesting to see those who have less choice and more urgency. Versus those who are actually making much, much more, you know, considered inactive [00:46:10] decisions and exciting decisions rather than those fearful decisions.

[00:46:13] Veronica: 'cause this is really God's waiting room. You know, like getting in early is just so much more empowering and you've got so much more agency over [00:46:20] your own life. I've got a bunch of friends, in fact I've got two different bunch of friends and we talk about our own sort of, you know, what villages are we gonna build for ourselves, you know, we're gonna do it ourselves.

[00:46:29] Veronica: I'm sure I'm not alone [00:46:30] in that. are you part of one of those conversations too?

[00:46:32] Harry: Yeah. Australians are thinking outside the box, right? So I heard of this, one case of a finance executive who I think is Melbourne based. [00:46:40] And then he decided to pull up stumps and decided to build a purpose built dwell. like I think a southern Southern Queensland or northern New South Wales, somewhere around there, you know, where, where the sun is always shining. [00:46:50] And he did that specifically to accommodate him and his aging sister. So I think they were both in their sixties and it was like the, it was designed specifically for their needs and then they, [00:47:00] they've organized, you know, their, their, care. Someone to come in once a week and clean and so forth.

[00:47:04] Harry: So Australians are thinking differently if you've got the wherewithal and the, and the. The finance to do that [00:47:10] often. awesome. But the key thing is, I think Veronica, as you mentioned, start thinking early, right? Start making those plans because it's far better to make those plans from a position of, [00:47:20] optionality and confidence than, as you said, stress and panic, because those decisions tend to be kind of like, they, they don't work out as well when you're, [00:47:30] panicking and, and trying to get things sorted in very compressed timeframes.

[00:47:33] Veronica: Yeah, it's not easy to make good decisions under that amount of pressure. Harry, have you got a, a example of a [00:47:40] property dumbo for us today? A story that we can, we can all learn from. We love personal stories on this, podcast as well. If you've got one.

[00:47:46] Harry: I know a family and I won't mention any names, but Yeah, no, it's mine. [00:47:50] which, which is literally that this case of, of, um, helping parents to, Age in place versus move. Right. So we, we got to the point, me and my, siblings, where we realized that my [00:48:00] parents had to move. and there was a conversation had with, with an uncle who was also aging. And it was like, all right, well, do we find a, a piece of land and it's like two townhouses and do the whole [00:48:10] architectural blah blah, blah thing. And, and that was kind of all going really well until two things. One, COVID, oops. And then two,because of that, the other party, my, my [00:48:20] relative not being able to sell his property, and then it all went pear shaped. And so we ended up doing kind of all the things we just talked about, which is a, a very,scatter gun approach to moving my [00:48:30] parents, closer to my, my sibling. So now they are in proximity to where they can get a lot of family assistance. But it was rushed and it was kind of like, backwards [00:48:40] and, and weirdly it ended up being, and I kid you not an accidental upsize because obviously we, we were looking for a, a big block of land. And a house that we [00:48:50] could potentially knock down.

[00:48:51] Harry: So now it's, it's all worked out really well, but it just goes to show that, you know, the best laid plans of, of mice and men and a once in a hundred year, pandemic can definitely [00:49:00] throw your plans about. But you know, you, you live and you learn and you adapt. But, that was definitely an interesting couple years through COVID.

[00:49:06] CB: Harry, it's been a good chat. I do think this is one that, [00:49:10] um, I've sort of been thinking about a lot over the last few years because I can see it and I think we've been doing partnerships with the advice firms like financial advice firms and up. It was always like, oh [00:49:20] yeah, my clients don't need debt advice.

[00:49:21] CB: 'cause a typical advice client is 55 to 60, the one we're talking about. but it's that proactive sort of debt planning [00:49:30] together with building a super portfolio because like this thing's not gonna be paid off. Like you need to be coming out with a strategy and you know, and paying that money outta the super fund to pay it off isn't gonna be in [00:49:40] anyone's interest, including yours advisor, because you're gonna have less in their fund.

[00:49:44] CB: Right.

[00:49:44] Harry: Yeah, I think you're right Chris. And this is the thing, just to finish up, I think there's this real demarcation kind of like issue, right [00:49:50] between super funds, financial advisors and debt professionals who work in the credit space and it actually ends up being kinda like a worse outcome [00:50:00] for the actual individual, the member. And we need to somehow work together. To break down those barriers so that the advisor understands what the, the super trustee's [00:50:10] trying to do. The super trustee understands what the advisor's trying to do, and both of them understand what the mortgage broker can bring to the equation for the betterment of their mutual client. that's [00:50:20] something we're really hot on. And when I speak to super funds, they're really struggling with that and they, they need to get on board because otherwise I can guarantee you a lot of [00:50:30] super money. But we will be walking out the door. Two banks when if everyone works together, they can just kind of think about it a bit more intelligently and everyone, like [00:50:40] literally all, all four parties will be better off.

[00:50:41] Veronica: I would add in there that you really need to be, have good property strategy advice as well, because the reality is that, you know, it, holistic [00:50:50] advice is always the best advice. You know, there's, there's knock on effects for all these decisions. Certainly when I'm doing strategy sessions with people, we are talking about the other advisors that they need at, at different times and donate [00:51:00] that decision without consulting with that advisor.

[00:51:02] Veronica: but you know, the problem is a lot of people do everything they can to hold onto a crap asset. So sometimes you do have to be thinking, [00:51:10] is it worth holding onto, you know, like, you know, I think that's gonna be growing in value over time and it's therefore it's worth holding onto. Or should I get out of it now and actually look at other [00:51:20] options?

[00:51:20] Veronica: And so without, mind you, there's not many people in the country I can honestly tell you that ask able to advise assets. Caliber. It's a unique [00:51:30] set of skills and, and there's no rule university for it, sadly, because it takes critical thinking and a lot of experience to have really been, looking at what does [00:51:40] well over time and what doesn't and why.

[00:51:41] Veronica: Right? So there's data, but there's also just lots and lots of anecdotal evidence as what brought Chris really into the property space. You know, he started seeing that. I mean, [00:51:50] Chris, you tell that story many times about what you started seeing. Clients, you know, why is it some people do really well in property and other people don't?

[00:51:56] Veronica: You know, and it's comes down to the asset selection as well as, I [00:52:00] guess what they do with, with it after they own it. But, you know, a lot of the people that are trying desperately to hold onto properties. And I, and I feel a bit sad for them 'cause I think to myself, not sure I, [00:52:10] you know, if it was me, I don't think I want to keep that one.

[00:52:12] Harry: Yeah, look, it's, it's the biggest decision, right? Because it dominates the household balance sheet and like buy a long way, it's three to one for every dollar in, in [00:52:20] super. Most Aussies have $3 in bricks and mortar. So that decision pretty much will determine, and I kid you not will [00:52:30] determine the sort of retirement you have.

[00:52:31] Harry: It. It's that critical.

[00:52:32] CB: Yep. Thanks. Harry, I really appreciate the chat.

[00:52:36] Harry: Not a problem.

[00:52:37] Veronica Morgan: If you have a question that you'd like us to [00:52:40] answer in an upcoming q and a episode, you can send us a voicemail or written question via the website. The elephant in the room.com au. Or you can email us directly [00:52:50] at questions at the elephant in the room.com

[00:52:53] Veronica Morgan: au.

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