Hello and welcome to the RAS Network. What you're about to hear and see is limited to general financial information only. Please be sure to speak to your financial planner or refer to our financial services guide available at rk.com/FSG before acting on the information. Grant, thanks for taking some time to join me in the studio.
No, thanks for having me.
Today we're going to talk about your, I guess, style of leadership, your ability to lead corporate teams, the rituals and things that you incorporate into your daily routine, and something that, in hearing different interviews with you through time, the focus on insurance bonds is something that is very unique and something that you talk about very well. So we'll spend a lot of time on that because our community are really interested in this, particularly with changes to superannuation laws and these types of things. Before we get into that sort of thing, I would like to know how you came to be in the position of CEO of Generation Life/GDG, which is listed on the ASX.
Yeah, I guess that journey, you know, like any journey, has its ups and downs. People kind of see you in a position, whether you're winning Olympics or you're being CEO of a listed company, and they kind of just see you there. But, you know, for me, I was always very ambitious in business, probably even more so than sport, which I know a lot of people find hard to believe because that's where my profile really comes from. But I always loved business. I always loved financial markets. I've been trading shares since I was a teenager. Have always enjoyed investing. As soon as I was going to finish swimming, I already had my job lined up in finance, which was going to be at Westpac and Bankers Trust. Five years out from that, I had a conversation with two major CEOs of large banks here just to work out what should I be doing now to get myself in a great position to transition well. So I've always been a bit of a planner. And as I moved through the different positions, I think the one thing that did come naturally for me was the leadership style more than anything else. You know, I was captain of the Australian swim team, the Olympic team, and for me, I always cared about other people's performance. And I think because I was genuine about that, that often came back into my own performance in terms of support from other team members. And I was always looking at ways to not only improve my own performance but the people around me, and I was always heavily invested in that. And that just didn't change in business. So for me, once I got into a management position, it gave me the opportunity to work with people. It also gave me the opportunity to incentivize, drive, and inspire people to be better than what they think they can be. I never sort of carry that lightly. So for me, those basic sort of underpinning values or drivers of performance is something that I've been able to really get from sport over many, many years, probably two and a half decades of sport, you know, ever since I was four, I first started swimming and doing other sports as well, and really take some of those fundamental principles into business and drive that. And eventually that's found me into a position where I love to be accountable. And you're no more accountable when you're the CEO. Everything good and bad rests on your shoulders within that business, and I like it that way.
Yeah, it's something that, in researching your history and the way you've gone about things, it's very much about accountability. When I spoke to my wife about catching up with you today, there was just something that resonated with her, was the amount of attention to detail, the continuous, relentless focus, and how you have to get up every day, swim early in the morning, test yourself, continuous improvement, and then have that play on in other respects of your life. But there was one follow-up that I wanted to insert here, was before you became CEO, that kind of fateful meeting that you had with the two fellows that were involved in the financial services industry, if I'm not mistaken. So that was a particular meeting that ultimately led to where you are today in some respects, because Rob, who's the chairman, if I'm not mistaken, said to you something along the lines of, 'You do this sales role, and if you're good at it, then we'll see what happens.' Do I have that correct?
Yeah, well, in part. So the meeting that I did have, the lunch that I had with the two CEOs, was Rob Kumso, who's now my chairman. The other person there was Tim Bishop, who is the CEO of Macquarie Bank in the US. So I had lunch with them, which I was very fortunate to be able to have that sort of exposure at that level, just because of my sporting career. Rob, when we came into this business, so I ran a lot of his growth assets at Westpac eventually, so that was kind of the first half of my career. And then once we joined this company, he sat me down. He knew I was really strong on the sales side, and I'd run other areas in distribution and marketing and, you know, people leadership at Westpac, and run a very, very big P&L, even bigger than the P&L that I've got today at that bank, which is easy because you're talking telephone numbers in those sorts of places. But basically said, look, if you're able to get a decent sales uplift here and get the team humming, then when I step back from executive chairman to non-executive chairman, I'll put you in as CEO. So there was a big carrot there for me. It's quite funny. I loved the thought of that opportunity, but it's not what drove me each day. It was actually the deep sense of purpose and getting the result in sales that was actually where my focus was, which is probably what it should be. Like, as an athlete, you always learn it's all about process. Yes, the goal's there. Yes, we all want to win. But at the end of the day, you've got to be able to execute the next step, and my focus is always on the next step. So I was focusing on what sales looks like today, the amount of activity that we've got going, the structure that we've got in place, how we're actually selling, positioning our products. You know, I found a lot of the salespeople were trying to do steps, you know, one to seven in the first meeting instead of just doing steps one and two, which is really all that the advisor or the potential customer could digest. So we really made that a real science within the group. We also made sure that the art of sales and building relationships was also critical. And then at the end of that year, we had our biggest, you know, sort of sales year ever in a 15-year history of the business, and we were up 72% from the previous year. So that was good enough to get the job then.
Well done. It reminds me of the book by Seth Godin, 'Permission Marketing', which is, you know, one step at a time. You don't go to the bar and ask the lady to, you know, marry you on the first, in the opening stings, right?
It's exactly right. It's a great analogy. And, you know, of course, yeah, I want to be married. I'd like to be married because I feel like I'm more of a family man. But if you haven't got a girlfriend, you've got to start somewhere, and probably just saying hello to someone is the first good step.
Yeah, that's great. So coming back to that transition from professional sport into, you know, finance, which you were already doing because of these things that you had in motion, and you were, as you mentioned, you were trading stocks, which we'll come back to in a minute, I'm sure. But you said something in a podcast, I think it was with the Howie Games podcast, I think it was, you said something that your dad would say, which is, 'retire to something, not from something.' Can you explain what you meant by that?
So, well, as an athlete, it doesn't matter how successful you are financially, how well you do for yourself, the fact that you're retiring around 30 years of age, you should be retiring to something else because life is not about money, life is about purpose. You know, how many people retire then, you know, within a few years, you know, something bad happens in their life, or they're just not as happy as they once were, or people retire too young and they probably needed a break, not to retire and sort of be in the exit lounge for the next, you know, 40 or 50 years. Particularly as an athlete, you've got to find yourself in that situation. So, you know, it was always a bit of a mantra in the family that, you know, study was important, having a career outside of sport or beyond sport was important. And for me, it just came naturally. I made that statement that I actually enjoy business probably more than I enjoyed sport. I really enjoy business. I love learning all the time. You know, once you think you're on top of your game, there's always something to give you a quick lesson. And there's always new opportunities, there's always new challenges that present themselves. And I really enjoy immersing in all of that and seeing what we're doing at the moment. So for me, that transition was easy in the sense that I knew I wanted to do other things. Now, the difficult part about that transition is you go from being, I guess, what you could arguably say in a sense is like a global CEO, and something like I'd been undefeated for 11 years in my pet event. I'd won every major championship there was to win and broken, you know, 15 or 16 world records or something. And so I was right at the top of my game. And then I went into Collins Street on a Monday morning and I wasn't the best at the table, I soon realized. And, you know, you've got to eat a lot of humble pie. You've got to start learning off other people. You've got to realize that, yeah, you don't have any skills in this field that have got to offer too much value right now. Probably the leadership side and driving performance side, I certainly was able to add value there very quickly. But understanding the product, the services, the customer value proposition, where the opportunities sat within the group that would align to my type of personality and execute really well in the marketplace, all of that stuff I had no understanding of. But as soon as I realized that, the sooner I was able to actually do something about it. So I went out there, I did my MBA, and I got first-class honors there because I, you know, worked really hard with all of that. I was very determined, like my sporting career, to have an impact on what I was going to do next. And yeah, those words that were shared by my father and just the way it worked within my family, full stop. It was, yes, sport was big. My brother was a world champion in sport as well, so it was big in our family. But we knew it wasn't the only thing, and that'll certainly be the same for my kids if they ever show any sort of sporting prowess or want to pursue something in that respect.
Yeah. One of the things that seems to be quite apparent is this idea that you're setting goals for yourself and for your team, no doubt as well. I'm obsessed, and I ask most people that come in about rituals or routines that they incorporate to help keep that momentum, to focus. We had a CEO on a couple of years ago who said this wonderful line, which I've always thought of every time I speak to another CEO, you know, 'ideas are cheap, good execution is very expensive.' And so we can all have these ideas of, like, we set a goal, whether it's a financial goal, whether it's a lifestyle goal, whether it's a business goal, but then how do you actually put things in place to achieve that? So take this in whatever context you want, whether it's sport or whether it's business or both or life, whatever.
Yeah, often enough in business we're normally dealing with problems. Problems and opportunities are probably the two biggest things. And in sport, it's very similar. You're dealing with a problem: are you sick, are you ill, is a competitor too good, too far ahead or too far behind, what's your weaknesses? But the opportunities: the Olympic Games, the Comm Games, World Championships, breaking that world record. In business, it's being number one in your field, selling more products than your key competitors. Obviously, if you're listed like us, it's having a share price that's, you know, sort of consistent with the results and the business and the opportunity that people see and the capability of management there. So, you know, problems and opportunities are going to be there at the forefront of you. And if they're not there, it pretty much means you're dead. It means you're not doing it anymore. So for me, I really look at, you know, whenever there's even a big problem, I always put it into the opportunity bucket very, very quickly, and I get very focused on execution. You're 100% right, that's where it all is. So you can have a lot of grand ideas, and guess what? Some of them are going to be really good, some of them are going to be pretty average. Know the average ones quick, and as we say, fail fast and move on and learn from it, and then, you know, start capitalizing on the new opportunities. It was like us within our product here. A good example of that was we were trying to open up our distribution a little bit more. We were investing in the distribution side of the business because we knew that's where all the execution happens. We knew we already had a pretty good product that just needed a little bit more refinement. We thought we'd go direct to market instead of through just financial advisors. Spent a lot of money, a lot of time, realized that the thousand phone calls that we got through client services that then upset all the advisers that were already supporting us, and then we only made three or four sales, probably wasn't a good idea. So we canned that. We said, okay, we're really going to focus on the intermediary channel, the financial advice channel, and we're going to build everything around that. And now, you know, if we look back when we first came into the business six or seven years ago, we had 451 what we'd call active advisors, and we've got now close to, you know, getting close to two and a half thousand today. Over the same period, you know, that whole advice industry obviously shrunk around 40%. So that's something we're very proud of. So we knew where we needed to do business. Then we needed to create a compelling proposition for them to look like rock stars to their clients, because that's the point. At the end of the day, they're trying to get the best solutions for their clients because they're delivering on top of an emotive outcome. You know, this is my objective to send my kids to this school or retire like this or have this sort of lifestyle. They're not worried about money, they're just worried about what money provides them in terms of their own goals. So we made sure that we absolutely align to that with everything we built around it. So execution is absolutely where it is at. You've got to know the problem that you're solving, and you've got to have the right people behind you to do it. They're all the real critical parts of leadership, and you're going to fail in some areas, but recognize it. Don't continue to throw good money after bad, so to speak. Just cut it, move on, and do that quickly. And don't get too down on yourself. We all get—we're good at beating ourselves up as humans. I'm great at it, so don't get me wrong. This is something I have to tell myself. But ultimately, there's going to be successes and failures. But the sooner you can move through those, either one of those—don't stay on your successes too long either, because it will become a failure shortly after—is really important, just to keep moving forward, good or bad.
Yeah, fascinating. I love that idea of, like, killing the idea really quickly. We had Brian Hart, former CEO of Westpac, on the show not too long ago, and he said, make the hard decisions early. And on the capital allocation side, I'm remembering a conversation that I had with Steve Johnson, co-founder of Forager, in 2017. He's obviously looking for different companies to invest in and what have you. And he said something: get to no as quickly as possible, get to yes as slowly as you can. This idea that if it's a bad idea, recognize that immediately, move on, you know, no harm done, find the good idea.
Yeah, correct. You've only got so much capital as a business you can invest in, if you know, and even your gut a lot of the time will tell you very early on that you're investing in the wrong area. And there are some things that you know you have to stick with as well, which can be really hard because there's a lot of areas telling you no, but there's a lot of yeses, and intuitively you believe something's going to work. And that's not to do something blindly, that's not what I'm saying. It's just that you could be a little bit too early for that opportunity. And if you can manage the expense side of it, if you can be smart in terms of the way you execute it to know that that opportunity is going to come forward at some point, then I think that's even a harder area as a CEO to stay high and mighty on when people are questioning you too. And we all see that there's a lot of great stories, you know, from some of the wealthiest people in the world where they've had to stick at something for a while because they've believed in an idea. So there's that element too. But you do, I think, you see pretty clearly where the areas of failure are. And sometimes the failure is not necessarily the product or the market that it's in, it's the way in which you're marketing the product that could be the area of failure. So failure is not necessarily this big category that everything within that category means failure and we should stop it all. It's an element of, okay, we've got a really good product, we know there's a market for it, we know there's demand for it from, you know, maybe retirees or people building their wealth, whatever, you know, your sort of certain area is. However, we're clearly not positioning it well, they're not understanding it, they're not gravitating towards it. So change and pivot from that area quick, I think, is really important as well.
That's, and that was illustrated through your example before as well. Where did your passion for finance and investing come from? Because I've heard you say before that you bought, and I think you mentioned earlier on, you bought stocks when you were a teenager. Not a lot of people do that, Grant. So where did that come from?
I don't know, because my dad's a police officer, mom's a hairdresser. So dad was a detective. He was a savvy investor though, but mainly on the property side. But yeah, for me, I can honestly say when I was five or six, apparently I was running around to my mom saying I wanted to be an entrepreneur. So I always had this interest in business. Anyone that I would meet along the way that I knew was in business, ran a company, or, you know, was very successful, I would ask them so many questions, it was ridiculous, because I just wanted to know how they did it. I was super curious, and I still am today, like, what makes them tick, what drives them, what are they doing in their business that's really exceptional that I'm not doing in the business that I'm running? Like, I want to understand that to be able to make it better culturally, make it stronger around its performance, and make it more interesting for people to want to join and stay as a part of that organization. So, you know, for me, there's always been this, probably, you know, success is something that I've always enjoyed. Like, I love winning. Like, I've just been like that. So if I'm going to go into a field, I definitely want to win. But if I'm passionate about it, I'll kill myself trying to do it. And that's me. And that's probably a weakness of mine too. Sometimes I can get very narrow, you know, very narrow-minded on my focuses, and I can sort of, you know, push through illness and sickness and other things and not take rest where I should. Always been a weakness of mine in sport and in business. I always overdo it. I think, you know, doing, you know, four or five flights in one week with 500 meetings is perfectly normal and sustainable. So, yeah, there's always blind spots that we all have that we've got to have some awareness around and make sure that we manage those effectively. But I just love it. Like, I just enjoy it. I enjoy transactions. I enjoy, you know, the opportunity to be able to take something to market, to help people. I find, you know, would I sell these products to my mom? Like, it's always the mum test that I do whenever we're creating something new or building in a new feature for one of our products that's going to make a significant difference to someone. I always do those tests on things. So, yeah, there's just so many elements about it that I really enjoy. And for me, just being in somewhere where you're creating value and driving something and delivering something and trying to do things that people can question you on as well. Like, I always love that. Like, I know a lot of people, in essence, you know, when someone's critical of them, it can often stop them or inhibit them or hurt their confidence. I've always used it. You know, I've had many great athletes, even coaches, say when I was coming up through the ranks that I was never even going to break 15 minutes for a 1500-meter freestyle. Or someone very significant, who we all know, I won't mention their name, said I would never break this world record of Kieren Perkins in the 1500. I managed to go under 15 minutes by 26 seconds and break his world record by 7 seconds. So I just used those things, and I had to use them for years because they took a very, very long time. But, yeah, you've got to use the people who've got to question you, and you've got to, you know, be appreciative of the support as well along the way.
In the pool, you would have been able to have, you know, a timer that says you did this, and you'd be able to get instant feedback. What do you wake up each day as CEO, what do you wake up each day and check to see progress? Like, to make sure, or even if it's not each day, maybe it's every month, every quarter. I know you put out, like, the CEO's letter, you get updates if you're a shareholder, and people can check them out on the ASX. But what do you look at?
Everything that's measured in the business, I try and look at each day. So I'll look at how sales are tracking. I'll look at the start of the week, what are the productivity measures saying. I'll wake up, I normally try and exercise before. I normally get all the call stats coming through, like how many calls do we get, longest sort of call time weight, average call time weight. I'll often question things if it's not good enough, or if there is a spark in volumes or volumes are low, I'll, you know, sort of source the feedback around those sorts of things. So, yeah, there's a lot of little things that you're looking at in the business. There's another thing that both my chairman and I really subscribe to is just what we call an operating rhythm. In sport, I would have called that preparation. What are your training schedules? What are your big rocks that you can't move? You know, that gym session, that critical endurance session, that sprint session over here, all that sort of stuff. But in business, it's things like, okay, how often should I be catching up with my team? What should be the objectives of that catch-up? What are the two or three things that we need to know about? What are the current issues, you know, bubbling along within the business? What are the people issues? What's the feedback from the market? So you have those sorts of forums, and you have your one-on-one, of course, with your team just to see how they're tracking against their deliverables. Yesterday, for example, we did our, you know, we're in Q2, we did our, you know, I always get the team to do what worked well, what didn't work so well over the last quarter, and what are our objectives for the next quarter. So we might have a strategic plan, we have a clear, I guess, clear definition of success and failure within each of those areas against the strategic plan, and then obviously I own that from a corporate point of view, and I make sure there's, you know, no more than two or three key numbers that really matter and roll up to that. So we check in, how are we scoring ourselves against that? Are we aligned as a team in terms of our deliverables next quarter? You know, you're talking sales, marketing, fund operations, finance, you know, administration, client services, product investment. So a lot of different teams doing a lot of different things. You're all aligned right now, but tomorrow when we wake up, we're all thinking. So you've got to have a leader in there that makes sure that get that alignment amongst your team members. And some people can just have a tendency to move on to the next thing too quickly before they've executed one thing really well. So you've just got to, the job there around the operating rhythm is to keep everyone focused on the same goal, to make sure that we're all heading in the same direction, and any problems or issues, which happen every single day in business and life, that we're addressing as soon as we can to make sure they don't, you know, have a big impact on what we're trying to achieve effectively. But that operating rhythm's critical, and having hard conversations is as well. I like to think that we invest more than just money, we invest time and energy into things.
Grant, you mentioned there that rhythm, it's really important. Reminds me of, like, a Gino Wickman book, if you're familiar with Traction. It's something that I wanted to ask you, which is, so you've got 300 people, we were just talking off across the various businesses that effectively, you know, you're responsible for and you're accountable to. If something needs to be fixed, how do you structure your days? You fly all over the world, across the country for different things. You're here today. How do you sit down each week and go, okay, I've identified that the call wait time was too long, or this is a persistent issue, I want to focus on that opportunity. How do you maintain that focus amongst all of the problems, which you said before, the chaos that can come with running a business of that scale?
I don't think you need to go into a huge level of detail if you've got a good structure in place with good people and good leaders in place, and different leaders for different eras of the business too. Is it in a growth era? Is it in a maturity era? Is it a problem era where we've, you know, had a regulatory issue that we've had to fix up? So what is a style of leadership that you actually need within the team? That's always important to critique, review, and make sure that it's doing everything that it should be to be as effective as possible within that position. So you've got to trust that. So as a CEO, you know, as I said to my kids, they ask what do I do for a job, I just say I talk. That's all I seem to do. But it's making sure, one, all of those leaders are held to account against those deliverables. And if there is a problem in a certain area of the business, that's when you get into the weeds as a leader. I really want to understand it. I want to do it. I want to understand the thematic around this consistency of, say, this customer complaint that we're receiving over here. What do we need to do to address it, to fix it? How are we going to prioritize that on the projects list? Is it human error? Is it something we need to automate from a straight-through processing point of view? Is there something fundamentally wrong with this part of the product? So, like, what have we actually got to fix? Who's going to own that? How are we going to check in against the milestones that need to get from where we are today to where we think it's going to be absolutely sorted? So you've got to make sure that you spend your energy wisely. You know, how often are you getting out there and seeing customers? How often are you sitting down beside a team member, understanding what are their processes like as part of their role each day? So all those little things that you need to be doing on a consistent basis. And then, yeah, like, what's important today is going to be different to tomorrow. And then, you know, when you're in my position, not only are you looking at BAU, you're also looking at, you know, potential mergers and acquisitions. You're also dealing with all of your stakeholders, such as your investors, which is a big one. And so you've got all these various parties. You've got multiple boards that need to be managed. So there's a lot of different conversations that you need to be having, and they've got to be consistent in terms of what you're doing as well. You know, telling one person one thing versus another what our focus is. There's got to be absolute transparency and honesty within a business, and I think that's really important that all conversations are very forthright as well. I don't try and manage to people what they want to hear. I try to manage them with what they need to hear, and I think that that fast-tracks a lot of the processes within the business as well. So, yeah, I do have that operating rhythm in place to be able to do all of that. And if there is a problem and I need to go, you know, deep dive into one of those areas, I absolutely will. But at the end of the day, the biggest part of my job is making sure that everyone is clear on what we're trying to achieve and that they know they're 100% accountable to that, whether it's good or bad, and they'll get rewarded or, you know, there'll be other consequences if it's not favorable.
In interviewing different CEOs and different, just different people over the years, I've come to realize that that is not very common, that idea that a CEO or a leader, it doesn't have to be the CEO, it could be anyone, drops down into the, like, below the hierarchy and says, what is this core problem? Like, I need to get my hands on this problem to see what it actually is that everyone keeps telling me about. A lot of leaders often just kind of just sweep it under and they just keep going.
You can delegate, but you can't abdicate. And if there's a problem in your business, it's on you. So you better get down and understand what needs to be done. And then once you understand what needs to be done, make sure you get the right people in place to be able to manage it. Make sure you have the right check-ins and operating rhythm built specifically around that. And then if you have to put it into what we call situation management, where you're basically checking in on every single day if it's severe. You know, there's things like TMDs, DDOS, like the regulator can come down quite hard on these sorts of things. And I'm very clear with our team: be proactive, see what we learn from others that have made mistakes around this, because it's new legislation only from a few years ago. So let's keep updating ours to be relevant, because a stop order comes into your business, you can't sell your products anymore. So that's something that you really want to be proactive in. But that's an example of a problem that I know has happened in other business where everything stops. And as a CEO, if you're not down and very deep with that, and if you haven't got the right, you know, business continuity plans or crisis management plans in place to manage those sorts of things, you'll find yourself in trouble for much longer than what you perhaps needed to be. Those sorts of things, we should never be in trouble. We're very planned around those sorts of things. But at the end of the day, there is some elements of business which you can't control as well, which, you know, things like going into COVID, going into lockdowns. Like, we had the BCP set up, the business continuity plan, and then we sort of dusted off out of the drawer that, you know, we updated each year. We got to test, you know, all of our technology. We've got to review a lot of our processes. For a few days, we had half the team in the office, half the team working from home before working from home was mandatory, just to test to make sure that everything worked. And then all of a sudden, it got bad very quickly. Markets were going down up to six or seven percent in a single day in March 20. We manage billions of dollars of investors' money on an after-tax basis. There's things like deferred tax assets, which are intangibles inside those funds. So that's an area where I got in very, very quick with our appointed actuary to make sure that that was done so no investor was disadvantaged. I think my head of investments didn't sleep for five days through that period, but we did everything spot on. We had good help, and I made sure I was across all the level of detail. So there are just a few sort of examples where you do need to get into the weeds, and sometimes you've got to get into the weeds just to support your people that are already in there, you know, sort of fighting the good fight. You've got to be right behind them.
One more question on this before we move on to insurance bonds, which is a very big focus of this because it's what our community really wants to know about. When you have the BAU, so business as usual meetings, do you use like a traffic light system or anything like that to push, like, what is important to the surface quickly, or do you use anything like that in your rhythms?
We do. We have a dashboard, so that has a traffic light system. So, yeah, so that's basically on a monthly basis. If, you know, something's a little bit more serious, and, you know, we have, like I said, our weekly Monday morning check-in with all the executive team. And, you know, the objective of that meeting is to discuss anything that came out the week before that everybody should be across, issues, or anything that we need to have a deeper understanding of that we've got to collaborate as a team to be able to work on, any people issues on top of that. And then what are we executing for the week to, what are the key focuses across some of the areas. And, you know, more often than not, if there's pressure points in the business, that's the opportunity for people to bring it out, and that's the opportunity to ask for help as well. We're in a team, so, you know, even if it's something that you don't feel like absolutely critical, but you're struggling a little bit, that's the opportunity to say, hey, this is a pressure point of my area, or my people can't absorb this. I need to, you know, product's got to work better with marketing on something, or vice versa, they might need product to come in and give them a little bit of a hand. So, yeah, those, we have the traffic light system, but that's more the formalization of how things are tracking throughout the year, really, when people are sitting there articulating, you know, what's going on within their business as part of that normal operating rhythm, that traffic light should be spoken about before it gets to the red.
Yeah, okay. So, insurance bonds, you talk about these each and every single day. I'm going to ask you to set the scene however you like. I figure maybe there's analogies or examples or however you want to break this down, because I'm imagining someone has just tuned in for this moment right now, Grant. They're like, what is an insurance bond?
Well, we call it investment bonds, so we get away from that word insurance, because it is an investment. The best way to articulate what an investment bond is is that it's an after-tax paying structure. What's like that? Well, superannuation is. Superannuation has a maximum tax rate of 15%. We have a maximum tax rate of...
Regardless of your financial circumstances, of 30%, we work on revenue account, not capital account. So that means we can do things like offset capital losses against income. So therefore, our effective tax rate compared to another 30 cents in the dollar structure around tax is often much more effective across pretty much all asset classes. So it's a very compelling proposition, therefore, from a tax point of view. So we're investment agnostic. We put on 68 different options on our investment menu that you can choose from, or have a mixture of all 68, if you will. And then on the other side of that, what's another great thing about the investment bond, and this is where the insurance bid is actually quite good, because it's an investment-linked life policy, you actually get the benefits of the Life Act, which means, you know, for estate planning purposes, you have binding nominations. So for some reason you don't like your family, or you've got kids from a different relationship or marriage, and you've got a lot of money within your estate, you know it's going to be contested. These are a great estate planning vehicle because not one of these have been overturned. So we see a lot of wealthy people leaving for a child that might need a little bit more money just because of, you know, reasons within the family, but they know the other kids are going to be upset about that. So it helps for estate equalization because it doesn't go into probate or anything like that. If you want to set it up as a non-estate asset, you can do that. Other big benefit, again, is because of tax. So it's tax-free, 100% tax-free upon death, regardless of who the beneficiary is, whether they're a dependent or a non-dependent. So yeah, a lot of attributes towards an investment bond.
And the reason that we actually got into this space was because of those changes to superannuation in 2017, where they said, hey, the party's over in super now. We're seeing more and more of that. We got a cap on super. It wasn't meant to be a, you know, sort of tax haven for wealthy individuals or people to put a lot of money in there. We've sort of seen the amounts of money that have gone into the trillions of dollars that we see in that system now. And it was actually the coalition government that said the party's over. So they capped, you know, concessional, non-concessional, total super balance cap. We saw the Labor government in more recent times, which with Division 296, with the balance above 3 million, it was proposed legislation going to be taxed on earnings and the unrealized component up to 30% in total than that. And then you had that not being indexed, that threshold. So I think the narrative around superannuation is the party's over. If it's not this change, it's going to be some sort of other change. So people naturally need to look for alternatives. And I think a lot of advisers kind of had that set strategy with super, which was the smartest strategy, just to put all the surplus income in there, particularly when preservation age was 55, not 60 as it is now. So I think, you know, advisers now have got to look for other alternatives. They've got to be tax-effective when they're looking at investments. They've obviously got to consider estate planning because we're going to go through, you know, the biggest transition, intergenerational wealth transition that we've ever seen in not just Australia but the world's history. So it's a great vehicle for doing that. So yeah, a lot of things to like about bonds and to sort of package all those sort of tax benefits and estate planning benefits up. It's also credit protection as well. It's in the Bankruptcy Act. If you want to know section 1162D of the Bankruptcy Act, it does say insurance bonds in there are creditor protected. So yeah, credit protected, tax, estate planning. Yeah, I actually love the product. I've got them for all my kids as well. You know, it's going to be too expensive for them to buy a home one day unless they end up being Michael Jordan or something like that in sport. But yeah, I just can't imagine, you know, when my youngest two that are four and one, what it's going to be like, particularly in Sydney or Melbourne, for them to be able to put a deposit down on a house, not to mention all of the, you know, university fees and everything else around, you know, just living costs and having to save on top of that for what is it going to be, maybe five, six, seven hundred thousand dollars for a deposit potentially by the time that they get there, you know, in the next thirty years. It's pretty wild. So I feel like it's actually the responsible possibility of a parent to be able to help with that.
Now I've got so many questions to unpack from this because our audience would just love what you just said about super for so many different reasons. One is I've been saying for years that super is a great vehicle, but it's not particularly right now as we sit here in 2024, the end of 2024, with so many changes already in place and more proposed. People need to start thinking very honestly about not just what the system is now, but what it's going to be in ten, twenty, thirty years.
Correct. That's the big thing because the trouble was with these proposed changes, if you were someone who was twenty years away from preservation age, but you're tipping over that large super balance, you're paying the tax and you can't touch it, you can't move it out. So the inflexible nature of it is a big concern for a lot of people given those shifting goalposts.
