Australian Investing Thread

[AustralianMustachio]

Looks good, but probably just another like a "smart beta" on the US stock exchange.

I think for US exposure you can't really go past VTS. The total stock market index it's based upon has also outperformed the S&P500 over the last decade or so. All for .05% MER.

QUS looks good, but 25 basis points (difference in MER between VTS and QUS) is significant over the long term. It was the size of the latest RBA rate cut!

[FFA]

Looks good, but probably just another like a "smart beta" on the US stock exchange.

I think for US exposure you can't really go past VTS. The total stock market index it's based upon has also outperformed the S&P500 over the last decade or so. All for .05% MER.

QUS looks good, but 25 basis points (difference in MER between VTS and QUS) is significant over the long term. It was the size of the latest RBA rate cut!

Thanks for sharing dungoofed. I must admit I had the same thought as above and inclination to stick with VTS.... For my money, I'm not convinced by alternate index approaches (including VHY) if the extra MER and portfolio complexity is worthwhile.

[Lynn52]

Hi,

I'm in suburbs of Melbourne - great to be reading an Australian thread on MMM.

I'm aiming to retire in just over a year, at 50 and trying to think through safe withdrawal rates and interested in what views are for Australia.

Best I have come up with for my situation so far is:

• Any superannuation (employer and industry fund between myself and my partner) plan on 4% drawdown
  Any shares owned outright plan on income being what ever the dividend actually is. 
  Have a one-off separate amount for some planned expenditures in first two years. 

I'm trying to get to 25% of my planned annual income from dividends and the rest from 4% drawdown on super.

If I end up with more assets than what I require (given this recent surreal increase on the ASX it is actually possible but I'm not counting on it at all), I'll just plan to take out a lower percentage from super, such as 3.9%  or whatever it works out to be.

I expect that when we have some down years, we will have to reduce expenditure, which will be challenging.  I'm aiming for the AFSA comfortable standard for a couple, which currently is about $58kpa.  Initially this seemed really hard to get my expenses that low -- I have ongoing medical costs, travel to the US every 18 months to visit my parents who are in their 80s, and have to pay about $1k each year just to get my US taxes filed) -- but we have been working hard on expenses following the Your Money or Your Life approach (loosely) and are now comfortably there.

My partner is some 10 years older than me.  We might get a small amount of pension given the age difference with my super not being accessible for at least 10 years, but that will be offset by my having to pay tax on my super in the US as I withdraw it.  So, we aren't counting on any Australian pension income.

Am I off with the fairies or does this seem like a reasonable plan?

Thanks.
Lynn

[dungoofed]

Quick question, is my understanding that for bequeathed assets the cost basis changes but there is also a cgt obligation on death? And this is different to the US where there is no cgt obligation on death?

[happy]

Hi,

I'm in suburbs of Melbourne - great to be reading an Australian thread on MMM.

I'm aiming to retire in just over a year, at 50 and trying to think through safe withdrawal rates and interested in what views are for Australia.

Best I have come up with for my situation so far is:

• Any superannuation (employer and industry fund between myself and my partner) plan on 4% drawdown
  Any shares owned outright plan on income being what ever the dividend actually is. 
  Have a one-off separate amount for some planned expenditures in first two years. 

I'm trying to get to 25% of my planned annual income from dividends and the rest from 4% drawdown on super.

If I end up with more assets than what I require (given this recent surreal increase on the ASX it is actually possible but I'm not counting on it at all), I'll just plan to take out a lower percentage from super, such as 3.9%  or whatever it works out to be.

I expect that when we have some down years, we will have to reduce expenditure, which will be challenging.  I'm aiming for the AFSA comfortable standard for a couple, which currently is about $58kpa.  Initially this seemed really hard to get my expenses that low -- I have ongoing medical costs, travel to the US every 18 months to visit my parents who are in their 80s, and have to pay about $1k each year just to get my US taxes filed) -- but we have been working hard on expenses following the Your Money or Your Life approach (loosely) and are now comfortably there.

My partner is some 10 years older than me.  We might get a small amount of pension given the age difference with my super not being accessible for at least 10 years, but that will be offset by my having to pay tax on my super in the US as I withdraw it.  So, we aren't counting on any Australian pension income.

Am I off with the fairies or does this seem like a reasonable plan?

Thanks.
Lynn

As well as SWR, you also need to consider cash flow.

If you were born in 1966, then the earliest you can withdraw from super is age 60. There is a minimum withdrawal rate from super which is age based - at 60 you must withdraw at least 4%. And rises as you get older. You can find rates and calculators at Moneysmart (Or ATO)https://www.moneysmart.gov.au/superannuation-and-retirement

So you need to have a strategy to get you from 50 to 60 - i.e. enough dividends or sell some shares, or have another income source to fund all your needs. I wasn't quite sure how you were going to do this from your post. Once you hit 60 you  can access your super and cover some or all of your expenses.

Is 4% a SWD for Australia? - maybe , but Wade Pfaus research indicated it was a bit lower http://wpfau.blogspot.com.au/search?q=australia+safe+withdrawal+rate  - 3.5%. 

[deborah]

Lynn52, there are minimums that you must take out of super each year - until 65 it is 4%, then it goes up to 5%... ending at about 13% when you are rather old and decrepit. These are the minimums from your super that is in pension phase. You can leave some of your super in accumulation phase if you want (you can't take anything out until it is converted to pension phase) but that has 15% tax on earnings, whereas money in pension phase doesn't. And you probably won't be able to put anything into super after you are 65. The government wants your superannuation to run out while you are living - but not quickly enough for you to need a pension.

See the following (only a few posts back) for Australian SWR.

Not sure how many of you have seen/read this but it is brilliant! 

http://www.finsia.com/docs/default-source/Retirement-Risk-Zone/how-safe-are-safe-withdrawal-rates-in-retirement-an-australian-perspective.pdf?sfvrsn=2

Long and short of it - the 4% 'heuristic' is not too bad for Aus.  Interesting data re asset allocation results vs portfolio failure over time.

Got it off the Whirlpool forum which I know some of you check out from time-to-time

Dungoofed - see https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Gifts,-inheritances-and-deceased-estates/Deceased-estate-and-CGT/

[happy]

Lynn52, there are minimums that you must take out of super each year - until 65 it is 4%, then it goes up to 5%... ending at about 13% when you are rather old and decrepit. These are the minimums from your super that is in pension phase. You can leave some of your super in accumulation phase if you want (you can't take anything out until it is converted to pension phase) but that has 15% tax on earnings, whereas money in pension phase doesn't. And you probably won't be able to put anything into super after you are 65. The government wants your superannuation to run out while you are living - but not quickly enough for you to need a pension.

Yes Deborah is correct : If you don't want as much as 4% of the whole sum you have, just leave some in the accumulation phase.

[marty998]

Just because you take out 4% or more from super doesn't mean you have to spend the 4%. You can stick the leftover in  a saving account of buy direct shares if you wish, earnings of which will still be tax free up to a point...

Tax system is quite generous in that as a couple you could earn $40k outside of super and still not pay tax.....

[deborah]

George Cochrane's latest post http://www.canberratimes.com.au/money/super-and-funds/whats-my-best-tax-move-before-i-go-20150211-13ax1z.html includes some interesting stuff on a dual citizen going back to the US, and changing an SMSF to company rather than individual ownership

[Lynn52]

As well as SWR, you also need to consider cash flow.

If you were born in 1966, then the earliest you can withdraw from super is age 60. There is a minimum withdrawal rate from super which is age based - at 60 you must withdraw at least 4%. And rises as you get older. You can find rates and calculators at Moneysmart (Or ATO)https://www.moneysmart.gov.au/superannuation-and-retirement

So you need to have a strategy to get you from 50 to 60 - i.e. enough dividends or sell some shares, or have another income source to fund all your needs. I wasn't quite sure how you were going to do this from your post. Once you hit 60 you  can access your super and cover some or all of your expenses.

Is 4% a SWD for Australia? - maybe , but Wade Pfaus research indicated it was a bit lower http://wpfau.blogspot.com.au/search?q=australia+safe+withdrawal+rate  - 3.5%.

Thanks Happy for your reply. 

Good question - for money until I am 60 we will be drawing down from my partner's super (who is some 10 years older) and using directly held share dividends.  When my partner's super account runs dry, I will be in my 60s and will then access my super.   

Thanks for the Wade Pfau reference -- I've read some of his stuff and find it very interesting, but hadn't read that one.  Sounds like from his research an Australian 50% stock / 50% bond portfolio having a withdrawal rate of 3.5% works - it will be interesting to see what the SAFEMAX will be for retirees after 1981 (given that he couldn't go any further as writing in 2011).  That's very encouraging given that I will retire in Australia.

I am aiming for a higher stock weighting, a75% stock/infrastructure through direct stocks and super and 25% fixed interest through a diversified fixed interest through Australian Super.   Thinking about it, 1/3 of the stocks/infrastructure are international shares, so I'm holding more shares but not as much in Australia as compared to Pfau's article.  So not sure if on balance that still lands me, based on Pfau's research, at about the 3.5%.

Lynn52, there are minimums that you must take out of super each year - until 65 it is 4%, then it goes up to 5%... ending at about 13% when you are rather old and decrepit. These are the minimums from your super that is in pension phase. You can leave some of your super in accumulation phase if you want (you can't take anything out until it is converted to pension phase) but that has 15% tax on earnings, whereas money in pension phase doesn't. And you probably won't be able to put anything into super after you are 65. The government wants your superannuation to run out while you are living - but not quickly enough for you to need a pension.

See the following (only a few posts back) for Australian SWR.

Not sure how many of you have seen/read this but it is brilliant! 

http://www.finsia.com/docs/default-source/Retirement-Risk-Zone/how-safe-are-safe-withdrawal-rates-in-retirement-an-australian-perspective.pdf?sfvrsn=2

Long and short of it - the 4% 'heuristic' is not too bad for Aus.  Interesting data re asset allocation results vs portfolio failure over time.

Got it off the Whirlpool forum which I know some of you check out from time-to-time

Thanks for your reply Deborah.  Okay, sounds like keeping my partner's accumulation account open will be a good idea so that if we withdraw more than our target spend we can put it back into accumulation as long as my partner is still under 65, or into mine once my partner is over 65.  I will have to check on contributions to super from a U.S. tax perspective when I am not working as I'm not sure I will be able to defer tax on earnings on that portion if the contribution didn't come from earned income.  The whole US-tax-on-Australian-super is just so complex that so I find it hard to plan tax effectively for my super, but I do have a good Aust-US tax preparer, which helps somewhat.

And thanks for bringing up the "How Safe are Safe Withdrawal Rates in Retirement? An Australian Perspective".   It is interesting that over 40 years in Australia 75% stocks/25% bonds etc has gotten an 88% success rate at 4%.   And a 95% SAFEMAX is 4% over 30 years.  Based on this research, if I could just bring myself to go 100% Australian stocks, in theory I would have a better chance of having my funds last as long as they need to. I'm not sure I'm quite that brave.  Is any one else that brave.

George Cochrane's latest post http://www.canberratimes.com.au/money/super-and-funds/whats-my-best-tax-move-before-i-go-20150211-13ax1z.html includes some interesting stuff on a dual citizen going back to the US, and changing an SMSF to company rather than individual ownership

I read that article in The Age this morning and it immediately made me feel faint and stressed --I've been through the "getting right with Uncle Sam" process and found it really really stressful -- I feel really sorry for the individual writing in if they aren't already working with a good US-Australia tax consultant. For U.S. tax reasons, I am more grateful than I can describe that I have not married my partner, do not have an SMSF, am not running a business overseas, do not have capital gains on my residence of more than USD$250k, and do not own Passive Foreign Investment Company shares (LICs, trust companies listed on ASX, or companies that have not paid a dividend for a year or two).  Expat US Tax is a great service for US citizens in Australia.


Thanks Marty998.  I hadn't realised a couple could earn $40k per year outside of super and not have to pay tax.  I will have to research that more as next financial year my partner will start selling some stocks that are outside of super and purchasing them inside super -- but have to manage it to avoid paying too much tax -- sounds like I'll need to do more research there.


---

Based on Pfau and the Australian Perspective report, seems like 3.5% is pretty much safe for Australia, and 4% may also work but I will need to be very vigilant in keeping track of how I'm going at 4%.  I think I need to formalise some of my thinking about rules to to use in adjusting drawdown amount each year when market returns are poor.

Thanks again for all the replies and suggestions - all of them really got me thinking more.   Great to get Australian perspectives since I am Australian.

[FFA]

Here's another article with some retirement modeling specific to Oz. Sharing here as I thought it might be of interest...

http://www.towerswatson.com/en-AU/Insights/Newsletters/Asia-Pacific/view/2014/How-important-are-your-investment-and-spending-strategies

Pls note: I've never used Towers Watson (so don't take it as a recommendation) and I don't have any connection to them whatsoever.

Actually I found this in the weekly vanguard smart investing email I subscribe to. It's refreshing to see the focus on the spending side of the equation, instead of just looking at investment options !

[bigchrisb]

Was anyone else using interactive brokers in Australia on a margin account?  I had an account with them, up until their issues with ASIC, and closed my accounts shortly afterwards - the main reasons I was using them were cheap international brokerage, and cheap margin debt.

I got a very unexpected letter from them today.  They have been ordered by ASIC to refund the net fees an interest to retail clients.  That means the total fees an interest, less any statutory costs, and the total margin interest less the cost of funds. 

For me, this means that for a few years of my investments, I'm getting back about 85% of my brokerage costs, and about 93% of the margin interest that I'd paid.  For someone with leverage over a few years, its a non-trivial windfall - think about getting back a few years of interest on your home loan.

If you had an account with them over this period, I suggest you check back with them and see if you are in the same situation.  It does make me wonder about the solvency of their Australian operations too - I'd hate to think what impact repaying three years gross revenue would have on my business - it would most likely drive an insolvency. 

[marty998]

ASIC media release. IB didn't have a licence to issue margin loans so they've been forced to refund all related revenue.

If your refund is non-trivial, you must have been their biggest client! Total pool being refunded is only $1.5 million.

[bigchrisb]

Interesting.

I'm surprised that the amount is that low - at $1.5M across 3000 accounts, I was certainly bigger than average.   

Goes to show that remaining a retail client is worth something?  One of the tricks I used to get a lower interest rate offer in my last margin negotiations was to provide the competitor with proof of wholesale status (accountant's letter for control of over $2.5M of assets, or >$250k income last two financial years).  My existing lender (which is a retail account) then price matched it. I wonder what the level of "insurance" from ASIC oversight etc is actually worth in terms of basis points?
 

[bigchrisb]

Anyone else having a fight with the ATO about getting their foreign income tax offsets recognized?

I've got about $1000 of foreign income tax offsets that the ATO didn't give back this year.  The rationale is that they are a "non-refundable" tax offset, unlike AU franking credits, which are fully refundable.

I had this happen a couple of years ago, and after I protested it, I eventually got them back.  Basically, the argument I used was:
- The credits are not refundable - this means they cannot take the amount of tax paid negative.
- However, the credits can be used to lower the total tax paid
- I still paid $$$$ in total tax (despite getting some of the over payments refunded).

Its annoying to have to go through it though.

Anyone else had this issue?

[potm]

Are you sure it's 93% of the interest you paid? It should be interest charged to you, plus brokerage, less their cost of funds and some fees.

[bigchrisb]

Are you sure it's 93% of the interest you paid? It should be interest charged to you, plus brokerage, less their cost of funds and some fees.

Yep, the 93% was from dividing the two numbers on the statement of refund from them.  I borrowed mostly USD in my IB account, paying about 1.5% interest.  From their refund document, their cost of funds on USD over this period was almost zero.  Guess that's where a lot of the QE printing money ended up!

[dungoofed]

Richard Livingston in today's SMH:

http://www.smh.com.au/money/planning/nestegg-needs-hard-to-calculate-20150217-13dtz2.html

Any idea what they are trying to do over at http://www.eviser.com.au ?

[happy]

Thanks for the link dun goofed. Figures in the article are all over the shop in terms of withdrawal rate.

[deborah]

Thanks for the link dun goofed. Figures in the article are all over the shop in terms of withdrawal rate.

I actually tried to replicate them at the MoneySmart site and couldn't - usually I can! The comfortable retirement assumes you will get the pension, whereas the other doesn't, so the figures should be a bit all over the shop anyway.

[travelbug]

Hi everyone,

I love this thread, but I have two newbie questions for the more experienced among us please.

1. Do you invest in Vanguard Index funds by buying them directly with your etrade account? Or have you set up an account directly with Vanguard. (looking at VTS and VEU at the moment as a small parcel of 20k, will be looking to invest 600k+ later this year)

2. What percentage of your portfolio is invested in index funds versus individual shares?

I have always invested in individual shares and was looking to fund our retirement with dividends from the blue chip brigade, after researching index funds they look like a good way to stay in the market long term with a bit more of a safety net.

Thanks

TB

[Ozstache]

Hi everyone,

I love this thread, but I have two newbie questions for the more experienced among us please.

1. Do you invest in Vanguard Index funds by buying them directly with your etrade account? Or have you set up an account directly with Vanguard. (looking at VTS and VEU at the moment as a small parcel of 20k, will be looking to invest 600k+ later this year)

2. What percentage of your portfolio is invested in index funds versus individual shares?

I have always invested in individual shares and was looking to fund our retirement with dividends from the blue chip brigade, after researching index funds they look like a good way to stay in the market long term with a bit more of a safety net.

Thanks

TB

1. I invest in Vanguard index funds through NAB Trade
2. 100%. I trust the broader market more than I trust my own emotions with individual stocks and the returns are more than satisfactory.

[happy]

Hi everyone,

I love this thread, but I have two newbie questions for the more experienced among us please.

1. Do you invest in Vanguard Index funds by buying them directly with your etrade account? Or have you set up an account directly with Vanguard.



Thanks

TB

I'm interested in this too. If one was only buying vanguard, is it necessary to do it through a broker? Any pluses or minuses to setting up a direct account v doing through a broker? Presumably cheaper without a middleman?

[AustralianMustachio]

If it's ETFs you're buying (listed on ASX) you need a broker of some sort (either online broker or the traditional broker). Online brokerage is a lot cheaper, I believe, but you don't get any advice or other full service. I've never had a full service broker though so I don't know what it's like.

Unlisted funds you buy directly through Vanguard, but the MER tends to be a fair bit higher unless you have a large amount of money to invest

[travelbug]

Thanks guys.

So if I was to purchase VTS or VEU or even VGE with my etrade account as I usually purchase WOW or CBA etc, that would be me buying into the index fund that MMM and so many here invest in?

TB

[This_Is_My_Username]

yes

[marty998]

yes

If you want your high dividend payers without the resources/mining exposure of BHP/RIO then look at VHY.

4 banks, TLS, WOW, WES and WPL, with a smattering of other industrials like Transurban and Sydney Airport.

One word of caution, there is no "market depth" as such with an index fund. A market maker (typically a big investment bank) sets a moving market depth around about the theoretical unit price, depending on intraday movement of the constituent index. Units in the fund are not traded like shares in other listed companies where they must be sold to another buyer. Units in an ETF are created/destroyed when you buy and sell.

You will likely end up paying away a small entry/exit type fee this way, but thats the price we pay for convenience. The upshot is that you never have to worry about liquidity, your order will always be 100% filled if the market maker accepts your price.

[dungoofed]

Anyone know whether they have something like this for Australia:

https://personal.vanguard.com/us/faces/JSP/Funds/Tools/FundsToolsEtfCostPurchInfoContent.jsp

I haven't seen one. I think you could finagle something similar if you find ETFs with similar MER though, YMMV.

[travelbug]

yes

If you want your high dividend payers without the resources/mining exposure of BHP/RIO then look at VHY.

4 banks, TLS, WOW, WES and WPL, with a smattering of other industrials like Transurban and Sydney Airport.

One word of caution, there is no "market depth" as such with an index fund. A market maker (typically a big investment bank) sets a moving market depth around about the theoretical unit price, depending on intraday movement of the constituent index. Units in the fund are not traded like shares in other listed companies where they must be sold to another buyer. Units in an ETF are created/destroyed when you buy and sell.

You will likely end up paying away a small entry/exit type fee this way, but thats the price we pay for convenience. The upshot is that you never have to worry about liquidity, your order will always be 100% filled if the market maker accepts your price.

Thank you so much. That makes sense. I appreciate everyone's help.

[FFA]

Hi everyone,

I love this thread, but I have two newbie questions for the more experienced among us please.

1. Do you invest in Vanguard Index funds by buying them directly with your etrade account? Or have you set up an account directly with Vanguard. (looking at VTS and VEU at the moment as a small parcel of 20k, will be looking to invest 600k+ later this year)

2. What percentage of your portfolio is invested in index funds versus individual shares?

I have always invested in individual shares and was looking to fund our retirement with dividends from the blue chip brigade, after researching index funds they look like a good way to stay in the market long term with a bit more of a safety net.

Thanks

TB

1. I invest in Vanguard index funds through NAB Trade
2. 100%. I trust the broader market more than I trust my own emotions with individual stocks and the returns are more than satisfactory.

I'm also with Nabtrade.
I'm 100% index for global shares and about 60% index for oz (excluding super, would be higher with super as that's all index). I decided to hold some direct asx blue chips for dividends and since they are buy and hold forever, and as the Asx index is relatively concentrated anyway.

[DerringerJones]

Hey, I'm just starting out and I've read a decent chunk of this thread.
I've found that there is a lot of acronyms and terms that I know nothing about.
That being the case, I was wondering if anyone could recommend some reading material to help me get up to speed, as I'm super excited to get in on all this.
Preferably something that can explain the very basics so I can work my way up.
Thanks

Derringer

[steveo]

Hi everyone.

I'd like to ask a favor of all the Australian posters. I work for one of the big banks and we have to do a training course on experimentation. My idea was to create something like Betterment in Australia.

If we had that would you use the service assuming it was exactly the same - low fees, automatic asset allocation and tax loss harvesting ?

I can't see any of the big banks ever offering this service as I think it would cut their profits in other areas of financial advice/services too much but it'd be interesting if there was a demand for a service like that.

[deborah]

Hey, I'm just starting out and I've read a decent chunk of this thread.
I've found that there is a lot of acronyms and terms that I know nothing about.
That being the case, I was wondering if anyone could recommend some reading material to help me get up to speed, as I'm super excited to get in on all this.
Preferably something that can explain the very basics so I can work my way up.
Thanks

Derringer

Just ask what the terms are - sometimes this thread is talking about specific ETFs (Exchange Traded Funds - an index that is traded on the stock exchange) such as VTS or VEU or VGE - which are the three letter names for the ETF on the ASX (Australian Stock Exchange). Many of the other three letter acronyms are shares (WOW - Woolworths, BHP - BHP Billiton...). I guess if you looked up the acronym on the ASX you would probably find just about every one.

[dungoofed]

Just to add to deborah's post, you can get the ETFs (ETPs) on a single page here:

http://www.asx.com.au/products/etf/managed-funds-etp-product-list.htm#9124-content

Make sure you're on the ETP tab in the table. Otherwise you might have to start googling or as deborah said just ask us : )

[dungoofed]

Hi everyone.

I'd like to ask a favor of all the Australian posters. I work for one of the big banks and we have to do a training course on experimentation. My idea was to create something like Betterment in Australia.

If we had that would you use the service assuming it was exactly the same - low fees, automatic asset allocation and tax loss harvesting ?

I can't see any of the big banks ever offering this service as I think it would cut their profits in other areas of financial advice/services too much but it'd be interesting if there was a demand for a service like that.

Hi Steveo -

I assume you have already seen www.stockspot.com.au. They are "partnered" with Macquarie, though no mention of whether they are an investor. Would like to get Chris from StockSpot to comment but my impression is that it's still quite manual when compared to Betterment/etc.

I think it's just a matter of time before the American robo-investors arrive in Australia in earnest and disrupt the entire industry. If Stockspot or someone else could do it first and do it better then there would be a massive opportunity here, albeit with lower margins.

(although I've been wrong with similar predictions before. I'm still waiting for sub-$1 buy trades, like they have in Canada*)

Personally I wouldn't use it if it were the same as Betterment - the fees are still too high, and I like the control (real or imagined) of my current setup. But I could see myself recommending it to friends/relatives one day that were trying to get started in investing.

* edit: specifically Questtrade

[DrowsyBee]

I'll throw out one question about acronyms. What are all the different names for their family members like DH and DD?

[Sunnymo]

I'll throw out one question about acronyms. What are all the different names for their family members like DH and DD?

DH = Dear husband
DW = Dear wife
DP  = Dear partner
DF = Dear fiance
SO = Significant other
DD(1)/DS(1) = Dear Daughter/Son 1, 2, 3

I hope this is what you meant

[DrowsyBee]

Really? That simple? I've been thinking the D stood for "Domestic" but that didn't make sense.

Yes, that helps, thanks.

[Sunnymo]

Could also be 'darling' I suppose. I spend time on a parenting website so I see these a lot.

[FFA]

I'll throw out one question about acronyms. What are all the different names for their family members like DH and DD?

DH = Dear husband

I must tell my wife this. I think she often has an alternative one in mind :)

[Sunnymo]

I'll throw out one question about acronyms. What are all the different names for their family members like DH and DD?

DH = Dear husband

I must tell my wife this. I think she often has an alternative one in mind :)

Lots of words that start with 'D'!

[steveo]

Hi everyone.

I'd like to ask a favor of all the Australian posters. I work for one of the big banks and we have to do a training course on experimentation. My idea was to create something like Betterment in Australia.

If we had that would you use the service assuming it was exactly the same - low fees, automatic asset allocation and tax loss harvesting ?

I can't see any of the big banks ever offering this service as I think it would cut their profits in other areas of financial advice/services too much but it'd be interesting if there was a demand for a service like that.

Hi Steveo -

I assume you have already seen www.stockspot.com.au. They are "partnered" with Macquarie, though no mention of whether they are an investor. Would like to get Chris from StockSpot to comment but my impression is that it's still quite manual when compared to Betterment/etc.

I think it's just a matter of time before the American robo-investors arrive in Australia in earnest and disrupt the entire industry. If Stockspot or someone else could do it first and do it better then there would be a massive opportunity here, albeit with lower margins.

(although I've been wrong with similar predictions before. I'm still waiting for sub-$1 buy trades, like they have in Canada*)

Personally I wouldn't use it if it were the same as Betterment - the fees are still too high, and I like the control (real or imagined) of my current setup. But I could see myself recommending it to friends/relatives one day that were trying to get started in investing.

* edit: specifically Questtrade

Thanks for the comments. I'd like more feedback from other posters. Cmon would you use it or not.

I'll give my feedback. I personally would prefer to do it myself simply by investing in index etf's if the fees are a little lower.

[FFA]

Hi everyone.

I'd like to ask a favor of all the Australian posters. I work for one of the big banks and we have to do a training course on experimentation. My idea was to create something like Betterment in Australia.

If we had that would you use the service assuming it was exactly the same - low fees, automatic asset allocation and tax loss harvesting ?

I can't see any of the big banks ever offering this service as I think it would cut their profits in other areas of financial advice/services too much but it'd be interesting if there was a demand for a service like that.

Hi Steveo -

I assume you have already seen www.stockspot.com.au. They are "partnered" with Macquarie, though no mention of whether they are an investor. Would like to get Chris from StockSpot to comment but my impression is that it's still quite manual when compared to Betterment/etc.

I think it's just a matter of time before the American robo-investors arrive in Australia in earnest and disrupt the entire industry. If Stockspot or someone else could do it first and do it better then there would be a massive opportunity here, albeit with lower margins.

(although I've been wrong with similar predictions before. I'm still waiting for sub-$1 buy trades, like they have in Canada*)

Personally I wouldn't use it if it were the same as Betterment - the fees are still too high, and I like the control (real or imagined) of my current setup. But I could see myself recommending it to friends/relatives one day that were trying to get started in investing.

* edit: specifically Questtrade

Thanks for the comments. I'd like more feedback from other posters. Cmon would you use it or not.

I'll give my feedback. I personally would prefer to do it myself simply by investing in index etf's if the fees are a little lower.

Hi Steveo,

It's funny you mention this, I have had the exact same idea recently and given it some thought already

At 0.15% MER (for $100k plus) I would be tempted to give it a look, but frankly i'd probably end up DIY too in the end. 0.15% is still 0.15% and over 40+ years it adds up.

Personally I would be keen if someone made a low cost investment portal (basically like an industry super fund available for non-super). Vanguard is heading in this direction, but their MER's are on the high side especially for small portfolio balances, and the wholesale is inflexible unless you have a huge portfolio. So for mid sized folks, it ends up being easier to tinker with a spreadsheet and executing etf's via online broker.

Re: Betterment, I haven't looked in too much detail, but i'm not a huge fan of the heavy engineering/ statistical portfolio optimisations. I don't know how much this contributes to their MER. I would advocate a simple questionnaire to determine risk tolerance, then some basic portfolios (conservative, balanced, growth etc). And maybe an option for automatic age adjustment (e.g. "age in bonds" type heuristic) so it can be a long-term / set and forget / one fund solution for those truly passive investors who want to focus their time elsewhere safe in the knowledge their funds are being invested in an efficient and disciplined manner.

The key thing for Australia is it's such a niche / small scale market. I'm not sure if a betterment (or equivalent) would fly. Nonetheless I think the banks will be experiencing severe disruption to their fin. advice / fund mgmt businesses regardless, which will come from the passive investment/etf. With Vanguard / iShares already in the market and growing, this trend can continue and accelerate rapidly if Australia follows the US. And traditional active retail fund managers will face the same challenges as Fidelity to retain market share.

[FFA]

I assume you have already seen www.stockspot.com.au. They are "partnered" with Macquarie, though no mention of whether they are an investor. Would like to get Chris from StockSpot to comment but my impression is that it's still quite manual when compared to Betterment/etc.

Thanks dungoofed for this link I hadn't heard of stockspot. Am going to check it out in more detail but my first click to the fees page.... was excited for a few seconds to see 0.044% (platinum >$500k) until I realized it's monthly :(   

So then, 0.53% p.a. and upwards MER... i'm sure I won't be going for this, but keen to explore what they are offering nonetheless.

Once again, I think the big problem for Oz is the sub scale. This is a niche within a niche. The volumes will always be small and therefore the costs will never be cheap. And the target market is index investors who tend to be cost sensitive, so it seems to me a tough challenge to work.

[steveo]

Thanks for the comments. It'd be good to get a bunch more comments.

I also hadn't heard of stock spot. Its basically the same thing as what I was thinking about.

FFA - for this to be a successful product I believe like you that you have to offer a really low MER. I can't see one of the big banks (who I work for) ever taking this up however I still think its a good idea for a training exercise.

[FFA]

Thanks for the comments. It'd be good to get a bunch more comments.

I also hadn't heard of stock spot. Its basically the same thing as what I was thinking about.

FFA - for this to be a successful product I believe like you that you have to offer a really low MER. I can't see one of the big banks (who I work for) ever taking this up however I still think its a good idea for a training exercise.

Agree not a big bank. But it could be an industry super fund or Vanguard, basically a Not For Profit business model is needed. IMO it would be hard to compete with Vanguard and I understand they are investing more to grow in Oz (focused towards super I think). Their diversified funds MER 0.35%, and they are experimenting now elsewhere with low cost financial advice. It is easy to imagine a simple package of low cost advice plus these diversified funds that will be hard for others to match. Realistically this is the likely disruptive threat to the Australian funds management industry. i guess the days of 2% MERs for CFS etc are numbered.

p.s. Yes good idea for training exercise and nifty approach to get us all to help you complete it too ;)

[steveo]

p.s. Yes good idea for training exercise and nifty approach to get us all to help you complete it too ;)

I'm meant to interview people. This is so much easier. Help me out more dudes. It'll be over soon.

[bigchrisb]

Pretty sure those loitering on these boards are deep into the DIY quadrant (financial or otherwise), so probably a somewhat skewed response.

Personally, I wouldn't pay a brass razoo for this.  I'm pretty cost sensitive - with about $2.5M under my management, one basis point is $250 a year to the bottom line.  Even paying myself $100 an hour, saving a basis point is worth two and a half hours of my time.  I'm also the kind of investor that has swapped from IVV to VTS to get from 0.07 to 0.05% (when the cost basis worked out too, for CGT).  I'm probably not the ideal profit centre for wealth management.

Heck, even my low cost ETFs and LICs (which average about 15 basis points) are costing me close to a months expenses every year.

[AustralianMustachio]

I'm wondering how long it will be before someone comes up with an Australian Shares Ex-Resources ETF :p

[dungoofed]

haha

I think if it were done well it could be as big as Betterment in the US. But the problem is making it profitable. The word on the street is that Betterment/Wealthfront/etc are not profitable, but just positioning themselves for when the big banks need to play catchup and buy out someone.