Peter Stanhope, Co-Founder of GigSuper

Nicholas Beames: 0:01

Today we're joined by Peter Stanhope who is the co founder of GigSuper. GigSuper is simplified super for self employed folk. We'll talk to Peter about how and why he started his business, who he's working with, and what their journey is going to look like. Given the concepts we'll cover in today's podcast may contain general financial advice, you should consider whether the information is appropriate for your needs. GigSuper is a corporate authorized representative of gross super FSL proprietary limited and full details of the license can be found on their website. But before making a decision, you should consider their product disclosure statement, which again is available on their website once they've launched and if appropriate to seek professional advice from a financial and/or tax advisor. So without further ado, let's say hello Peter.

Peter Stanhope: 1:27

Thanks Nick, that was quite an intro.

Nicholas Beames: 1:29

It is. It's the first time I've done an intro that sounds so serious, all these financial stuff.

Peter Stanhope: 1:36

If anyone still listening at this point after getting through all the legal mumbo jumbo.

Nicholas Beames: 1:44

So tell us , GigSuper. How did it start with who and why.

Peter Stanhope: 1:49

I grew up in a place called Healesville , which is about an hour out of Melbourne. My parents had a plant nursery up there, so they were self employed. And probably, like a lot of self employed people, I had it running through my veins and I always knew I was going to go down that path at some point. But you know, I didn't do that to begin with. I did the normal thing, finished school, went to uni , and went and got a job in a big corporate , in the share trading space. Did that for 10 years bit over that. Then as you do start a family and discovered that working in a big corporate and having a family aren't necessarily two things that go together. So at that point, I decided to make that move out and into the world of self employed.

Nicholas Beames: 2:44

How long were you in the corporate world?

Peter Stanhope: 2:47

Corporate world about 12 years altogether and don't regret it for a minute. Particularly in the world of financial services where there's so much regulation that sits over the top of everything you need to do. You could never do what we're doing today had I not had that really valuable experience. But it was basically started this some consulting business and when we started that consulting business as self-employed people, we started looking at superannuation through an entirely different lens. And when you start looking at it as a self employed person, I think it's fairly common that a lot of people find it really difficult. And so we decided to use that knowledge that we'd acquired in the online share trading space to really try and help self employed people to solve their retirement saving problems.

Nicholas Beames: 3:44

Tell me, with self employed people in Australia and superannuation, are there any anecdotal facts or evidence or background as to how many people in that space who are self employed that don't have super at all?

Peter Stanhope: 4:01

Yeah, at the moment it's about 1.3 million sole traders in Australia. About 20% have not a single cent in superannuation, which is incredibly scary for those people. And then the other 80% of people, they've got some superannuation, but the vast majority aren't currently making any contributions to that. That was superannuation that they acquired before they went out on their own and became self employed. Some of that stats are quite scary when you start looking at it. Although self-employed people make up around about 10% of the working population of Australia, but we only make up around about 5% of super contributions. On average, we're contributing half as much as what our employee friends are. And there's a cost to that. It's not just a financial cost to me , and I think that's obvious, but there's an emotional cost attached to that as well. I saw that with my parents.

Nicholas Beames: 5:09

Do they have retirement savings?

Peter Stanhope: 5:12

They were one of the lucky ones in that they had a business. And so the business was their retirement savings. But that still didn't mean that they didn't suffer from a lot of guilt and probably more anxiety, particularly over those last 20 years of their life. Because you don't know how much you're going to be able to sell the business for. You don't even know if you're going to be able to sell the business. And then when you're self employed, you're always only one lawsuit away from being bankrupt. And when you've got your retirement savings, some of your retirement savings on super are protected to a degree because generally, money inside super is beyond the reach of creditors. I think, as a side , when you look at the stats, a real problem but then when you talk to people, there's an emotional problem there for people. We just believe that's not right. Just because you choose to work independently doesn't mean you should have to suffer from that guilt and anxiety and you shouldn't need to be a finance whiz to save for retirement.

Nicholas Beames: 6:28

The app GigSuper. How's it work?

Peter Stanhope: 6:34

We're trying to provide a way to people to be able to solve this problem. The first thing we needed to do was understand, why does the problem exist? And to get one thing straight, Australia's superannuation system is not broken. It's the envy of most of the developed world. For an employee, it's fantastic. You start a job, you tick a box and then magically your superannuation balance starts going up every month. I don't think by any measure you can say that that system is broken, but from the very outset of superannuation, it was always conceived and designed as a way for employers to put money aside on behalf of their employees. And so for self employed people, the whole system was not really ever designed with them in mind. Why aren't they currently contributing to super? Well, nobody really focuses on them because they're all focused on that 90% of the population who are employees. But then they also don't understand it. Most self employed people, because super is voluntary and when you're self employed, you're the CEO, the COO, the CFO , and you're also the tea lady. And then when you've got something that's voluntary, it's easy and complex, it's easy to see why it gets, too often, put in the too hard basket. Then I guess the third reason why people may not be contributing to super is that when you're an employee, you know exactly how much money is going to be in the bank at the end of each month. Whereas when you're self employed, your cashflow fluctuates in line with the performance of your business. Putting money straight into super is really hard because once that money goes in, it comes out again till I get to retirement age. Designing a superannuation product, we wanted to help people overcome those barriers. That's what we've done with GigSuper.

Nicholas Beames: 8:42

Awesome! And physically , it's all app based? And if so, how does it work?

Peter Stanhope: 8:51

When you talk about someone wanting to save for retirement , when they're self-employed, the first thing you've got to do is you've got to help them understand it. And as the first super fund that's been built specifically for self employed people, we can communicate directly to them. We can use human language instead of stuff that looks like it came out of a legal disclaimer . To really break the key parts of superannuation down for them to help them understand it. That's the first part. The second is to help people overcome that problem of putting money straight into super. You might want to, but your cash flow makes it really hard for you to do. We've put a saver account in between. And the saver accounts, it's outside of super and that allows someone to be able to get into that habit of putting money aside on a regular basis, but with the confidence that if I need to get access to that money because the cashflow circumstances have changed, they still can. Otherwise, at the end of the quarter, we automatically sweep that money from their saver account over to their super account.

Nicholas Beames: 10:05

So they've got it there for the period of the quarter if they need it.

Peter Stanhope: 10:10

You've got it there for the period of the quarter if you need it. And then when we get to the end of the quarter , if they still want to have a buffer there then we allow them to set that so they can set up to a 10 weeks buffer. They can say, look, transfer everything to super at the end of the quarter with the exception of up to 10 weeks worth of savings. And that really allows someone to get into that habit of putting money regularly into superannuation, but doing it in a way that still allows them to get access to that.

Nicholas Beames: 10:41

So it gives them that sense of of comfort that, yes, as a self employed person, they're putting their money, their savings, their retirement savings into an account. But there's that buffer that they can take that back if they need to. But if they leave it there, even if they ask for a 10 week or put in the instruction for a 10 week buffer , if they do nothing at the end of that 10 weeks, it gets sucked into their super account.

Peter Stanhope: 11:11

Spot on .

Nicholas Beames: 11:12

All right . Okay . So it's super for dummies, but it's super 101 for people who need this type of help.

Peter Stanhope: 11:23

I'm a big believer in habits and it's about making that habit an easy one. And quite often, the hardest part of new habits is starting them. And once you've started it , it becomes so much easier and almost effortless. And that's the way we've designed the product, to make it really, really easy for some to start that good habit. And we believe that once you've started these good habits, you'll realize how actually easy it is to continue

Nicholas Beames: 11:56

There's a number of apps I've seen out there, not for retirement savings but for general savings and they allow the user to set a certain risk profile, which is also something that a financial planner would allow. Let's call it a conventional super fund or super account to have. Does GigSuper work on the same basis?

Peter Stanhope: 12:17

What is your tolerance for risk is a really difficult question for somebody to answer. Just asking that question.

Nicholas Beames: 12:26

If they're already a sole trader, one might assume that their tolerance risk is probably higher than average

Peter Stanhope: 12:34

Correct. But then that also changes over your life. Once you have kids, your tolerance for risk is probably going to decrease. As you get older and get closer towards retirement, your tolerance for risk is almost certainly to decrease. That's another feature that we've built into the app or into the fund is that, with your investments, you can, if you want, you can select a high growth through to a conservative portfolio. But we've also got an autopilot option. And what the autopilot option will do is, if you select that one, will automatically decrease your risk as you get closer to retirement.

Nicholas Beames: 13:16

Terrific idea.

Peter Stanhope: 13:17

We're not the first fund to do it but there's a lot of merit in that because superannuation is not really something that you think about or necessarily have the confidence to be able to go and make those calls yourself. We just wanted to make that process a little bit easier for people. And the third major difference between our product and the other employee-focused superfunds out there is around tax. And on your listeners, there'll be avid tax fans of finding ways to help reduce the amount of tax that they pay or make sure that I'm paying more than their fair share. Let me give you a bit of an example. If I'm an employee and my employer makes a contribution into super on my behalf, that money is automatically taxed at 15%, which is what they call the concessional tax rate inside super. And the government taxes you at that 15% because it's like a trade off, right? The barefoot investor describes it as a bribe. The government says, " I'm going to tax you less as an incentive for you to save for your retirement so that when you get to retirement age, I don't have to pay your pension." So when your employer makes a contribution to super on your behalf, that money's automatically taxed at 15 %. When you're self employed and you go and make a contribution to super yourself, that money is still taxed at your marginal tax rate. So for the average tax payer that's 32 and a half percent for the tax bracket, that's 45% tax rate. And there's a way for you to have that money that you personally contribute to super to be taxed at 15% as opposed to having it taxed at your marginal tax rate. But at the moment we think about 90% of self employed people aren't taking advantage of that. So the process that you need to go through in order to have that the money you've contributed to super to be taxed at your superannuation tax rate of 15% as opposed to your marginal tax rate is you need to go through the process of claiming that contribution as a tax deduction. And the process with other funds to claim that contribution as a tax deduction, well there are seven steps. You need to find a form called a "Notice of Intention to Deduct" form, it's an ATO form. You need to complete that form, you need to then send it off to your fund. Unfortunately, some funds require that still to be sent via snail mail. Once the funders received that form, they will then tax that money at the 15% tax rate and then they'll send you back a receipt to allow you to say, "Hey, yep , okay, that money, you can now claim it as a tax deduction" and then you've got to take that receipt off to your accountant at tax time.

Nicholas Beames: 16:21

That sounds like a lot of hard work.

Peter Stanhope: 16:23

It is a lot of hard work but makes a tangible difference, right? To the amount of tax that you pay. For someone who's saving, let's say you're earning $60,000 a year and you're saving 10% towards retirement, $6,000. Tax on $6,000, that's 32 and a half percent. I'm trying to do the math in my head right now, Nick and I want to say it's just shy of $2,000 versus tax on $6,000 at 15% is $900. So you're talking about $1,100 in tax and that's for one single year.

Nicholas Beames: 17:01

So how do you guys deal with making that simple?

Peter Stanhope: 17:05

Basically when you set your account up, you simply just tell us on the app if you want to claim your contributions as a tax deduction. And you click a single button and then automatically , every time we make a contribution into super high net contribution as a tax deduction for you, then at the end of the financial year, you'll just get an email from us, which is basically just your receipt.

Nicholas Beames: 17:26

Oh darn , there you go. That's called disrupting the whole process and turned it into a single click.

Peter Stanhope: 17:33

Yeah. And again, it's easy for self employed people to miss that step. A because it's so complex and B, there's a lot of other things to worry about every year. It gets even better than that because just this year , the ATO , as part of their pre -fill , when you do your tax return, now the ATO is pre-filling more and more stuff every year. Now the ATO is actually pre-filling that X deduction climb. So we'll send you the receipt, but the ATO should pre-fill that for you in your tax deduction.

Nicholas Beames: 18:08

I've got to say, watching you talk. I've never seen anyone so animated about the topic of superannuation.

Peter Stanhope: 18:15

I'm easily excitable, Nick.

Nicholas Beames: 18:20

Congratulations on making this so easy, particularly for a segment of the population that find it the most confusing. Are you in the business on your own or did you start it with a co- founder?

Peter Stanhope: 18:37

No, I'm lucky enough to have a fantastic co-founder or two co-founders. Martin Batur, we worked at the online trading business together. And then Branka Injac Misic. So actually they're both from Eastern Europe. They're a bit fiery. I'm the boy from Healesville. I tend to be a little bit more laid back than those two.

Nicholas Beames: 19:05

A good combination.

Peter Stanhope: 19:05

Yeah, that's right. For me, having those people, I don't think I could just couldn't do it. Without that solid team around us.

Nicholas Beames: 19:17

And we were chatting before that you're in the final final throws right now, which is November 2019, of going live. So talk us through getting across the finishing line, which is I guess then the starting line.

Peter Stanhope: 19:33

Yeah, that's right. Superannuation as an industry has been a lot harder to innovate in than we expected, which is surprising given the amount of money that is in superannuation. You would expect the technology within super to be really quite modern. There's $2.3 trillion sitting in Australia's superannuation system. You would think that there would be enormous incentives for people to innovate from a technology perspective in the superannuation landscape. But what we've discovered in the journey is that the pace of innovation is quite slow, incredibly slow. A lot of the systems that are sitting in the back-end of superannuation have been there since the early nineties. And when you ask yourself why is that? Because there's an enormous amount of regulation that sits at the top. And the reason there's an enormous amount of regulation over the top is because the government forces 90% of the population to enter into retirement. So they need to make sure that our money, they've got a moral obligation to make sure that money's being managed correctly.

Nicholas Beames: 20:44

I'm thinking that you're about to cross the threshold of a very high barrier to entry, which is good for you in many ways. Is that a fair comment to make?

Peter Stanhope: 20:48

Yeah, I think. And that's a good thing, right? It's a good thing from a business perspective, but it's also a great thing from when we're talking about our retirement savings here. I think as someone who's got retirement savings, I quite like the idea that there's lots of rules and regulations sitting at the top, making sure that my retirement savings , money, is looked after as it should be.

Nicholas Beames: 21:19

And also that high barrier to entry in terms of competitors coming into try and claim your turf. Is it fair to say that the struggle and the journey you've gone on to date is worth that in part because whoever's coming up behind you also has a very, very high barrier to cross?

Peter Stanhope: 21:39

Yeah , there definitely is a high barriers to entry, but at the same time we would quite like some competition because this is an enormous problem and, quite frankly, we're not going to be able to solve it all by ourselves. There's 1.3 million sole traders in Australia. I think there is plenty of scope for other superannuation funds to build products that help. It's part of the community.

Nicholas Beames: 22:04

Is there a way for them to feed into your product whilst maintaining their relationship with their client?

Peter Stanhope: 22:11

Not currently. We are a stand-alone superannuation product. I guess they would see us as a competitor. They wouldn't see us as a competitor because at the moment, they focused on the 90% of the population who are employees so they probably don't.

Nicholas Beames: 22:30

This is a new Greenfield environment for the superannuation industry.

Peter Stanhope: 22:35

Yeah, that's right. It's significant and it's only going to become more significant as with the changing nature of the workforce and more people moving towards the independent style of working, no longer being an employer and employee. That's only going to grow. And the way we work is changing and it's only natural to us that the way we save for retirement also change.

Nicholas Beames: 23:00

And let's wrap up on your go-to market strategy. You'll be live within weeks. What's the plan to tell as many people as possible, as quick as possible what you're doing.

Peter Stanhope: 23:10

We believe we're here to serve the community. So our go-to market strategy is really about plugging into the existing self-employed communities. There's obviously not one single community. They congregate in all sorts of wonderful communities, whether that be mompreneurs who are aggregating in groups on Instagram or whether that be a fantastic group on Facebook called "Like-minded Bitches Drinking Wine. There's all these communities both online and offline. And we've been very fortunate that those communities have invited us in because they recognize the problem and they recognize the challenge that their community faces when it comes to saving for retirement. Our go-to market strategy is really about getting out to those communities and beginning that journey of supporting them.

Nicholas Beames: 24:13

Peter, it's been awesome to talk to you today and I wish you the very best of luck in the next few weeks. I look forward to getting the email, I'm a subscriber, so I look forward to getting an email to say it's live and ready to rock and roll. And thank you for looking out for the self-employed folk in Australia and helping them work out how to not rely on the government in their retirement.

Peter Stanhope: 24:36

Thanks very much, Nick. It's a pleasure to be here.

Nicholas Beames: 24:40

No worries. Have a great one.

Intro_Voiceover: 24:42

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