Talk Investing Podcast
The Talk Investing Podcast & Blog discusses investment advice from our previous podcasts and radio shows by Remo Greco & Marco Mellado. Learn all things around retirement and investing.
Talk Investing Podcast
Who Really Protects Your Super When Things Go Wrong, Part Two
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In this follow-up episode, Marco Mellado continues the conversation around superannuation risks, failed investments, and the hidden dangers that can impact retirement savings. He explores what happens when things go wrong, who is responsible, and the key steps investors can take to better understand their super and protect their financial future.
The Talk Investing Podcast and blog discusses investment advice from our previous podcasts and radio shows by Remo Greco and Marco Melado. Learn all things around retirement and investing.
SPEAKER_03Now, the collapse of investment funds related to superannuation, you have heard about it. It's been all over the news. First Guardian and SHIELD. It's still in the news, and EPRA's trying to figure out what went wrong. 12,000 people lost a total of $1.2 billion. How did this happen? And let's unpack some of those early warning signs, those red flags, so that we can keep your superannuations safe. We have Marco Mulato joining you and just a tick for on the money. He's our superannuation specialist. And later on this hour, do you rely on the insurance within your super? What are the tricks and pitfalls, which includes your cover levels, income protection traps, and how policy wording can make or break your claim? We've got an insurance lawyer coming up on the show as well. But right now, why don't we do on the money?
SPEAKER_00On the money.
SPEAKER_03It is seven past ten. Still in the news. The collapse of First Guardian and SHIELD. $1.2 billion worth of super was lost. Marco Mulato is superannuation specialist and joins you. Hello, Marco.
SPEAKER_01Good day, Lisa.
SPEAKER_03Nice to be back. 1-300-322-774-0437-774-774 are our numbers, and we can take your questions. Anything we share here is general in nature and doesn't take into account your personal circumstances, financial situations or needs. Just a recap of what happened with First Guardian and Shield, please, Marco.
SPEAKER_01Sure. So we covered this about a month ago, I think, one or two shows ago. And the upshot is we had some cold calling, which originated from a comparison website, which was a bit of a dodgy website. It was a bit like a lead generator for these advisors. People went onto that website, you know, thinking they could compare their super fund to other products. It led them essentially to one type of superannuation product. Advisors then were able to call those people because it wasn't technically a cold call. They had kind of requested a call. So they kind of got around the hawking provisions there. They called the customers, they convinced them with you know written advice to switch over to a super product of their choice. Ends up that in that super fund they selected some funds that were run by some pretty dodgy people who made poor investment choices, who made investments into related parties, who had conflicts of interest all over the place, who had illiquid investments. It's very difficult to get your money out of. And I guess what's kind of got it back into the news more recently is that Macquarie, so a very large financial institution who was a platform to get into these funds, is going to pay its investors $320 million and make them good.
SPEAKER_03So it's the investors who happened to use the Macquarie platform, not other people. So it's only those ones.
SPEAKER_01Yeah, so it's investors who happen to, through an advisor, go through a Macquarie superannuation platform, and there are lots of those available. So then in the Macquarie platform, you have a huge menu of investments to choose from. So those advisors could have selected all sorts of different investments. They didn't. They chose SHIELD and First Guardian and Australian fiduciaries. That's how the clients lost their money. So Macquarie has essentially come out and said, well, we probably had to take more responsibility for not shutting down those investments a lot more quickly.
SPEAKER_03Marco Mulata is with you. He's a superannuation specialist, and we're going through the collapse of First Guardian and Shield because we want to really look at what are those early warning signs? What are the red flags around this so that you don't get trapped into this situation? Because regardless of how much regulation there is, these types of things they sort of crop up, don't they? There's always these loopholes. So let's go through some of these early warning signs. What's a big one for you, Marco, looking at all of this?
SPEAKER_01Well I think a big one is just really that cold call or a call if you have done some investigating yourself on a website and done a bit of research and maybe put in that you'd like more information to get this call from someone that you don't know who's kind of used that research you've done as a way in and then starts to talk to you about different types of super funds and switching and you know, maybe a free piece of advice that they can give you. Start talking about investment returns immediately and how you could be doing so much better. They're really, you know, like sensitive points that they're hitting.
SPEAKER_03This is really hard though, Marco, because it's not like you might have this is not our area, right? And you think that comparison websites so that was the tricky thing here, I think. You the reason why you use comparison websites is because you don't know. So I think that was a new one for me.
SPEAKER_01Oh, that's right. So the comparison website, which is really nothing to do with superannuation, it's a completely different world about having legitimate, credible websites up, was in this case pretty new. That hasn't happened before. We haven't had a you know what we're doing. A dummy it's basically a dummy website. Correct. Yeah. So you end up with the one answer which is what the advisory group wants you to where they want you to end up.
SPEAKER_03So that was number one.
SPEAKER_01So that was number one. Check that out. Number two was yes, the calls. So the calls were from uh advisors who use that as a way in to get to you and immediately start talking to you about potentially higher returns, which kind of leads to number three. If assumptions for investment returns are abnormally high, that's a red flag. Trevor Burrus, Jr.
SPEAKER_03What's that to you? Six percent or more? What is that?
SPEAKER_01If we look at you know ten, twenty, thirty-year historical returns for the normal balanced investment portfolio of a superfund or even a non-superfund, just a balanced portfolio, you really want to generate between maybe six and eight percent per annum over that time. So if we're looking at assumptions of growth in any advice you've been written of ten, eleven, twelve, fifteen in some cases. Too good to be true. It's too good to be true, right? So at very minimum, you need to think about a lot more questioning.
SPEAKER_03Uh now, let's say you do get that cold call. How can we check if this person is legit? Is there a website?
SPEAKER_01Yeah, so first thing uh don't agree to anything on the call, obviously, and then go away and check the ASIC register. So you can put the advisor's name into the ASIC register, and that'll give you a pretty detailed description of the advisor, their qualifications, where they've worked, how much have they moved around. Also check the FAA, which is the financial planning industry's uh largest group essentially that represents advisors. They also will have detailed information on the advisor. And you can start to build a bit of a picture or some evidence that this advisor has been around long enough, done the right things, and can advise in the right areas. That's a good start.
SPEAKER_031-300-triple two seven seven four zero four three seven seven seven four seven seven four. Uh ask you can ask questions either related to this topic or we'll take general super related questions in just a tick as well. I just want to get through a few more red flags then, Marco. So we've checked when we've got the cold call about this financial advisor. What next?
SPEAKER_01So the other thing is if they're really pushy in terms of wanting you to switch super funds almost at any cost, um because they feel that your existing superfund doesn't have the investment range for them. Now, sometimes that's pretty credible, and generally you know that because the portfolio you're looking at in the new superfund just has a whole bunch of investments in there that wouldn't be available in your current superfund. And they're explained, there are detailed fact sheets about them, there's research, independent research on them. So you get a lot of information about these new investments you're being recommended. That didn't necessarily happen in this case. These investments that fail, they weren't around that long. So there wasn't a five-year history you could gather, or a ten-year history. So if investments are fairly new, that's a bit of a flag as well. You want to just understand why they're new and whether or not these investors have conflicts of interest, they're working with related parties, have they done this before? There's a whole bunch of questions you can ask around credibility. Is there independent research on this fund? Who's done the research? Is there more than one party doing the research? Those sorts of things for legitimate credible investments are all available.
SPEAKER_03Speaking about the collapse of First Guardian and Shield, what could you have done? What were the early red flags? Marco Millado is our superannuation specialist. We will take your calls. 1-300-272-774-0437-774-774. Thanks to those who have called through and just hanging on. Marco, let's say you did have an inkling something is wrong. What do you do then?
SPEAKER_01I think first you just stop, you make sure you don't sign anything, and then second you can make a complaint to the financial ombudsman, definitely.
SPEAKER_03That's the Australian Financial Complaints Authority. Mm-hmm.
SPEAKER_01AFCA.
SPEAKER_03So there's a website and you just go there?
SPEAKER_01Yes, absolutely.
SPEAKER_03What if you've lost money? Who gets paid?
SPEAKER_01Okay, so uh this is where it can get a bit tricky. Uh if you have had an advisor involved, then you could go through the Ombudsman or the AFCA process, and there may be some compensation for you, of course. If you haven't had an advisor involved, it becomes very difficult. You can still go through that process, but you lose access to what's called the CSLR, which is a compensation scheme, essentially, where generally all advisors are contributing to this on an annual basis and the the the pool of money is set up for exactly these instances. And so you may have some recovered funds via that method, but if you've done this on your own without being advisor, without an advisor, you actually lose access to that. So we only have the ombudsman, the AFCA. Now that still may be good enough, and you may recover some money that way. There's the other uh negative, of course, that there just may not be enough money to recover. And in that case, if the liquidators are only getting 40 or 50 cents in the dollar back, there just isn't any other pool of money to go to. So we might actually not get it all back.
SPEAKER_03Aaron Ross Powell And why does the superannuation guarantee not apply in these cases?
SPEAKER_01So that's that that that scheme of last resort. So they've designed it because advisors are essentially paying for it. So the industry is paying for it. They've designed it to help those who've been advised. At this stage, it's not been extended to those who haven't been advised. That's one of the sticking points and being discussed at the moment.
SPEAKER_03Got it. And so the people who went through Macquarie, that was Macquarie's decision at this stage, wasn't it?
SPEAKER_01I guess the difference there is it it doesn't mean it was a Macquarie advisor. It could have been an advisor, and in fact it was from other independent.
SPEAKER_03I think they're doing it as a brand thing, isn't it? Because, you know, if Macquarie platform and it was who they decided to put on their platform as well, as you say, which is not is opaque.
SPEAKER_01It's not like it's a responsibility, but maybe they're doing it just to say, look, I think there's definitely some brand value destruction that would have got happened and probably isn't recoverable, but this payment of $320 million probably goes a long way to people thinking, well, Macquarie did the right thing here.
SPEAKER_03All right, I'm gonna open up the phone lines. It is 19 past ten after this.
SPEAKER_08Welcome to our palace.
SPEAKER_07If you had no limits, what kind of dream home would you build? It's beautiful. The brand new season of Grand Designs Australia. So impressive. Streaming now on ABC IV.
SPEAKER_03On the money. Our phone call line is 1-300-222-774-0437-774-774 is our text line. We're talking superannuation. Marco Mulato is in the house, and we will take your calls right now. Joy has been waiting patiently. Hello, Joy.
SPEAKER_09Oh, hello, Lisa. Thank you very much for this part of your programme. It's always good every week. Um, Marco, thank you. I have a question about my superannuation. Um, I retired five years ago, and I've had my superannuation with a very large company, probably the biggest, um, since about 1993. And I um moved it over into some of it into an income account. Um so there's two accounts, there's a main account, and then you move your money over into the the uh income account. And apparently, without my knowledge, the income account ran out of money. And without without me knowing about that, they just closed my account and sent me a letter and put some money in my bank, the few hundred that was left.
SPEAKER_05Right.
SPEAKER_09So I'm sufficiently annoyed um to be treated like that, um so I will leave them um and I will take my money elsewhere. Um and I'm just asking for a um a suggestion of what to do. Is it always best to just put my money into superannuation or are there other investments that I could look at at this age?
SPEAKER_01Yeah, so that's a that's a really good question because there are a lot of factors that come into play there. So the reason why superannuation is often touted as the you know one of the best places to put your money is because when you uh eventually transition into that income account, as you call it, which is really the pension environment, so we're now talking about retirement, there just isn't any tax in your portfolio. So you can make huge amounts of capital gains, you can make lots and lots of income via dividends and rent and interest, and you just don't ever pay a cent of tax. So it's this tax-free environment that's really, really attractive. But as an individual, if you're now retired and not working, you don't have any income essentially anyway, other than your super. So you yourself are a bit of a tax-free individual up to certain limits. So you've got to get that balance right. You've got to have, you know, I guess enough cap enough capital or portfolio investments in your own name to not necessarily get you into taxable territory.
SPEAKER_06Yep.
SPEAKER_01But you should also have as much as you can in the super or pension environment because you know that's always just going to be a tax-free environment for you. So that's probably the preferred vehicle to create wealth. But yes, there are other ways you can hold investments as well and not necessarily ta pay tax. It often comes down to tax joy.
SPEAKER_09Where is our lowest tax and Marco, can I move that money from that company to another superannuation company and it it uh I have all the same benefits like in some sort of income account and a tax-free bid and all of that.
SPEAKER_01Yeah, so I think you what you're talking about is just a rollover to another super fund. So, yes, all the super funds have to play by the same rules. So you know, there's only one piece of legislation that governs them. So you'll have all of the same superannuation characteristics. It's about selecting the fund that you want that has enough investment choice for you to deliver the investment returns that you need. That's the big piece for you. So you probably need an advisor to help you with that. Uh and particularly if we're we're then looking at also, well, is is super actually the right place for your money and how much of it should be in there versus how much should be just in Joy's name.
SPEAKER_09Wonderful. Thank you so much, Monk. I appreciate your that advice. That's good advice. Thank you.
SPEAKER_03Thank you, Joy. And we're inviting your phone calls related to superannuation on 1-300-222-774 or 0437-774-774. Anything we share here is general in nature. It doesn't take into account your personal circumstances, financial situations, or needs. Alan is here. Hi, Alan.
SPEAKER_04Yeah, good morning. Um I listened to you when I have a walk on a Sunday morning, so I'm not enjoying that conversation.
SPEAKER_03At least I'm getting fresh air somehow. Through you, Alan.
SPEAKER_04I'm a little bit down the track now, but I'm 74. But when I turned 70 um and I was with Vic Super, all of a sudden the insurance uh stopped. Um can you tell me uh uh whether that was uh a fun you know a funds uh specific thing, or is that across the board with all superannuation providers?
SPEAKER_01Yeah, it'd be that so that's an insurance uh clause, I guess. So it'd be the insurer within the super fund that's determining when your insurance ends. And so that's gonna vary between super funds and insurance providers, but um I'm gonna find that out.
SPEAKER_03Do you have to dig in there?
SPEAKER_01Yeah, probably just ring the call centre and they'll know because they'll be able to look it up. It's I don't think it's on your statement in terms of when your insurance ends, but it's pretty easy to find out by calling your fund. But so all the insurances you'll have in your super fund will have a like a termination date where they'll just stop.
SPEAKER_04I'm 74, I'm still working, still paying taxes and doing all those normal things. Um then they decide, okay, you're 70, you're too old. Now we you know, you're too old to insure.
SPEAKER_01Yeah, it probably sounds unfair. And the the insurance provider will say, Well, we're I guess we're making a risk-weighted decision here. As we get older, that's more likely that uh you're going to call on these insurance policies at some point. So they you know they they they essentially put a you know a termination age in there, which is often sort of around 70 or 74, for example.
SPEAKER_03So it's not unusual. It's not unusual.
SPEAKER_01No, it's pretty normal. So that it it will differ, though, between providers, so it's pretty normal. But I think that's that's the insurance company's way of mitigating some risk for themselves.
SPEAKER_03Feels like the two calls where you find out that things have happened and things have been switched off but without you knowing, it doesn't sound very good.
SPEAKER_01No, so there's a lot that's I guess put on the consumer to find out. And in the complex world of superinsuring is not great.
SPEAKER_03Yeah. They don't really notify you. You have to keep on looking at the state.
SPEAKER_01They should be. So there should be. I feel like they should. Lots of lots of people maybe haven't kept up to date with addresses and emails and things like that. So you know it's it's definitely insurers and super funds' job to contact you when things are changing, but not necessarily everyone's getting that correspondence. But uh it it's all complicated, and we just need to make sure we're trying to get as much info as we can.
SPEAKER_03Thanks for your call, Alan, and I hope uh that works out for you. Uh Dorothy is here, so we'll go to Dorothy now. Good morning, Dorothy.
SPEAKER_08Good morning.
SPEAKER_03Good morning. Do you have a question for Marco?
SPEAKER_08Yes, thank you. I'm just inquiring if you meet a condition for withdrawal between 60 and 65 from your super, does that affect your income over the year? Is that counted as a part of your income?
SPEAKER_01So the simple answer is no, because once you turn 60, if you meet a condition and you can withdraw some of your super, and that's whether you take it just as a sort of lump sum from your normal super or you convert it to a pension, provided you're over sixty, that's tax-free. So it doesn't get added to any of your other income at all.
SPEAKER_08Well, that's good news. Thank you very much.
SPEAKER_03Yay, Dorothy. Good news for you. It's not very often you're delivering good news, Marco. Let's take this one as a win for Marco. Great. Uh 27 past ten on ABC Radio. We're doing on the money. Marco Mulato is your superannuation specialist. We're taking any super related questions this morning. 1-300-272-774. Let's go to Glenn now. G'day, Glenn.
SPEAKER_05Yeah, good morning.
SPEAKER_03Good morning.
SPEAKER_05Sorry, I forgot your name, but Marco's guest, yes.
SPEAKER_03Yes. Lisa and Marco. But I would I would ask your question of Marco if I were you.
SPEAKER_01Lisa, you do all right most weeks.
SPEAKER_03I'm learning a lot actually. Glenn, what's your question for Marco?
SPEAKER_05I I retire in uh about 16 months' time. I'm currently I've got the sack from work because I'm uh working for the um the doll, the pension, uh volunteer work. So I I get about nine hundred a fortnight from that, which I can say. I've got about seven hundred thousand in uh super. Um should I wait? Yeah, what should I do with that um money?
SPEAKER_01So this is a pretty broad question, because there's a there's a lot of things that we take into consideration here. But just generally just give us some of the bigger things of the So the moment uh you turn age pension age, that that that money in your super fund starts to be counted as an uh asset for centrelink purposes. So while it stays where it is in we call it accumulation phase, centerlink don't means test that. So that's probably why you're receiving some centrelink assistance, I'm guessing. When you then turn 67, which is age, pension age, well that super is going to be counted regardless. So perhaps at that time, if your cash flow is sufficient for you now and you don't need to start a pension, you could consider just leaving your arrangements in place. If your cash flow you think isn't enough and you'd like a bit more money, you can convert your balance into a superannuation pension. And that will do two things. It will make that super balance tax-free. So you won't have any tax on any of the portfolio investments, and it will also start to pay you an income stream. So they're the things I'd be thinking about.
SPEAKER_03Thank you, Glenn. Uh this question from Leo. Marco, what's the effective tax threshold taking into account the extra offsets, please, to work out what we can have out of super? I don't think I understand that. Do you?
SPEAKER_01No. There are normally when we talk about effective tax thresholds, we're talking about our individual tax thresholds, what you can earn as an individual tax-free. So that's about 22,500 for someone who's underage pension age. If you considered a senior Australian, which is seven sixty-seven or above, you can earn quite a lot in your own name and not pay any tax. And I mean about over thirty thousand as an individual, over sixty as a couple. So that they're the things that we often consider around, right, well, how much should we have in super versus how much should we have in our own name?
SPEAKER_03Beautiful. And this is a comment most built-in super fund insurance stops around age seventy-five, writes this texter, external life cover can continue to age ninety-nine.
SPEAKER_01Sounds about right.
SPEAKER_03All right. Simon from Morwell. G'day. How are you?
SPEAKER_02Yeah, hi, Lisa. Um I just wanted to well, number one, put to Marco the idea that this um scam that we're talking about is everything that's wrong with self-managed super, because ultimately your advice is be better informed and smarter than you actually are. And in the end, some people will always fall for things like this. And the other thing is that uh is it not the case that Macquarie, by compensating people, are effectively making the investors in Macquarie who weren't greedy or foolish enough to fall for the scam, to pay those who were.
SPEAKER_01Yes, I think you hit some pretty uh poignant points there. I think what Macquarie is really trying to do is, other than save some brand damage, is probably make an admission that their platform was used. They need to have enough due diligence in place and responsibility to make sure that the investments they put on their platform are monitored. So, in addition to the advisor, the platform provider of the superfund also has responsibility to make sure that what's available to their members is still meeting all of the credibility tests. And I think that's where Macquarie says we weren't quick enough to identify these funds were failing and opaque and illiquid, and we were too late to stop them. So I think they've probably done the right thing.
SPEAKER_03Margaret says here, another surprise, Ree super guarantee. Mine has not stopped going in at seventy-five, and then the super fund had to return it to my employer and to me. Advance notice would have been good, like a birthday card at 75.
SPEAKER_01Yeah, so this is super guarantee from the employer. I should it should stop at 75. But but it didn't.
SPEAKER_03So that's not great, is it?
SPEAKER_01Uh I mean there's a lot of this stuff that's really down to communication, isn't it? So you're whether getting communication out and the service is good and we're okay, or we're being let down by communication and service. And you know, the I think the bigger the fund, the more the members, sometimes the harder it is.
SPEAKER_03Beautiful. Thank you so much. And uh we've got a text here basically saying uh I listen to your finance show every Sunday. I'm in my 60s, did not grow up with any financial literacy, we were poor as kids. Super, it's so complex. I would really appreciate a show. Focusing on basic finance tips for those of us who are not wealthy but would love to learn more.
SPEAKER_01We can do that.
SPEAKER_03I think we should do that, Marco. Thank you for that. The more ideas, the better. Yeah, I love that. Let's do that, Marco Milano, super specialist. Thank you. See you next time. This is Matthew Wilder. Break my stride.
