VINCE SCULLY | from Life Sherpa

In this episode I'm joined by Vince Scully from Life Sherpa to unpack one of Australia’s biggest financial scandals: the collapse of the First Guardian and SHIELD Master Funds. With over 12,000 investors and $1 billion in losses, this case is a stark reminder that even regulated investments can go wrong.

Vince explains that most Australians invest in managed funds through intermediaries—often financial advisers—who are supposed to act in their clients’ best interests. However, conflicts of interest, poor due diligence, and aggressive lead generation tactics can leave everyday investors exposed to high-risk or fraudulent schemes.

Key red flags include:

1. Promises of unusually high or “guaranteed” returns (e.g., 7–9% from a supposedly conservative portfolio)
2. Complex fee structures or hidden commissions
3. Investments in related-party or illiquid assets (like private property loans)
4. Pressure to make quick decisions, often via cold calls or social media ads

Vince stresses the importance of reading your Statement of Advice, understanding where your money is actually invested, and seeking independent, professional advice—especially as advice becomes more expensive and harder to access.

The episode closes with a call for vigilance: learn to spot the warning signs, don’t let a few bad actors sour you on the value of good advice, and always remember—these are real people’s retirement savings at stake.

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EPISODE TRANSCRIPT

Vince Scully: These are life changing losses for people and it might look smart on the 7:30 report or on the front page of the Finn Review, but these are real people and this is their retirement savings. And as a nation, as a uh, sector and as a uh, profession, we've got to acknowledge that they've been let down.

Phil: G'day and welcome back to Shares for Beginners. I'm Phil Muscatello where we're going to look today into dodgy Brothers investments. The first Guardian and S H I E L D Master Fund debacle. A scandal that has rocked the Australian financial landscape leaving over 12,000 investors with losses exceeding $1 billion. Joining us today is Vince Scully from Life Sherpa, uh, who's going to help us unpack this complex case which saw nearly 1% of Australian financial advis as implicated. We'll explore the dangers of such investments, how to spot red flags and what you can do to protect your hard earns from dodgy schemes. G'day Vincent.

Vince Scully: G'day Philip. It's great to be back on the pod.

Phil: And it's only my mother that calls, but calls me Philip.

Vince Scully: I thinking of uh, the Late Night Live guy, Philip Adams. Good old Philip. Seem both of you share a former employer. I think I d take that as a compliment, Phil.

Phil: That's eposite, is it? Yes. Although most people say Lucky Phil. Lucky Phil is where I get that from.

Okay, so we just had a little bit of an off air discussion about this particular topic and you wanted to unpack and unravel a few of the onion skin layers involved.

Vince Scully: Yeah, let uh, this is like Shrek in his onion layers and understanding how this all hangs together is actually really useful in understanding where the System failed these 12,000 investors and I don't think they'll end up losing the whole billion odd dollars. Um, I think there'll be a fair bit of recovery. So the three funds you mentioned, two of them being First Guardian and the Shield E L D masterrust. There's a third one called Australian Fiduciaries which was much smaller, much lower key, but it shares most of the same hallmarks. So a managed fund is regulated by ASIC as distinctive super funds which are regulated largely by apra and ASIC is not a prudential regulator. So it's there to make sure that the license holders or the Players in the thing are honest, comply with the law and do what they're supposed to do. They're not there to test the prudence of investing in so they're not there to the prudentiality, the sensibleness, the sense of investing in it. So they're not there too save you from making a bad financial decision. They're there to make sure that you make a financial decision, confident that the relevant players are telling you the truth. And there's been failures here because the ultimate cause of the loss is fraud in the underlying vehicles. Most people who invest in managed funds do so through a financial intermediary. So for listed stuff that's a stockbrokr whether online or human and for most manage funds therefore it's particularly unlisted ones. It's a financial advisor and it'mostly because the providers of these funds don't have the direct to consumer distribution to do so. So Vanguard, BlackRock, State street, they don't really have a consumer facing business. Most of the flows come through advisors. Many of those people invested in those funds through a super fund, either a self managed superf fund in which case they would have invested directly into the managed fund or via a member directed superfund. So that's a super fund run by one of the 100 um, 60 ish registrable superannuation entities who takes instructions from the member. Usually that member is guided by a financial advisor. And so uh, the question is should the trustee be second guessing an individual who's chosen this product to direct where their money'to going and that person's advised by a professional. We go back and talk about that later. And that's similar to your hostplus M member direct option where the member directs the Trustee of the HostPlus Super Fund to apply some of their balance to investing in a ah, list of I think about 27 ETFs and many people.

00:05:00

Vince Scully: You and I spend enough time on Reddit and Facebook to know that there is a very strong level of whinging that people who choose to invest in the member direct option bitch MU about why HostPlus makes them keep 20% in a prem option. There's probably two reasons for one is the Prudential Trust ASA that's trying to protect the member from themselves from making dumb decisions. They also place some restrictions on concentration like how much of your funds you can have in an individual ETF or fund and they probably do have a commercial interest too in making sure that they get to clip the ticket on the premixed fund but primarily the first one. So all of the super funds, so those member directed juaper funds, they obviously have a menu that you can choose from. And so to get a fund onto the menu there's a bunch of work that goes on. So the fund manager will usually engage a ratings test and there's probably a dozen of them. This is generally paid for by the fund manager. So there's obvious conflicts there. And if you've seen the big short you'll understand that one. And the uh, superund will employ asset consultants to do the analysis. And to some extent they're going to rely on the ratings agency. So they're going to say we will only accept funds that rate four stars or better. And so in a life share but context we'd say look, we're only going to deal with super funds that manage $10 billion or more and we're only going to deal with fund managers with a track record of X years and minimum funds under management. In most cases that ends up being vanguards and black rocks and state streets and all the big big players around town. And of course the underlying fund is where all your turns coming from. The rest of it is about compliance and portfolio construction. So getting the right fund is actually the key to it. And so when you go to an advisor they may rely on a uh, research house, they may rely on their license holder to develop the approved product list or they may very well employ consultants. And for us at Liveshippa, uh, portfolio construction is core to delivering financial advice because it's the thing that's going to deliver the returns that brings your plan to life.

Phil: It'it's the eng, the engine of the.

Vince Scully: Returns Y we think that's core. Whereas many adviseors, either because of the restrictions of their license holder or because they focus on other areas of financial planning, they go well we're going to outsource this to consultants or we're going to outsource this to our license holder. None of that I think should takes away from the obligation of the uh, advisor. And I think this will get tested in these cases as to what level of due diligence and advisors should be doing. I mean we will go and meet with all the fund managers. So there is not a fund on our approv list that we haven't met with the manager and usually the portfolio manager and usually we will do that once a year. So this time of year is just chockers with fund manager and portfolio management meetings because this is when they're doing their reporting. So that's not cheap and so that's where corners get cut I guess and then the final player which is possibly the biggest culprit in this particular scenario is the lead generation companies so there are maybe more than a handful maybe 20 or 30 players here who run websites they call things like know o super compare or compare your super all sounds pretty innocuous all sounds pretty official.

Phil: Yeah it sounds like where you're going and choose your energy provider something like that but this is obviously sinister a level of responsibility there much greater responsibility.

Vince Scully: Hold financial services license and they're in the business of collecting leads and so someone will fill out a form on Facebook or Google Ad or whatever and then they'll get a call from someone in a call cent centre many of which are on the girl coast to pressure the consumer into agreeing to a meeting with one of the advisr to whom they sell these leads. So there's a whole bunch of rules about not selling financial products on a cold called so they're call the anti hawking rules and it's illegal to phonebod and say want to buy some BHP shares that's illegal whether

00:10:00

Vince Scully: you hold a license or not. Obviously there's nothing illegal about calling someone who's filled out a form and giving you permission to contact them and in that call they will go would you like to get a better return from your super fund? Of course nobody's going to say no to that question and they will then introduce the advisor and the advisor in this case is going to pay 2/3 of their fee to these guys. So these are serious amounts of money and that's where much of the so.

Phil: 2/3 of the advisors goes to the lead it obviously goes to the lead.

Vince Scully: Generation company as a general guide that's the sort of split that's happening.

Phil: It's usually no conflict there uh no.

Vince Scully: Conflict it's disclosed in the statement of advice but in ways that no one would notice like you'll see words that go uh our fee for this advice is $3,300 and then it'll be a little asterisk or a little carrot and down the bottom and say we pay Our referral partner 2,200 of this is that inherently a conflict? I mean clearly there's nothing wrong with me paying Facebook for ads or paying Google for ads or taking out a full page in the fin review so is this materially better or worse? I think the problem arises in the pressure that's put on the call so someone's getting a call in there re being Put through to.

Phil: It's more than advertising, isn't it'you're? Actually talking to a human who is trying to get you to sign on theted line.

Vince Scully: In many cases the uh, deal is done on the phone as good as and the statement of advice follows. And this is pretty cookie cutter advice and I've seen quite a few. So we do a lot of second opinions in our business where people will message me on Facebook or reach out and go look, I've had this piece of advice and I want to know what to do. So in August 2023 I had a guy reach out on Facebook and says look, I've had this advice from Venture Egg which is uh, one of the main culprits in this whole thing and can you have a look at it? And so the recommendation was that this guy should't move from HUUS to the uh, shield. I saw First Guardian Diversified Strategies. So this guy was profiled as a 6040 investor at 6% growth, 40% defensive. So a fairly conservative sort of guy. He was still relatively young. He was 40 something but profile is a relatively risk averse and the recommendation was that he should move his house plus to this First Guardian on a super fund called APRC super of which the trustee was Diversa. Now the name should have rung alarm bells because Venture Egg was licensed by Interprac and the super fund was called aprac. Sound similar? Yes, this connection was buried deep in the statement of advice. You page 50 or something and who.

Phil: Reads a statement of advice?

Vince Scully: Well you should and they should be written in a way that it encourages you to do so. But that's probably a story for another day. So aprc, the trustee is diverse so Divers is One of the 160ozPRC is a uh, call it a white labeled product promoted by Interprac and Interprac is the license holder for Venture eg. So you're starting to see how these connections. So these connections are uh, the part of the red flags you should be looking at. They're not all red flags but it should certain and well, sorry, they should all be red flags but they're not always ones that should stop you doing it. But this is the place it's starting to smell.

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Vince Scully: Diversified strategy says on the face of it looks like a 6040 portfolio. It's got 60%, 40% fixed interest. But the fixed interestortion was loans to Chiioiodo's property fund, uh, loans to other products. So they're not what you and I would understand by fixed interest. These are not government bonds. These are uh, high risk property related loans. And so that's the only way you could claim to deliver. In fact, the projections in the statement of advice, we're done at 9.39% annually. That's almost mathematically impossible with a 6040 portfolio.

Phil: And this is one of the things to watch out for and one of the red flags because we've talked about private credit

00:15:00

Phil: before and we've talked about real estate investments and how difficult it is for these to be valued as well. And it's not like a stock that's on the market that you can just as soon as something goes wrong, you can sell it. You don't know when you can get your money back from one of these kinds of investment. I don't want to go down that rabbit hole.

Vince Scully: First Guardian Diversified Strategies, which is allegedly a 6040 portfolio delivered on paper 7.84% for the five years to February 2025. That's what it reported to thatess what the accounts would have shown that were lodged with ASIC. That corresponding number for Host plus or Australian Super 6040 here portfolios was in the sixes. So more isn't always better. There's a reason why. And of course that 7.8 turned into maybe zero, maybe minus something by the time this all washes out. So that's the point about these private debt is that all looks good till it defaults and then it might not be worth anything at all. And we've seen this this morning with Art's property in Seattle which they paid 360 odd million dollars for when it was leased to Microsoft. Today it's vacant and they've just handed the keys back to the debt holders. Now that was still valued at $360 million in last year's accounts. So. Well, sorry, it's hard to work out what it was because it's buried in a Brookfield externally managed fund. But I will be pretty confident that it was still valued at more than zero in last year's accounts. So that's a challenge and again a potential red flag. Another reason why we're fans of largely indexed or quant based fund, um, rules based funds. So that's um, Viper's nest I think is the technical term, isn't it, for all of this.

Phil: Okay. So by way of unpicking, I just wanted to quote this article that was in the Australian. I'm just going to quote it verbatim and refer that it is, comes from the Australian newspaper. But this is about shoddy investment funds led by chaps who either lost the money, plunged it into high risk rubbish or gobbled it up themselves and spent it on Floyd Mayweather. Yes, literally, Floyd Mayweather. They paid him to appear at a corporate event. Tyson Fury as well. Someone else went out and bought a Lamborghini. Another purchased a penthouse apartment for his wife. There was a $30 million loan made to a craft brewery in Tasmania. Another to a hospitality business. I think there was a restaurant in there as well. Just by the by to dubious real estate projects in Indonesia that probably won't be recovered. And some of it went to a character named Ferris Mary. He ran the call center that funneled people into these doomed investment products which we've just been discussing. His conduct dubbed, um, unconscionable by the corporate regulator asic because the clients all thought they were getting independent advice from Mary. They didn't have a clue. He was simultaneously getting $18 million in upfront, um, fees for his services. Mary is trying to cozy up to the official Facebook support group for the victims of First Guardians. Not only that, he's actually making contact with them. And then you mentioned Paul Keixote as well before, who ran one of the real estate funds and he's trying to have his fees pay to him as part of the wash up of this whole deal.

Vince Scully: Yeah, um, anyway, I just wanted to.

Phil: Get that out because it's so l.

Vince Scully: Actually gets worse in it.

So you talked about fighters. Mayweather is a boxer. Right. And so the main character behind the call centreers or marketing is a guy called Rashid Al Shakir, who is, I think it's what the newspapers you would have referred to as a colorful industry identity. So Shakear is a, um, Al Shakshear, I think is uh, Jim and cafe owner in Melbourne and the uh, principle of a business called Bespoke Marketing. And uh, he's linked to most of the or many of the boiler room call centres that created this mess and sorry, his sister, Al Shakshi's sister has been done for nd is fraud and she's an MMA fighter.

Phil: So it's all just, oh, ah, we've squared the circle there.

Vince Scully: Talk about colorful industry identities, which I think is the polite way that you're allowed say this without being done for um, defamation.

Phil: But what are the guardrails? What are the guardrails here, Vince. I mean what is to stop any fund manager just to go off and you know, buy Lamborghinis and spend their money on their favorite sporting.

Vince Scully: Well, you know, if you are looking for red flags, which we will probably come back years,

00:20:00

Vince Scully: you know, if someone's social media has got flashc cars on it, that's a red flag. If you've ever read. One of my favorite books that I recommend that people read is a book written in the 30s by a go called Fred Schwed called Where are the Customer'yachts and it's a timeless tale. So yeah, Lambos, Ferraris, flash social media lists, red flag.

Phil: We've got members and they've got a member Direct account in hostplus, for example, they filled out some form. Someone said, do you want a better return from your.

Vince Scully: Anyone ever said no to that question?

Phil: Someone gives them a call. No one ever says no to that question. And then you'll put in touch with a financial advisor who says, well here's this um, fantastic fund that you should have your money in. Then you go back to Host plus and say, okay, I want to buy this.

Vince Scully: Manage.

Phil: Is that the process?

Vince Scully: It is broadly, but I think the House plus example is a slightly different kettler fish. So the hostplus case, just to close that one off, they have trustee directed funds where hostplus have a balanced fund and a growth fund and a high growth fund and a defensive fund that you tick a box in the application form and you choose an option and hostplus decide what's in that. They don't actually manage any of the money, but they decide what's going to be in it. And they also offer a member directed option which I think they call Member Direct where you as the member can say, Mr. Hostplus, please put 20% of my money in the Vang Goardgh Australian Sharefro Fund or please put 5% of my money in the uh, Blackrock Australian Bond Fund so you can build your own portfolio. And that's sort of what's happen. That's the same sort of exercises'the same legal mechanism that's happening in these true member directed funds where the member, when they join the Macquarie Repp super fund or the OZPRC Super Fund, they're going to fill out a form which says I want to roll over my $200,000 from HousePlus and I wanted invested in this percentages and in the case we're talking about they would have said I want to put 100% of this into the uh, Shield diversified strategies fund which is allegedly a 6040 diversified portfolio. It was invested in about seven or eight other funds and your advisor would send your instructions usually online to the trustee and the uh, trustee would go buy them and hold them for your account. That's in theory how it works. And the trustee will do what you tell them to do as long as it falls within the rules of the fund. In most funds will have a cap on what you can put in an individual fund or an individual sector or it varies from fund to fund. So a, ah, trustee receiving an instruction to invest in a diversified fund, in this case a 60 40. Yeah, that's exactly what you're going to win obviously different 64 different underlying funds. But that's exactly what you're doing by ticking the conservative growth fund at host plus you're saying I want this invested in a 6040 fund. 100% it's all split out into stuff below that. Now as it turns out it wasn't actually invested in what you thought it might have been invested in. That's a failure of the uh, responsible entity and arguably the due diligence of the advisor and arguably the due diligence of the trustee and arguably they're asset consultant. But ultimately it's a decision of a consumer supported by a licensed professional and conveyed in accordance with the rules of the fund to the trustee.

Phil: Sounds totally above board.

Vince Scully: I mean at high level it is.

Phil: The problem here consumer from a consumer level it does seem m that way, doesn't it?

Vince Scully: The flaw here is that the underlying fund wasn't as represented and it wasn't what a normal person would or even a reasonably qualified professional would recognize as a 6040 portfolio. Uh, and you had a whole bunch of conflicted advisors. It's broken it. That's where all this flaws down. So when I looked at the Diverseive Art Strategies PDs it took me probably 20 minutes to go uh, this is not very orthodox.

Phil: There were some and presumably a trustee would have the financial skills to work that out themselves.

Vince Scully: You would argue that they should do. Now their incentive is obviously different than mine. So I was being commissioned to provide a piece of advice to a consumer which says should I action

00:25:00

Vince Scully: this piece of advice I've got from venture eg. And so I have a single duty here. My remuneration is not dependent on the answer that I'm going to get paid a uh, fixed fee for providing the advice and the person who would benefit from me going yeah, that's fine would be venture eg. And all of his mates. My sole duty there, is it? So I can probably, I guess, err on the side of that's a bit unorthodox. I clearly had no idea and was unable to assess without spending days to work out whether it was actually invested the way it said it was and whether the money being diverted to pay for Chioda's Lambo, that was well beyond the capacity of an advisor. But it only took about 20 minutes to go. Whilst that technically meets the definition of a 60:40 portfolio, the 40 is in pretty racy private debt, which is mostly in related party funds. Red flag, red flag, red flag. And I've got a what purports to be a 60 40, which in its DDO report, its market determination is saying we're targeting CPI plus 3 and point 5, which sounds perfectly reasonable for a 6040 portfolio. But the PD's says we're targeting CPI PL5. Well, which is it, guys? And how is it feasible to generate 7 or 8% on a 60? Whether 40 is traditional fixed interest, that's sort of mathematically not impossible, but a bit of a stretch target. And then when I look at the statement of advice recommending this, it did its projections at 9.39%. So it doesn't take too much work to go. That's a bit unorthodox. And so my recommendation was don't buy the Lambo. Whether, uh, the client actually did in due course is, I guess, their call. But so you say. Well, I could see that. Does that make me an investing genius or does it make the trustee incompetent? I don't think you have to draw either of those conclusions that a trustee was certainly an asset consultant being paid by the fund has a different set of incentives that they're likely to be put under the pump to justify. Ah, and don't do it. Whereas I could take a. On the balance of probabilities, this looks like bad advice. Whereas, you know, if Atison'are uh, reporting to the equity trustees investment committee going, uh, I can't put my finger on why this is dodge, but I don't like it. That's not how they're going to keep their contract. Uh, and so the level of ass they're going to need to form a, uh, decline recommendation is tougher. So I do have some sympathy for Achchison's in this case. I'm not saying they did it right. The court case will tell us who was right and who was wrong. And Certainly nobody in 2023 would have known there was fraud without doing some serious digging. I mean, certainly he was associated with some fairly colourful characters. Red flag. It was invest in a lot of related products. Red Flag. It was, uh, an unorthodox allocation in a 60, 40. Red flag. It was a relatively small fund. Red flag. And the nature of the pitch was overacted. All of those are red flags. Remember my assessment there is on the balance of probabilities. I think this is a bad thing. I, uh, don't have a horse in the race, but, you know, or a dog. Dog, whatever that expression is. And so the whole relationships in all of this are, uh, really hard to unpick. And removing all of those incentives is really, really difficult. That, you know, they say if. What's the expression about, you know, if your livelihood depends on believing something, accepting that it's untrue is extraordinarily difficult. And so, yeah, I don't have a silver bullet that's this going away, but there are certainly some things that you can do to tip the odds in your favor.

And the challenge for a consumer is, how do I do that? And that's why very few of these decisions should be getting made without professional advice, because it is so complex. I've been doing this for nearly 40 years and I still learn something new most days. And

00:30:00

that's why I use an advisor to give me that second sen. It's not that he knows any more than I do, it's that he knows where my blind spots are and he can identify them faster than I can. And so that's a problem because advice is so expensive. And that's a problem because there's obviously 140 of them that are, have either lost their way or been beaten up or incentivised otherwise to do it. Many of those will get weeded out, I think in the fallout of all of this. Not sure that helps the 12,000 consumers all that much. And many of these advisors, the advisr wrote the piece of advice that I'd seen is still practicing. He had previously been licensed by Dover and we know how well that worked out at the Royal Commission. So if you want to look at red flags, you go, does this align with my goals and objectives? So choosing a fund is not about lining them up by fees and return and picking the lowest fee and highest performance any more than you could pick the Australian test team by lining up all of the Batsmen by their batting average and picking the highest 11 numbers. That's not how you build a winning team. So you have to build a portfolio and that's where you start. So you've got, what's my goal, what's my strategy, what's the asset allocation that's going to support that? And then how can I build that? And I'm going to use fund managers that have solid track records in doing that and whatever research you want to choose. I mean, we do most of our research in house and then when you're going to build it, you got to build it on, uh, if you're going to do it in your super, you've got to build it in a super fun trustee. And in most cases where you've got a balance of above 70,000, do a segregated account or a wrap account is likely to give you a better answer, partly because of better tax benefits over your life and partly because of the ability to be certain that you're getting the asset allocation you need. But that does lead you to, ah, a whole series of other decisions. So we won't deal with an RSE that has less than 10 billion under management. And that gets you to about the top response.

Phil: What's an RSE?

Vince Scully: Registrable superuentiality. So that's the trustee of a superf fund and there's only about 150, 160 of them. But if you draw the line at 10 billion or more, you're down to about 30. So it's not a very big universe and it's a universe that's getting smaller. And the reason we choose 10 billion, I mean, it's a round number, but it's about getting scale so that you know that because managing a superfund is broadly a scale game, like the cost of managing 20 billion is not twice the cost of managing 10 billion. So you want to be big enough that you're getting the scale benefits, you want to be big enough that you're going to be the, not the one that gets merged by someone else. So APRA has a policy of trying to whittle this number down. So you don't want to be the one that gets taken over. But when it comes to a big pool fund, you're starting to restrict what you can invest in. So if you're Australian Su Supera, and you're managing 300 or 400 billion, whatever the number is today, it's pretty hard to invest in a company outside the ASX 300 because you just can't buy enough of it to make a difference. So by choosing a big pooled fund, not only are you getting a worse tax outcome, but you're also restricting your investment universe because you can't invest in small companies. And the evidence shows that small companies outperform big companies. So in our growth portfolio, the allocation away from large Australian companies to small Australian companies, so that's companies outside the ASX 300 has added about 0.6% a year to our returns. You can't do that in a big pool fund because you just can't buy enough of a company outside the 300ars to make a difference.

Phil Musatello: Super is one of the most important investments you'll ever make. But how do you know if you're in the best fund for your situation? Head to lifeshherra.com.au to find out more. Life Sherpa uh, Australia's most affordable online financial advice.

Phil: Yeah, you like a whale splashing into a swimming pool.

Vince Scully: There are disadvantages of being in a big pool fund because the manager is limited by the sheer size and weight of the money they're managing.

Phil: But is that part of the level of assurance that you'looking for? Is that why you're going for these? So the size is about fund managers.

Vince Scully: Making sure that they're going to be on the good side of that APRA rules. So if you're in a trustee that manages one

00:35:00

Vince Scully: or two billion dollars, you can probably take a better and even bet that they're not going to be aroundn in five years. They will get rolled up into something else. And you probably want to be in the one that's doing the rolling rather than the one that's being rolled up. Tell that to any Q super investtor. And so that's a problem. 10 billion are big enough to make sure that it's almost inconceivable that you're going to get a rogue employee able to do enough damage. Because obviously people are human and people get involved in this. So when we're looking at a superund trust, whether that's a pool fund like a hostplus or whatever, in order to be on our approval list to recommend to a member, hurdle number one is does the IRSE manage $10 billion or more? The answer to that question is no. They just can't be recommended. Then a superfer advisor. So if you come into life shera, uh, and engage with one of our advisors and say I want you to review my super. Our approved product list is entirely within our control. So we don't have a shareholder that's a bank or a superfund or an insurance company. So no one's telling us what to do. We choose which super funds we will deal with and the first cut is do theus $10 billion more. The answer the question is no, they don't get a look in. So that leaves us with about a fifth of the market and they probably manage 80% or more of the dollars. So if you're in that pool, you're confident they're going to be around for a while, you're confident that they got the systems and they're big enough that appa's giving them attention. So a uh, failure at Australian super is systemically significant that that will get a huge amount of attention that regulator and government level and on the front page of the paper. So you can be fairly confident that even if someone Australian super has their finger in the till, it's not going to be material in the scheme of things and it will be stamped out. So that's a good level of assurance. So that's why we draw the line at 10 billion. Then you go, okay, now that it's 10 billionars, do I want a pooled or uh, a segregated account? And there's reason, small balance is good reason to be in a pool fund because it's cheaper and more convenient. So if you're a 25 year old hospital worker with $5,000 in your super fund, you need to be in a big pool fund.

Phil: And it's probably so your money's there, put together with everyone else's money and it's all being invested on everyone's behalf.

Vince Scully: Cheap'reliable you've got the protections of government oversight, APPA regulation and uh, access to the reserve funds. That's good. Now when your balance gets over about 70 now you've really got to start looking at the uh, tax efficiency and certainty of ass allocation and the ability to access those other asset classes that you just can't if you're in a 300 billion dollar fund. And so now you're into the segregated market. And again there's probably in that 30, there's probably close to a dozen players in that space. And that decision is a function of uh, the technology that keeps the cost of us relaying your instructions to the trustee. Cost effectively, because the cost of me looking after your portfolio is uh, part of the overall cost. So there's no point in me saying you will save 0.3 or 0.4% a year in tax by going segreted if I'm going to have to charge you 1% to manage it. So the technology matters and the price of the platform matters and to a lesser extent the menu matters. But it's mostly around that technology that supports it that allows me to cost effectively manage hundreds or thousands of portfolios. Cost effectively. Now if you were going to a traditional advisor where you're investing a million or 2 million or 3 million in super, the labor cost of looking after that becomes less and less significant. But when you're trying to deal with 200, $300,000 balances, cost matters and well, you shouldn't see a difference between a dollar paid to Macquarie Rap or Equity Trustees or Net Wealth, a dollar paid to uh, Vanguard or blackrock or State street and a dollar paid to me. It all comes out of your return and uh, that we're about going, well, is that a better use of your fund budget or your investing budget than putting it in a Houseplus or Australiana? And in most cases if Your balance is $70,000 more and you got a decade or more to retirement, the segregating account is going to give you a better answer, which brings you into the whole member directed

00:40:00

Vince Scully: stuff and being comfortable at the underlying fund managers.

So having drawn this $10 billion line at the trustee level, we now have to look at the individual fund manager. So how does an individual fund manager get onto the live show about Approf list? And so we start going, uh, well for this asset class, should we be going indexed or quant or active? Is there an index that's investable? If so, is there an index fund I can invest in? And then we go and meet the fund managers. So every fund manager who's on our list, we've met with the portfolio manager. Obviously we don't meet with the computer that manages the Vanguard Australian share fund, but we do, we do have an account manager with Vanguard. We go and talk to their economists, we talk to their portfolio construction people and that's what real due diligence looks like. We don't rely on a particular ratings agency. The lack of ratings is a red flag. So if someone doesn't have one, that's a serious red flag. But the fact that They've got a 3.75 from SQM or a 4 crowns from Fe Fundino or 5 stars from Morningstar doesn't really feed into our uh, research process. But if a manager is going to come and say, look, we've been here for a year, we don't have a rating yet, my go, well come back when you got $500 million and a five year track record and a rating. So that's how you avoid the uh, things. We also would be very skeptical of a related party Investment. So when we talk about the Life Sherpa 80% growth portfolio, that's actually a bundle of fund from other people. We don't have a commercial interest in that. We provide portfolio management services for which we charge but we don't have a commercial interest in whether you buy Vanguard or BlackRock. We have an uh, evidence based reason as to why it's one or the other but we don't have commercial interest. I mean we do have a ah, business interest that we'd rather sell you portfolio management services than not sell them. But that all comes out in the wash in the comparison because that actually comes at a cost. But if you're not paying us, you're paying hostplus or Vanguard or someone else to do it. It's a job that has to be done. The question is who's going to deliver it? And we will say, well we'll do this for X basis points and here's our track record. You can buy those portfolios in many ways. You can buy it in a super fund on one of these member directed super funds. You can buy it in a managed portfolio either through with one of our advisors holding your hand if you've got a big balance or direct on the open invest portfolio if you want to invest $5,000. So from $5,000 you can go along to livere.commu invest and choose one of these portfolios that we've been delivering to our uh, larger clients and our super clients for many years, over a decade in fact. And you can buy that direct for $5,000. Choose one or four or let our bot help you choose which one. But none of those funds are uh, we don't have a commercial interest in any of those funds. And none of those funds, with the exception of the Vang Gogh funds invests in related party funds. So if you go and buy veu, the Vang Goard Global Fund, that's a uh, cdi, a certified depository instrument which is backed by a unit in a US Vanguard etf. And so in theory that fund is invested and that ETF invests in the underlying Vanguard fund. So in theory you would call that a related party transaction. But that's different to investing in a fund that's investing in the uh, property developments of one of the directors. That's a serious m like that's right.

Phil: Yeah.

So if listeners and viewers are interested in finding out more, where can they go to and what are the costs involved as opposed to going to a traditional financial advisor?

Vince Scully: We I created this business more than A decade ago now. So 2014 so we'coming up on our 12th anniversaryose to fill that gap between the completely throw yourself at the mercy of the winds and take a punt or pay an increase in number but it's six or $7,000 a year now goes up every year and we'll only go up further as the number of advisors falls and we're going to see another drop off in January when the education final tranch of the education requirements kick in and the number of people with money is growing. So next year or the year after is peak 65 year old. I don't know if you realize that film I think 2027 is the year there are more 65 year olds in Australia than ever before or since. Looking at unless we start encouraging

00:45:00

Vince Scully: family reunions it'd be the biggest for a very long time. And so uh, there's fewer and fewer advisors. So if you're running an advice practice well what's the logical thing to do is you just keep cranking up the price until you price away the excess demand. So you can deal with 80 people at $1.20. That's probably better for most people than dealing with 100 people at a dollar. And so we wanted to fill that gap where people without a million dollars or half a million dollars could get sound advice that's not tainted by ownership by a bank or super fund or insurance company. So sure you can go and talk to a superund advisor but they're not necessarily all that much cheaper and they're generally limited to dealing with the funds products for obvious reasons. And so we need to do a few things. Technology was really important for that and having a very clearly defined manifesto around how we deal with insurance, how we deal with investment. So our investment philosophy is on our website you can go and look at the 10 guiding principles that guide everything we do when it comes to investment. It's heavily evidence based and it's technology supported and we pass on the savings that come from the technology. So if you wanted to buy a liferiipper invest portfolio it's.65% a year on top of the underlying fund manager costs and out of that 0.65 openly invest keep 0.25 and payoff 0.4 that's as cheap as it gets and you're getting market leading performance over a very long period of time. Now we've been providing portfolios built using this methodology for over a decade. So there's a decade of they may not be open invest for a decade but we have a decade of history and a uh, further decade of backte testing. So the evidence is there to support them and that's how we do it. So if you wanted to get your super reviewed, we charge you $1,500 for that, which is probably the same as Venture EG was keeping. But they were paying another $3,000 to the market guy and that's not helping the consumer. So that's our goal. I've been doing this for a very long time, as you can tell from.

Phil: My hair and also lack of lamb. Well, I, um.

Vince Scully: No Lambomb. No, I do drive.

Phil: Just read. Actually, I was just reading on the.

Vince Scully: Long way down from Al Lambo.

Phil: Okay, well, very common, very common. No, I was just reading on the. I was reading on the weekend about the new Ferrari, the F80 I believe, which is worth $7 million. And Lewis Hamilton got scaredd driving it. And there's already 20 orders from Australia. So I'm just wondering how many of those orders from the funds management industry?

Vince Scully: M Probably very few. I mean, as you probably know, I spent a fairib bit of time at Macquarie in my past ande it's got this reputation as the millionaire factory Bute Factory Y that parking lot did not have that many exotic cars in it. Certainly nowhere compared to the Anderson Consulting car park which obviously is now Accenture. But that's where I was before Macquarie. Or you drive up to the MAA hospital and look at the doctor's car park or the San. Yeah, there's some very expensive cars there. Money that personally I would never spend. And I can certainly commend reading Fred Sched's book. Where are all the customers? Yachts. And I guess in the context of this we should be going, where are the customers? Lambos. Not sure my body's up to getting into a Lambeo anymore.

Phil: Oh, I know. They're so hard, those supercars to get in and out of. Don't you find?

Vince Scully: Every time I've bought one, I found it very hard to get in and out of.

Phil: I know. Vin Scully, thank you very much for joining me today, Muskeatel.

Vince Scully: It's been great, great chatting about this, um, saga, which has a long way to run. I'm sure that you and I will talk about this many times over the next few years before this all comes to fruition. And you know, clearly there's a lot of people here in a lot of.

Phil: I think so, yeah. And we don't. Yes. We don't want to make life that.

Vince Scully: Obviously, ah, these are life changing. Losses for people. And you know, it might look smart on the 7:30 report or on the front page of the Finn Review, but these are real people and this is their retirement savings. And as a nation, as a sector and as a profession, we've got to acknowledge that they've been let down. And that is terrible. But that just should not happen. And people need to bear the consequences of their actions, many of which may be legal

00:50:00

Vince Scully: but are just outrageous. And the sad thing, I guess if I just leave. Just leave.

Phil: Thanks very One final sor Go on.

Vince Scully: And possibly the worst outcomer is that more and more people are going to see that 1% of scoundrels and not take the advice they need. That's what we've got.

Phil: And PA paint the whole industry where.

Vince Scully: They will be worse off for that. But it is sort of understandable. And so, uh, learn the red flags and don't let the behavior of, uh, others ruin your retirement like they've ruined other people's. That's why.

Phil: Beautiful final words than Phil thanks for.

Phil Musatello: Listening to sharesfor beginners. You can find more at sharesfforbeginners.com. if you enjoy listening, please take a moment to rate or review in your podcast player or tell a friend who might want to learn more about investing for their future.

00:50:53

Any advice in this blog post is general financial advice only and does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs before acting on the information. If you do choose to buy a financial product read the PDS and TMD and obtain appropriate financial advice tailored to your needs. Finpods Pty Ltd & Philip Muscatello are authorised representatives of MoneySherpa Pty Ltd which holds financial services licence 451289. Here's a link to our Financial Services Guide.