by Erika Jonsson Catherine Robson is the founder of Affinity Private, an award-winning financial advice firm. She writes for The Age and Sydney Morning Herald and also has her own podcast, Success Stories. Catherine won Money Management’s award for financial planner of the year in 2010 and is a director of Scale Investors, a female-focused angel investor network. She spoke with Six Park head of communication Erika Jonsson about her financial journey and approach to money and planning.
What’s your earliest memory of money and its importance?
I vividly remember going to do the grocery shopping with my mum when I was 11 years old – we were at the front of the queue for the ATM and there was no money in the account. As we were driving home empty-handed, my mum told me: “Women are only ever one husband away from poverty.” That was really pivotal for me in my journey to financial independence and why I became a planner. The desire to have my own choices is a really strong driver for me.
I also remember that my dad used to apply quite corporate principles to our education and incentivise success. Dad used to pay us pocket money quarterly and would double whatever we had left at the end of the quarter to encourage us to save. It was some time before he discovered that I was borrowing money from my friends shortly before the conclusion of each quarter to maximise my payout!
Now I have kids of my own and, as a family, we try to incentivise outcomes rather than activities. For example, weeding the garden. We don’t pay an hourly rate – we pay for a weed-free garden and it’s up to them to manage themselves to achieve the outcome. That helps them think about problems and potential solutions quite differently. Increasingly the people who succeed in the changing world of work will be those who can identify problems to be solved and design creative solutions.
Who took more responsibility for money and finance in your household?
My dad took more responsibility for money in our house, but there were tensions at times. My parents typified the Australian money experience. They were squarely middle-class people but there was conflict around the approach to money. If you look at surveys (see page 11 of the Relationships Australia survey in link) about why marriages break up, tension around money is one of the primary drivers for divorce.
Over the years I’ve advised many different people with different levels of financial wealth. There’s often an assumption that people with more money have less financial stress, but that isn’t always the case. Sometimes the more money you have, the more it can magnify your problems. People need to feel they have choices and control over their lives.
One of the things as a society we don’t do well is see financial acumen as a core life skill. We’re reluctant to talk about money – but money is a tool to providing choices, so it should be valued as a life skill. And it doesn’t have to be complicated – there are some really fundamental principles, including behavioural principles, that have the power to change financial outcomes when they’re well understood and applied.
What was your first investment?
When I was a teenager, my father bought my sister and I some shares in Newcrest Mining – it was probably about $500 jointly. That was about the same time that Apple floated and I think sometimes about how different life could’ve been if my dad had invested in Apple! The Newcrest shares are now worth about $1,500 but Apple would be worth many millions. That was my first experience having ownership in something.
My first personal investment would have been the minimum allowable investment in the first Telstra float when I had finished university and was working at Macquarie Bank. With the profit I made on that investment, I opened a managed account and added to it every month, and eventually that became my first home deposit. The discipline that comes from putting a regular amount aside is really powerful – you can bind your future self by putting an amount away regularly, and you never notice it if it’s gone before you think about it. It’s amazing how much your mindset and commitment influence your action.
You worked at Macquarie and NAB for many years – what motivated you to start your own business in 2011?
Firstly, I felt there was a tension between product manufacture and advice. I come from a legal background, so fiduciary duty and putting the interests of the client before your own is very strong, and that created tension at times while working in the banking sector.
Secondly, I’d been at NAB for 11 years and realised I was in danger of becoming a disengaged worker. I actually believe that work is an amazing opportunity, and I didn’t want to be just going through the motions.
Finally, there was a cohort of clients who, no matter how good their returns or tax position, just weren’t progressing. It was like Sisyphus eternally pushing a stone uphill – the more these people earned, the more they spent. I thought there must be a different way for that cohort, and that’s come about through behaviour management and behavioural economics.
There are a couple of clients who spring to mind as really great examples the advantages of the right mindset. They had retired shortly before the Global Financial Crisis with a clear plan and notwithstanding the substantial decline in the capital value of their investments they did not panic and stayed on course. In the years since they have travelled widely and provided financial support for their adult children with more than enough income for their needs. They continue to be surprised that notwithstanding their drawings, their portfolio is now worth substantially more than when they retired. I know that they will be just as able to navigate the next downturn the same way.
Another couple committed to staying in the same house they’ve always lived in, being prudent with their money and continually reinvesting in their portfolio – so many people move up to a more expensive house or car or holiday option. Their portfolio has more than tripled in value in the last 10 years and they’ve been really happy in their approach to the way they live their lives. That’s very rewarding to see.
How do you think the Banking Royal Commission will affect the way financial advice is delivered? Are we seeing this already?
From my perspective I was quite sceptical that the royal commission was required. I have been proved wrong and it’s been quite painful to watch the egregious breaches of trust that have been committed by some members of the industry.
The Future of Financial Advice (FOFA) reforms were a fundamental shift for the financial industry, but there was a real complacency to applying them and a belief that the status quo could prevail even though the rules of the game had changed. My hope is that we’ll see a much greater focus on conflict of interest. I think technology will play a huge part in industry change – not by replacing financial planners but by helping them. As a financial adviser, ultimately your job shouldn’t be to make decisions for your clients but to empower them to make confident decisions for themselves. Technology is also helping more people to invest, because your commitment can be smaller and you can build on it. Many people think about shares as really risky, but when you think about the level of risk involved in borrowing to buy a $750,000 house, that’s massive. Becoming an investor is very empowering because you can educate yourself as you go.
Have you noticed any major differences in the way women and men invest? Is it the choices they make, the information they want, their comfort with risk?
Studies show that men tend to overtrade and have higher costs – women tend to stick with a strategy once they’ve chosen it and they’re not concerned with frantically moving in and out of the market. That’s a valuable point of difference for women.
When did you become involved with female-focused angel investing network Scale Investors?
I joined Scale as a member 18 months ago – I’d been keen to join for quite a while but I knew that I didn’t have the time I wanted to give to be able to get the most out of the experience and offer the most of myself. The learning opportunities have been huge. Being able to help deliver Scale’s online learning program, which shares the secrets to successful early stage investing from some of Australia’s most experienced investors, has been remarkable.
Scale is the first environment where I’ve really seen women talking about money openly and pulling investment options apart. I’ve been a personal finance professional for more than 20 years, but my friends would never ask for a stock tip or investment perspective, whereas my husband’s friends will comfortably talk to me about those things at a barbecue. I would love to see women becoming much more comfortable sharing their knowledge and experiences.
What do you think are the biggest challenges for the female-focused start-up industry?
Access to capital is clearly an enormous issue for female entrepreneurs. Statistics show that women find it harder to access capital even though their businesses tend to be more profitable. At Scale, we try hard to be aware of our biases when considering a business proposal and we will only invest in a business if it is female-led or a genuinely gender-diverse team. I’ve also noticed that male entrepreneurs get asked about the upside of their business, while female entrepreneurs tend to be asked about the risks associated with their ideas. The start-up scene would really benefit from more women.