00:00:01
Speaker 1: A lot of people, of course, thought that I'm mad. I was. If you objectively assess that decision, it is absolute madness. The conventional wisdom is that you have to be wealthy to be an investor. It's actually not true. My first job in Australia was a cleaner. So I was prepared to do anything basically. The one thing that's become a very powerful mission over this time that I have been in business is really to....
00:00:27
Speaker 2: I'm sitting here with Alex Vinica. He's the CEO of BetaShares, which I believe is a $ 75 billion investment giant at this point in time.
00:00:37
Speaker 1: Just over 90 now.
00:00:38
Speaker 2: Just over 90. Wow. It's an incredible amount of money. And you create exchange-traded funds and manage those. Is that correct? Yeah.
00:00:51
Speaker 1: Yeah. We own the business of managing people's money. but more importantly, we are in the business of empowering Australians to build wealth and to protect their wealth.
00:01:06
Speaker 2: And we'll get on to exchange-traded funds and what BetaShare does and why so many people are investing in ETFs a bit later in the chat. But I just wanted to get into your story because it's quite interesting from what I understand. You weren't born in Australia, were you?
00:01:25
Speaker 1: No, no. I was born in Soviet Ukraine and spent a meaningful portion of my childhood there during Soviet Union and immigrated to Australia in the mid-90s with my family.
00:01:42
Speaker 2: And what was it like growing up in Soviet Ukraine as a kid? Yes, yes.
00:01:48
Speaker 1: It's a great question. It was quite the experience. It was quite the experience. Look, there's probably a couple of elements to it. First of all, on the family front, I was born into a really tight-knit and very loving family. So I grew up surrounded by lots of love from my parents and my grandparents. I had very close friends. And my childhood was a very happy childhood. despite the fact that we were growing up in Soviet Union, which was a very difficult place, of course, for many reasons. And it was a difficult place for a number of reasons. I mean, first of all, you know, the Soviet Union was really, and then the people were still recovering and still carrying wounds from, you know, World War II, a meaningful part of my family. did not survive, you know, World War II and were killed. And those that did survive had a real appreciation for life. And I'd say, you know, if I reflect back on my class, on my schoolmates, you know, most people, you know, have had family members who did not survive the war. So that trauma basically, you know, is definitely something that was still... you know, that was still there, you know, even though it was many decades after the end of World War II. And of course, the Soviet regime, you know, it was a brutal, you know, difficult regime where people's freedoms, you know, were curbed, access to information, you know, was shut, you know, entrepreneurship was disallowed, and groupthink you know, was encouraged and cultivated.
00:03:48
Speaker 2: So you didn't have like shops that sold like 50 types of shampoo and stuff.
00:03:52
Speaker 1: Like that, I guess. No, no, you're lucky to get one. You're lucky to get one. I mean, it was, again, you know, Soviet economy and the communist regime is, it was a terrible experiment, basically. It was a terrible experiment. It was a centrally planned economy. Um, and, um, you know, the, the, the, you know, that, that experiment just did not work basically. So you had to line up in the morning. I literally had to line up in the mornings, you know, with my grandmother, for example, you know, sort of to, to be able to buy bread. Um, and if you did not line up, you know, before 7am, uh, you know, if you rock up at 7.30, there may not be bread.
00:04:33
Speaker 2: And how did you end up in Australia?
00:04:34
Speaker 1: Yeah. Well, it's a combination of my parents' wisdom and a bit of luck. So my parents wanted to leave for quite some time. They knew for a long time that their regime is very troubled and the regime is obviously very, you know, very difficult and, you know, it's corrupt. And they wanted to leave, but it was not possible to leave. getting out was not possible. You could not just apply. You needed to get permission to leave. And KGB were not in the business of letting people leave. So we had to wait. My parents had to wait. I was a teenager. At the time we immigrated to Australia, I was 15 and a half years old. My parents waited until Soviet Union collapsed. And at that time, You know, there was chaos, you know, in the country. It was a bit of a, you know, it was a bit of a, you know, sort of disorganized state of affairs. And nobody cared basically anymore whether you're there or not. And my parents applied to come to Australia. And, you know, their view was that if you're going to be an immigrant, let's go to the country where there are lots of immigrants, basically. And we were very fortunate to have received permission to come to Australia. And as soon as we received permission to come to Australia, my parents sold everything they had. They bought one-way tickets for our family. And they just had a few hundred dollars left over, basically. And that's how we arrived.
00:06:18
Speaker 2: And what was it like for you? You say you're 15, just over 15 years old. And you came to Australia. You've come from a background where you have to line up for bread every morning at 7 a.m. And then you come to Australia in, what, maybe the early 1990s? In 1994.
00:06:32
Speaker 1: That's right. We arrived in March 1994.
00:06:35
Speaker 2: And what was it like? It must have been a pretty incredible experience to arrive.
00:06:39
Speaker 1: It was incredible. It was really incredible. I talk to my kids a lot about it now. And, of course, it's very difficult to really explain it if you hadn't experienced it. But it was a complete... sensory overload. Uh, it was a complete, uh, you know, culture shock.
00:07:01
Speaker 2: Even just the, the weather from Ukraine.
00:07:04
Speaker 1: Everything. I mean, we, we settled in Bondi basically. I mean, we, uh, cause lots of Soviet immigrants ended up, you know, sort of settling in Bondi. And at the time, I mean, it was a very different Bondi. I mean, today Bondi is, I mean, it's always beautiful, but it was like lots of backpackers and I was, it was totally different vibe basically in Bondi. It was pretty rough and ready. But we, of course, absolutely loved it. You know, sun was shining and, you know, people were smiling. I mean, that's one big thing that I remember. You know, you walk the streets and people smile at you. I mean, in Soviet Union, nobody ever smiled, basically. People thought you were weird if you smiled. There was something wrong with you. I mean, it's just like the basic things, basically, just on the human level. It was so different. And then, of course, you talked about the 10 different types of shampoo. I mean, those were the sorts of examples. You walk into a store and like everything is plentiful. You've got choice of things. I mean, first of all, you know, 80% of what I saw in the supermarket I've never seen in my life. Like I've never seen an avocado in my life. I've never seen a broccoli. We were like staring at it, like wondering, what is this? It was pretty amazing. It's like, it's essentially like almost being a child again. And then of course there's the language because we didn't speak English. so we had to learn and we had to, you know, sort of figure out basically, you know, how everything works.
00:08:25
Speaker 2: Was that tough going into school and starting afresh almost at 15 years old and learning a new language?
00:08:32
Speaker 1: Look, you know, it's kind of easy on the one hand for me now to say, yes, it has been tough, but I actually never felt, I never felt, you know, difficulty and I never felt adversity at the time. I just felt that there's nothing else to do. Like you kind of, gets run into the deep end and you've got to sink or swim and you've just got to get on with it. I mean, we were so, so grateful for being in Australia and we loved everything. Like from the first minute, you know, we, we, you know, we landed here. Um, you know, I loved this country basically, and I still do. And I'm a very passionate, uh, and very proud, uh, Australian. And, you know, this country is just amazing. So we just embraced everything that Australia had to offer basically. And really from the first minute wanted to be part of this incredible society. And I would say from my pretty early days, I had fascination. I had a fascination with building a business and entrepreneurship. And I was just amazed that it's all possible here in Australia.
00:09:36
Speaker 2: So what were your first steps into your career? What did you do after school?
00:09:41
Speaker 1: I mean, I studied. My first job out of university was as a lawyer. I didn't know what I want to do. You know, so by the time I enrolled in university, I was only a couple of years into the country. I was just able to explain myself, you know, with the basics. Um, and you know, I worked as a lawyer. Um, I was very fortunate again, I got a job in, you know, in a pretty, um, uh, large international law firm and my parents were like, oh, this is great. He's going to be a lawyer. And, um, and yeah, about a year into, into my job, I kind of figured out that this is not for me. Because great lawyers are people who are excellent in taking instructions from their clients. They're great at translating those instructions into action. And I think I was probably too impatient, too opinionated to be taking instructions from people. And my boss at the time also reminded me a few times that I'm probably a little bit too impatient and too opinionated. But it kind of felt... that a career as a lawyer is probably not one for me. So I went and talked to my parents back then, and I said that I'm going to quit law. And they're like, what do you mean? You're a lawyer. That's the best job. But they were very, very supportive, and I never looked back.
00:11:10
Speaker 2: And so what did you do after that? Did you work for Malcolm Turnbull?
00:11:13
Speaker 1: I did. I did work for him. Yes, I did. Yes, yes. So I met him whilst I was a lawyer, basically, when I was working for Baker McKenzie, this international law firm. And yeah, I think we kind of struck up sort of a relationship. I think for whatever reason, he respected what I had to say at the time. And I was given this incredible opportunity. You know, he was coming out, you know, of his sort of time at Goldman Sachs. And I was just this young kid, basically just young immigrant who was just like, you know, hungry for opportunity and just like, you know, just willing to have a go at anything. I mean, that was obviously, I mean, he was a very, you know, very smart and very accomplished businessman at the time. I mean, that was well before he entered politics. So he wasn't like a high profile figure that he's become, you know, subsequently. But again, I was just very lucky to be given that opportunity. Honestly, I was doing everything. Listen, my first job in Australia was a cleaner. So I was prepared to do anything, basically. I mean, I didn't have to do any cleaning, you know, sort of working for, you know, working for Turnbull. But, but, I just, I did everything.
00:12:35
Speaker 2: So do you want to take me through how Beta Shares came to be?
00:12:38
Speaker 1: Yeah.
00:12:39
Speaker 2: What was the spark, the inspiration?
00:12:41
Speaker 1: Yeah. It was really a combination. And it's really interesting kind of trying to reflect on that because I'm obviously still so involved in this business and I love this business. And so I kind of find it quite an interesting exercise to try to be reflective whilst I'm still kind of in the middle of building. But the early days were definitely interesting. Look, the one thing I observed with a bit of experience that I've had by that time working in the financial services industry is that, first of all, investing is really a mystery for the average Australian, for the vast majority. I grew up with no money. The vast majority of us have grown up with no money. The vast majority of us are not investment professionals And it's bloody complicated. It is complicated. And the industry has traditionally made it complicated. And the industry has traditionally used the complexity to overcharge, used the complexity sort of to obfuscate the detail. And I thought there's a better way and there's got to be a fairer way of making investments available. But also very importantly, the one thing I've realized when I was, again, when I was a young person growing up here in Australia, is that the conventional wisdom is that you have to be wealthy to be an investor is actually not true. Everybody deserves an opportunity and everybody should have an opportunity to grow whatever savings they have. It doesn't matter whether you start with millions of dollars or whether you start just with a few hundred dollars. Everybody who's working hard and who's making savings and who's saving money, they deserve the opportunity to be smarter with their money. They deserve the opportunity to have that money work for them whilst they themselves are working and doing more. And those were the original ideas behind BetaShares. And I kind of felt really motivated from very early days to build a business that is going to be a meaningful way to improve the way Australians build wealth and they invest.
00:15:20
Speaker 2: So you saw a gap in the market, basically. You saw that fund managers were dropping the ball, not getting as good returns. as index funds and you wanted to help Australians access products like that, that could help them grow their wealth. And how did you make it? Like, how did you make beta shares, like actually take off? Like, what did you need to do?
00:15:42
Speaker 1: Oh, look, it's a really, really look, the first thing I'll say is just luck. Basically, you've got to have a lot of luck in life. Of course, there's like, you know, good timing, lots of hard work for sure. Like, you know, those things are necessary ingredients. but you have to have a bit of luck. Where I was lucky is that, yes, I had, I had an intuition that building this business at that time, um, you know, was the right business to be building. And it's the right, you know, aligning myself and aligning our business with the interest of the customer. I mean, it seems bloody obvious basically right now. It's like, you know, align yourself with a customer, but that was kind of like not the done thing basically. Um, And I just went with my intuition and I thought you can't go wrong basically doing the right thing by the customer. You can never go wrong, you know? So yes, we struggled in early days for, for, for quite some time. You know, I had to mortgage my house, basically. And, you know, my wife was thankfully very supportive of that initiative. We had young kids.
00:16:43
Speaker 2: How did that conversation go?
00:16:44
Speaker 1: Look, it was pretty good. So, my wife's actually also an immigrant from Ukraine. And we met at UNSW, basically, here.
00:16:51
Speaker 2: Oh, right.
00:16:52
Speaker 1: And it's just incredible. I mean, she didn't have much to choose from. There weren't many Ukrainian, you know … speaking people at UNSW at the time. But jokes aside, she was always very supportive and we kind of made this decision as a family. Our son was born in December 2008. In 2009, I started sort of putting some plans in place for beta shares. In December 2010, we launched our first funds. In March 2011, our daughter was born. We had... We had like the whole thing going on basically.
00:17:28
Speaker 2: So you remortgage your house.
00:17:30
Speaker 1: Yeah.
00:17:31
Speaker 2: Just shortly after the birth.
00:17:32
Speaker 1: Yeah.
00:17:34
Speaker 2: That's a huge gamble, isn't it? Yeah.
00:17:35
Speaker 1: Well, look, it was, it didn't feel, um, it didn't feel like a gamble. I actually had, I had quiet conviction that what we're doing is worthwhile. And my wife was supportive. Um, I mean, a lot of people of course thought that I'm mad, uh, for sure. And I was. I mean, you know, if you objectively assess that decision, it is madness, basically. It is absolute madness. But I never felt uncertain about the fact that this is the right thing to do. But early days were hard. You know, early days were hard because, you know, beta shares is in the business of managing people's money. And, you know, when you're in the business of managing people's money, this is first and foremost the business of trust. Like, people have to trust you. And trust is something that takes a long time to earn. And in fact, you know, we've now been in the business for over 15 years. You know, in December this year, it's coming up to 16 years since we launched our first funds. You never stop earning trust. You have to earn trust every single day.
00:18:47
Speaker 2: You can lose it pretty quickly too.
00:18:48
Speaker 1: You can lose it. You know, the day you take trust for granted, you... have lost that trust. And I'm never going to forget that. And I talk to my team about that every opportunity I get, it's really, really crucial to never forget that. So in the early days, here we are, there's like Alex and, you know, a few other, you know, a few other people, and they've got this business beta shares, and nobody's ever heard of it. And, you know, we've got these, you know, investment solutions, which seem pretty smart. But like, you know, why would I trust you with my money? And fair enough. Like, why would anybody trust us with their money, right? So, you know, in early days, we just, you know, like the thing that I really believed in is that we have to always under promise and over deliver. The only way, you know, you build trust is by delivering. You know, I never believed in talking a big game. It's just not how I grew up. We grew up in pretty modest family. We grew up with a pretty strong moral compass of always doing the right thing and always keeping your feet sort of on the ground. And so the ethos of BetaShares from day one was always under promise and over deliver, always do the right thing. Never take trust for granted and let your actions do the talking rather than stand on the pedestal and kind of talk a big game or talk down, you know, sort of the system or the competitors. So that's essentially how we went about it basically. And it's been a step-by-step journey since then.
00:20:28
Speaker 2: Yeah. It's become an absolute giant, hasn't it? As you said before, over $ 90 billion.
00:20:32
Speaker 1: Yeah. Yeah.
00:20:36
Speaker 2: Do you want to just explain to our listeners, some of them might not know what an exchange-traded fund is. What is it and why do so many people invest in them?
00:20:45
Speaker 1: Yeah, now we have millions, millions of Australians, but around the world, there are tens and tens and tens of millions of investors that invest in exchange-traded funds as a way to build lower cost, more diversified, more robust long-term investment portfolios. So exchange-traded funds really combine two great features, basically, that are important in investing. One, exchange-traded funds tend to be quite diversified. They index funds. They track a variety of indices and Some would be very well-known indices, such as, say, the Bidashare's NASDAQ 100 ETF, which tracks the NASDAQ 100 index. You've got companies like Amazon and Tesla and Microsoft, lots of famous companies that we all hear about. So NASDAQ 100 is an example of an index. And you can buy the second feature, is the accessibility. You can buy and sell that investment as easily as as buying or selling a share. So it trades on an exchange. It's very easy to buy. It's very easy to sell. The minimums, importantly, are very low. You can invest as little as $ 5. So you can get started as an investor without the barriers that we previously had in the industry where you had to be rich to be an investor or to have a portfolio of 100 stocks, for example, the NASDAQ 100 companies. You know, you had to have thousands of dollars, basically, in order to buy a little slice of each of those companies and have a diversified portfolio. Now you can just buy that in one trade in as little, say, as $ 5. And ETFs come in different flavors. You can buy Australian income funds. You can buy gold and lots of different exposures. So exchange-traded funds have really just busted open the mystery of investing. It, you know, some people use the term democratized investing. It made investing accessible to everyone. But what's really important also is the technology to make investments easy and to make investments accessible to everyone. And that really led to the second, you know, which is really the launch of BetaShares Direct, which is our technology platform, an investment platform, which now allows Australian investors to create an account in a matter of minutes, deposit money instantaneously, and be able to invest brokerage-free and invest for long-term compounding of returns. The one thing I have learned over the years as an investor and as somebody who's been building this business now for over 15 years is that compounding is one of the absolute magical forces in investing. And we, as Australians, often underappreciate the power of compounding. I think Einstein called it one of the greatest wonders of the world, which most people don't understand. And it is true. you know, compounding of returns as an investor is real magic.
00:24:32
Speaker 2: And when you talk about compounding, that's like growth on top of growth.
00:24:36
Speaker 1: Exactly. Exactly. It's growth on top of growth.
00:24:39
Speaker 2: Which becomes almost exponential.
00:24:41
Speaker 1: It becomes, yes, compounded growth is absolute magic. And it's really powerful. And frankly, the other dimension to this, Ben, as well, is that when I look at Australia today, and again, I'm a passionate and a proud Australian, and this country has done so much for me. Everything I have today is because of Australia and what it's done for me. I look at the future generation of Australians and I think about how do they get ahead? How do my children get ahead of life? How do people in their 20s and 30s today build a future for themselves? You know, the traditional way of creating wealth in Australia has really been all through housing, right? Everybody that you talk to that's been able to build a nest egg in Australia has done that through owning a property. I mean, property affordability is woeful today in Australia. It's very different to what it was back in the 90s when we arrived in Australia, and it's only getting worse. So, you know, I would not wish to bring politics into this because this is not a political issue. This is just the reality that property prices are continuing to climb and they're continuing to outstrip our ability to afford them, basically. Every time you feel like you've just saved up to buy a place, you know, the price keeps going up or your rent has gone up and your cost of living as a result is going up. So the one thing that's become a very powerful mission, basically, um, you know, over, over this time that I have been in business, uh, is really to allow every Australian to get ahead in life. And you do not have to be, you do not have to be a property owner. You do not have to be a property owner to make your money work harder for you. Um, and this is where our industry, this is where beta shares has really, um, has really, um, um, connected with Australians. And that's where it's really resonated with Australians, because we started really doubling down on providing opportunities for people to grow their wealth and to be able to get ahead in life, basically, without having to be a property owner. Because the truth of the matter is, no matter how many government announcements, how many policies the governments try to put in place, whether it's Labor government or Liberal, again, it's not a political thing. The reality is that property is expensive. And the reality is that cost of living in Australia is only going up, especially in capital cities. And as a result, we have to be smarter with our money. We have to be smarter with our money. And this is going to be more and more of an issue, basically, as we go forward.
00:27:41
Speaker 2: I suppose the elephant in the room is tax changes and what's happened recently, it's obviously going to sort of shift the landscape, isn't it, in terms of ETFs and people buying direct shares, it might be. I've heard people like Chris Brakey have said that ETFs are one of the big winners out of this.
00:28:01
Speaker 1: Yes, yes. Look, it is true. And I don't feel very good. I think people's after-tax earnings, after-income tax earnings, need to work for them, basically. That's why they work hard. So you want to encourage, I think we, as a system, we want to encourage people to have a go. We want to encourage people to work hard, to save up money where you can. Often saving up money involves a sacrifice because that means that you don't spend, basically. So if you're going to make those sacrifices to save up, the system should encourage the compounding of returns, you know, sort of to be with as minimal return um, you know, sort of taxation basically as possible, uh, instead of, um, you know, sort of trying to tax, um, you know, those, those savings more.
00:28:52
Speaker 2: And if people are more self-reliant and they don't have to rely as much on tax money.
00:28:57
Speaker 1: Exactly. Exactly. Exactly. Look, I grew up in a society where everybody relied on government handouts. Um, you know, there is time and place, you know, we, we occasionally go through adversity and that nobody even dreams of, like COVID. The government policy during COVID was about maintaining the, keeping the lights on, basically, in the economy. We had devastation in the country, right? We had people losing jobs everywhere. That was the time of national emergency where it was absolutely crucial to keep the economy going, to keep people in jobs where possible, and to keep people supported. I'm a very big believer when the time is right, we have to step up. But at the same time, you know, if the country becomes conditioned– on government handouts, basically, that's not Australia, frankly. I mean, Australia is built by young people, older people having a go, people building their career, taking a risk, working hard, saving up. This is what Australia is about. I mean, we today have a very low rate of unemployment. The vast majority of us are hard workers. This is not a generation of bludgers. This is not a country where people are even thinking about relying on government handouts. This is a country of achievers, basically. And this is what makes me so proud, obviously, of being Australian and very passionate. So for me, we've got so much great stuff that's going on in this country. And I'm a very optimistic person, and I am very optimistic about the future of this country. For me, what we really need, and I'm not just talking about it, we're definitely hard at work every single day, is just creating more and more opportunities for Australians, basically. This is what we need, and this is what I'm very passionate about, and this is what motivates me.
00:31:12
Speaker 2: Just looking back, you've had quite an incredible life, really, coming to Australia as a teenager and betting your house on this huge empire that it's become now. How do you think those lessons earlier in your life have shaped what you've done and what you've achieved?
00:31:31
Speaker 1: I would say probably one of the biggest lessons is just resilience.
00:31:40
Speaker 2: I had to.
00:31:44
Speaker 1: I had to learn resilience pretty early on. I, you know, sort of both in terms of my upbringing as a child in Soviet Ukraine, coming to Australia and being immersed in this new society, a new language, a new way of life. But resilience is actually not just something that immigrants experience. I mean, I look around our country and, you know, we all, you know, we all bloody resilient. You know, yes, again, some people criticize, like, you know, the young generation say, oh, people are entitled. That's actually not true. I mean, I'm surrounded by young colleagues, basically, in my business. I talk to young Australians all the time. I mean, we are resilient as a nation. We had to deal with COVID a few years ago. I mean, you know, if that's not, you know, resilience, I don't know what is, basically. So, yeah, I would say the big lesson is definitely be resilient and, you know, take, take setbacks on your chin basically, and get up and go, uh, you know, don't give up. Um, you know, keep going, um, you know, have conviction, have conviction and be prepared, uh, you know, to deal with, with adversity and be prepared to deal with, you know, people disagreeing with you. I think that's okay. Um, look, the big one for me is, is really about dreaming big, uh, as well. I think, um, Again, I've never known any other way, but dreaming big is actually really cool. You know, imagining the future and imagining what things could be is really fun. It's actually really fun. And, you know, we live in an incredible society here in Australia where everything is possible. A lot of things are possible. Yes, we have challenges, and, you know, I certainly would not, you know, deny those. We have real challenges and cost of living issues. I referred to before, is definitely a great example of one. But this is still a country where having a go is possible. And dreaming big is incredible. And I'm a huge fan of this country. I'm a huge fan of the opportunities that it's offering. And it will offer to generations of people from here. And I really want to make sure that I do my bit to keep it that way.
00:34:11
Speaker 2: Well, I think you're a living and breathing example of how you can turn that opportunity into something special. So thanks a lot for joining us on the podcast today. It's been a fascinating chat. Thanks, Alex.
00:34:21
Speaker 1: Thank you, Ben.
00:34:22
Speaker 2: Don't forget to subscribe to Stress Tested on YouTube or your podcast platform of choice. It helps us grow the show and get even bigger guests.
Speaker 1: A lot of people, of course, thought that I'm mad. I was. If you objectively assess that decision, it is absolute madness. The conventional wisdom is that you have to be wealthy to be an investor. It's actually not true. My first job in Australia was a cleaner. So I was prepared to do anything basically. The one thing that's become a very powerful mission over this time that I have been in business is really to....
00:00:27
Speaker 2: I'm sitting here with Alex Vinica. He's the CEO of BetaShares, which I believe is a $ 75 billion investment giant at this point in time.
00:00:37
Speaker 1: Just over 90 now.
00:00:38
Speaker 2: Just over 90. Wow. It's an incredible amount of money. And you create exchange-traded funds and manage those. Is that correct? Yeah.
00:00:51
Speaker 1: Yeah. We own the business of managing people's money. but more importantly, we are in the business of empowering Australians to build wealth and to protect their wealth.
00:01:06
Speaker 2: And we'll get on to exchange-traded funds and what BetaShare does and why so many people are investing in ETFs a bit later in the chat. But I just wanted to get into your story because it's quite interesting from what I understand. You weren't born in Australia, were you?
00:01:25
Speaker 1: No, no. I was born in Soviet Ukraine and spent a meaningful portion of my childhood there during Soviet Union and immigrated to Australia in the mid-90s with my family.
00:01:42
Speaker 2: And what was it like growing up in Soviet Ukraine as a kid? Yes, yes.
00:01:48
Speaker 1: It's a great question. It was quite the experience. It was quite the experience. Look, there's probably a couple of elements to it. First of all, on the family front, I was born into a really tight-knit and very loving family. So I grew up surrounded by lots of love from my parents and my grandparents. I had very close friends. And my childhood was a very happy childhood. despite the fact that we were growing up in Soviet Union, which was a very difficult place, of course, for many reasons. And it was a difficult place for a number of reasons. I mean, first of all, you know, the Soviet Union was really, and then the people were still recovering and still carrying wounds from, you know, World War II, a meaningful part of my family. did not survive, you know, World War II and were killed. And those that did survive had a real appreciation for life. And I'd say, you know, if I reflect back on my class, on my schoolmates, you know, most people, you know, have had family members who did not survive the war. So that trauma basically, you know, is definitely something that was still... you know, that was still there, you know, even though it was many decades after the end of World War II. And of course, the Soviet regime, you know, it was a brutal, you know, difficult regime where people's freedoms, you know, were curbed, access to information, you know, was shut, you know, entrepreneurship was disallowed, and groupthink you know, was encouraged and cultivated.
00:03:48
Speaker 2: So you didn't have like shops that sold like 50 types of shampoo and stuff.
00:03:52
Speaker 1: Like that, I guess. No, no, you're lucky to get one. You're lucky to get one. I mean, it was, again, you know, Soviet economy and the communist regime is, it was a terrible experiment, basically. It was a terrible experiment. It was a centrally planned economy. Um, and, um, you know, the, the, the, you know, that, that experiment just did not work basically. So you had to line up in the morning. I literally had to line up in the mornings, you know, with my grandmother, for example, you know, sort of to, to be able to buy bread. Um, and if you did not line up, you know, before 7am, uh, you know, if you rock up at 7.30, there may not be bread.
00:04:33
Speaker 2: And how did you end up in Australia?
00:04:34
Speaker 1: Yeah. Well, it's a combination of my parents' wisdom and a bit of luck. So my parents wanted to leave for quite some time. They knew for a long time that their regime is very troubled and the regime is obviously very, you know, very difficult and, you know, it's corrupt. And they wanted to leave, but it was not possible to leave. getting out was not possible. You could not just apply. You needed to get permission to leave. And KGB were not in the business of letting people leave. So we had to wait. My parents had to wait. I was a teenager. At the time we immigrated to Australia, I was 15 and a half years old. My parents waited until Soviet Union collapsed. And at that time, You know, there was chaos, you know, in the country. It was a bit of a, you know, it was a bit of a, you know, sort of disorganized state of affairs. And nobody cared basically anymore whether you're there or not. And my parents applied to come to Australia. And, you know, their view was that if you're going to be an immigrant, let's go to the country where there are lots of immigrants, basically. And we were very fortunate to have received permission to come to Australia. And as soon as we received permission to come to Australia, my parents sold everything they had. They bought one-way tickets for our family. And they just had a few hundred dollars left over, basically. And that's how we arrived.
00:06:18
Speaker 2: And what was it like for you? You say you're 15, just over 15 years old. And you came to Australia. You've come from a background where you have to line up for bread every morning at 7 a.m. And then you come to Australia in, what, maybe the early 1990s? In 1994.
00:06:32
Speaker 1: That's right. We arrived in March 1994.
00:06:35
Speaker 2: And what was it like? It must have been a pretty incredible experience to arrive.
00:06:39
Speaker 1: It was incredible. It was really incredible. I talk to my kids a lot about it now. And, of course, it's very difficult to really explain it if you hadn't experienced it. But it was a complete... sensory overload. Uh, it was a complete, uh, you know, culture shock.
00:07:01
Speaker 2: Even just the, the weather from Ukraine.
00:07:04
Speaker 1: Everything. I mean, we, we settled in Bondi basically. I mean, we, uh, cause lots of Soviet immigrants ended up, you know, sort of settling in Bondi. And at the time, I mean, it was a very different Bondi. I mean, today Bondi is, I mean, it's always beautiful, but it was like lots of backpackers and I was, it was totally different vibe basically in Bondi. It was pretty rough and ready. But we, of course, absolutely loved it. You know, sun was shining and, you know, people were smiling. I mean, that's one big thing that I remember. You know, you walk the streets and people smile at you. I mean, in Soviet Union, nobody ever smiled, basically. People thought you were weird if you smiled. There was something wrong with you. I mean, it's just like the basic things, basically, just on the human level. It was so different. And then, of course, you talked about the 10 different types of shampoo. I mean, those were the sorts of examples. You walk into a store and like everything is plentiful. You've got choice of things. I mean, first of all, you know, 80% of what I saw in the supermarket I've never seen in my life. Like I've never seen an avocado in my life. I've never seen a broccoli. We were like staring at it, like wondering, what is this? It was pretty amazing. It's like, it's essentially like almost being a child again. And then of course there's the language because we didn't speak English. so we had to learn and we had to, you know, sort of figure out basically, you know, how everything works.
00:08:25
Speaker 2: Was that tough going into school and starting afresh almost at 15 years old and learning a new language?
00:08:32
Speaker 1: Look, you know, it's kind of easy on the one hand for me now to say, yes, it has been tough, but I actually never felt, I never felt, you know, difficulty and I never felt adversity at the time. I just felt that there's nothing else to do. Like you kind of, gets run into the deep end and you've got to sink or swim and you've just got to get on with it. I mean, we were so, so grateful for being in Australia and we loved everything. Like from the first minute, you know, we, we, you know, we landed here. Um, you know, I loved this country basically, and I still do. And I'm a very passionate, uh, and very proud, uh, Australian. And, you know, this country is just amazing. So we just embraced everything that Australia had to offer basically. And really from the first minute wanted to be part of this incredible society. And I would say from my pretty early days, I had fascination. I had a fascination with building a business and entrepreneurship. And I was just amazed that it's all possible here in Australia.
00:09:36
Speaker 2: So what were your first steps into your career? What did you do after school?
00:09:41
Speaker 1: I mean, I studied. My first job out of university was as a lawyer. I didn't know what I want to do. You know, so by the time I enrolled in university, I was only a couple of years into the country. I was just able to explain myself, you know, with the basics. Um, and you know, I worked as a lawyer. Um, I was very fortunate again, I got a job in, you know, in a pretty, um, uh, large international law firm and my parents were like, oh, this is great. He's going to be a lawyer. And, um, and yeah, about a year into, into my job, I kind of figured out that this is not for me. Because great lawyers are people who are excellent in taking instructions from their clients. They're great at translating those instructions into action. And I think I was probably too impatient, too opinionated to be taking instructions from people. And my boss at the time also reminded me a few times that I'm probably a little bit too impatient and too opinionated. But it kind of felt... that a career as a lawyer is probably not one for me. So I went and talked to my parents back then, and I said that I'm going to quit law. And they're like, what do you mean? You're a lawyer. That's the best job. But they were very, very supportive, and I never looked back.
00:11:10
Speaker 2: And so what did you do after that? Did you work for Malcolm Turnbull?
00:11:13
Speaker 1: I did. I did work for him. Yes, I did. Yes, yes. So I met him whilst I was a lawyer, basically, when I was working for Baker McKenzie, this international law firm. And yeah, I think we kind of struck up sort of a relationship. I think for whatever reason, he respected what I had to say at the time. And I was given this incredible opportunity. You know, he was coming out, you know, of his sort of time at Goldman Sachs. And I was just this young kid, basically just young immigrant who was just like, you know, hungry for opportunity and just like, you know, just willing to have a go at anything. I mean, that was obviously, I mean, he was a very, you know, very smart and very accomplished businessman at the time. I mean, that was well before he entered politics. So he wasn't like a high profile figure that he's become, you know, subsequently. But again, I was just very lucky to be given that opportunity. Honestly, I was doing everything. Listen, my first job in Australia was a cleaner. So I was prepared to do anything, basically. I mean, I didn't have to do any cleaning, you know, sort of working for, you know, working for Turnbull. But, but, I just, I did everything.
00:12:35
Speaker 2: So do you want to take me through how Beta Shares came to be?
00:12:38
Speaker 1: Yeah.
00:12:39
Speaker 2: What was the spark, the inspiration?
00:12:41
Speaker 1: Yeah. It was really a combination. And it's really interesting kind of trying to reflect on that because I'm obviously still so involved in this business and I love this business. And so I kind of find it quite an interesting exercise to try to be reflective whilst I'm still kind of in the middle of building. But the early days were definitely interesting. Look, the one thing I observed with a bit of experience that I've had by that time working in the financial services industry is that, first of all, investing is really a mystery for the average Australian, for the vast majority. I grew up with no money. The vast majority of us have grown up with no money. The vast majority of us are not investment professionals And it's bloody complicated. It is complicated. And the industry has traditionally made it complicated. And the industry has traditionally used the complexity to overcharge, used the complexity sort of to obfuscate the detail. And I thought there's a better way and there's got to be a fairer way of making investments available. But also very importantly, the one thing I've realized when I was, again, when I was a young person growing up here in Australia, is that the conventional wisdom is that you have to be wealthy to be an investor is actually not true. Everybody deserves an opportunity and everybody should have an opportunity to grow whatever savings they have. It doesn't matter whether you start with millions of dollars or whether you start just with a few hundred dollars. Everybody who's working hard and who's making savings and who's saving money, they deserve the opportunity to be smarter with their money. They deserve the opportunity to have that money work for them whilst they themselves are working and doing more. And those were the original ideas behind BetaShares. And I kind of felt really motivated from very early days to build a business that is going to be a meaningful way to improve the way Australians build wealth and they invest.
00:15:20
Speaker 2: So you saw a gap in the market, basically. You saw that fund managers were dropping the ball, not getting as good returns. as index funds and you wanted to help Australians access products like that, that could help them grow their wealth. And how did you make it? Like, how did you make beta shares, like actually take off? Like, what did you need to do?
00:15:42
Speaker 1: Oh, look, it's a really, really look, the first thing I'll say is just luck. Basically, you've got to have a lot of luck in life. Of course, there's like, you know, good timing, lots of hard work for sure. Like, you know, those things are necessary ingredients. but you have to have a bit of luck. Where I was lucky is that, yes, I had, I had an intuition that building this business at that time, um, you know, was the right business to be building. And it's the right, you know, aligning myself and aligning our business with the interest of the customer. I mean, it seems bloody obvious basically right now. It's like, you know, align yourself with a customer, but that was kind of like not the done thing basically. Um, And I just went with my intuition and I thought you can't go wrong basically doing the right thing by the customer. You can never go wrong, you know? So yes, we struggled in early days for, for, for quite some time. You know, I had to mortgage my house, basically. And, you know, my wife was thankfully very supportive of that initiative. We had young kids.
00:16:43
Speaker 2: How did that conversation go?
00:16:44
Speaker 1: Look, it was pretty good. So, my wife's actually also an immigrant from Ukraine. And we met at UNSW, basically, here.
00:16:51
Speaker 2: Oh, right.
00:16:52
Speaker 1: And it's just incredible. I mean, she didn't have much to choose from. There weren't many Ukrainian, you know … speaking people at UNSW at the time. But jokes aside, she was always very supportive and we kind of made this decision as a family. Our son was born in December 2008. In 2009, I started sort of putting some plans in place for beta shares. In December 2010, we launched our first funds. In March 2011, our daughter was born. We had... We had like the whole thing going on basically.
00:17:28
Speaker 2: So you remortgage your house.
00:17:30
Speaker 1: Yeah.
00:17:31
Speaker 2: Just shortly after the birth.
00:17:32
Speaker 1: Yeah.
00:17:34
Speaker 2: That's a huge gamble, isn't it? Yeah.
00:17:35
Speaker 1: Well, look, it was, it didn't feel, um, it didn't feel like a gamble. I actually had, I had quiet conviction that what we're doing is worthwhile. And my wife was supportive. Um, I mean, a lot of people of course thought that I'm mad, uh, for sure. And I was. I mean, you know, if you objectively assess that decision, it is madness, basically. It is absolute madness. But I never felt uncertain about the fact that this is the right thing to do. But early days were hard. You know, early days were hard because, you know, beta shares is in the business of managing people's money. And, you know, when you're in the business of managing people's money, this is first and foremost the business of trust. Like, people have to trust you. And trust is something that takes a long time to earn. And in fact, you know, we've now been in the business for over 15 years. You know, in December this year, it's coming up to 16 years since we launched our first funds. You never stop earning trust. You have to earn trust every single day.
00:18:47
Speaker 2: You can lose it pretty quickly too.
00:18:48
Speaker 1: You can lose it. You know, the day you take trust for granted, you... have lost that trust. And I'm never going to forget that. And I talk to my team about that every opportunity I get, it's really, really crucial to never forget that. So in the early days, here we are, there's like Alex and, you know, a few other, you know, a few other people, and they've got this business beta shares, and nobody's ever heard of it. And, you know, we've got these, you know, investment solutions, which seem pretty smart. But like, you know, why would I trust you with my money? And fair enough. Like, why would anybody trust us with their money, right? So, you know, in early days, we just, you know, like the thing that I really believed in is that we have to always under promise and over deliver. The only way, you know, you build trust is by delivering. You know, I never believed in talking a big game. It's just not how I grew up. We grew up in pretty modest family. We grew up with a pretty strong moral compass of always doing the right thing and always keeping your feet sort of on the ground. And so the ethos of BetaShares from day one was always under promise and over deliver, always do the right thing. Never take trust for granted and let your actions do the talking rather than stand on the pedestal and kind of talk a big game or talk down, you know, sort of the system or the competitors. So that's essentially how we went about it basically. And it's been a step-by-step journey since then.
00:20:28
Speaker 2: Yeah. It's become an absolute giant, hasn't it? As you said before, over $ 90 billion.
00:20:32
Speaker 1: Yeah. Yeah.
00:20:36
Speaker 2: Do you want to just explain to our listeners, some of them might not know what an exchange-traded fund is. What is it and why do so many people invest in them?
00:20:45
Speaker 1: Yeah, now we have millions, millions of Australians, but around the world, there are tens and tens and tens of millions of investors that invest in exchange-traded funds as a way to build lower cost, more diversified, more robust long-term investment portfolios. So exchange-traded funds really combine two great features, basically, that are important in investing. One, exchange-traded funds tend to be quite diversified. They index funds. They track a variety of indices and Some would be very well-known indices, such as, say, the Bidashare's NASDAQ 100 ETF, which tracks the NASDAQ 100 index. You've got companies like Amazon and Tesla and Microsoft, lots of famous companies that we all hear about. So NASDAQ 100 is an example of an index. And you can buy the second feature, is the accessibility. You can buy and sell that investment as easily as as buying or selling a share. So it trades on an exchange. It's very easy to buy. It's very easy to sell. The minimums, importantly, are very low. You can invest as little as $ 5. So you can get started as an investor without the barriers that we previously had in the industry where you had to be rich to be an investor or to have a portfolio of 100 stocks, for example, the NASDAQ 100 companies. You know, you had to have thousands of dollars, basically, in order to buy a little slice of each of those companies and have a diversified portfolio. Now you can just buy that in one trade in as little, say, as $ 5. And ETFs come in different flavors. You can buy Australian income funds. You can buy gold and lots of different exposures. So exchange-traded funds have really just busted open the mystery of investing. It, you know, some people use the term democratized investing. It made investing accessible to everyone. But what's really important also is the technology to make investments easy and to make investments accessible to everyone. And that really led to the second, you know, which is really the launch of BetaShares Direct, which is our technology platform, an investment platform, which now allows Australian investors to create an account in a matter of minutes, deposit money instantaneously, and be able to invest brokerage-free and invest for long-term compounding of returns. The one thing I have learned over the years as an investor and as somebody who's been building this business now for over 15 years is that compounding is one of the absolute magical forces in investing. And we, as Australians, often underappreciate the power of compounding. I think Einstein called it one of the greatest wonders of the world, which most people don't understand. And it is true. you know, compounding of returns as an investor is real magic.
00:24:32
Speaker 2: And when you talk about compounding, that's like growth on top of growth.
00:24:36
Speaker 1: Exactly. Exactly. It's growth on top of growth.
00:24:39
Speaker 2: Which becomes almost exponential.
00:24:41
Speaker 1: It becomes, yes, compounded growth is absolute magic. And it's really powerful. And frankly, the other dimension to this, Ben, as well, is that when I look at Australia today, and again, I'm a passionate and a proud Australian, and this country has done so much for me. Everything I have today is because of Australia and what it's done for me. I look at the future generation of Australians and I think about how do they get ahead? How do my children get ahead of life? How do people in their 20s and 30s today build a future for themselves? You know, the traditional way of creating wealth in Australia has really been all through housing, right? Everybody that you talk to that's been able to build a nest egg in Australia has done that through owning a property. I mean, property affordability is woeful today in Australia. It's very different to what it was back in the 90s when we arrived in Australia, and it's only getting worse. So, you know, I would not wish to bring politics into this because this is not a political issue. This is just the reality that property prices are continuing to climb and they're continuing to outstrip our ability to afford them, basically. Every time you feel like you've just saved up to buy a place, you know, the price keeps going up or your rent has gone up and your cost of living as a result is going up. So the one thing that's become a very powerful mission, basically, um, you know, over, over this time that I have been in business, uh, is really to allow every Australian to get ahead in life. And you do not have to be, you do not have to be a property owner. You do not have to be a property owner to make your money work harder for you. Um, and this is where our industry, this is where beta shares has really, um, has really, um, um, connected with Australians. And that's where it's really resonated with Australians, because we started really doubling down on providing opportunities for people to grow their wealth and to be able to get ahead in life, basically, without having to be a property owner. Because the truth of the matter is, no matter how many government announcements, how many policies the governments try to put in place, whether it's Labor government or Liberal, again, it's not a political thing. The reality is that property is expensive. And the reality is that cost of living in Australia is only going up, especially in capital cities. And as a result, we have to be smarter with our money. We have to be smarter with our money. And this is going to be more and more of an issue, basically, as we go forward.
00:27:41
Speaker 2: I suppose the elephant in the room is tax changes and what's happened recently, it's obviously going to sort of shift the landscape, isn't it, in terms of ETFs and people buying direct shares, it might be. I've heard people like Chris Brakey have said that ETFs are one of the big winners out of this.
00:28:01
Speaker 1: Yes, yes. Look, it is true. And I don't feel very good. I think people's after-tax earnings, after-income tax earnings, need to work for them, basically. That's why they work hard. So you want to encourage, I think we, as a system, we want to encourage people to have a go. We want to encourage people to work hard, to save up money where you can. Often saving up money involves a sacrifice because that means that you don't spend, basically. So if you're going to make those sacrifices to save up, the system should encourage the compounding of returns, you know, sort of to be with as minimal return um, you know, sort of taxation basically as possible, uh, instead of, um, you know, sort of trying to tax, um, you know, those, those savings more.
00:28:52
Speaker 2: And if people are more self-reliant and they don't have to rely as much on tax money.
00:28:57
Speaker 1: Exactly. Exactly. Exactly. Look, I grew up in a society where everybody relied on government handouts. Um, you know, there is time and place, you know, we, we occasionally go through adversity and that nobody even dreams of, like COVID. The government policy during COVID was about maintaining the, keeping the lights on, basically, in the economy. We had devastation in the country, right? We had people losing jobs everywhere. That was the time of national emergency where it was absolutely crucial to keep the economy going, to keep people in jobs where possible, and to keep people supported. I'm a very big believer when the time is right, we have to step up. But at the same time, you know, if the country becomes conditioned– on government handouts, basically, that's not Australia, frankly. I mean, Australia is built by young people, older people having a go, people building their career, taking a risk, working hard, saving up. This is what Australia is about. I mean, we today have a very low rate of unemployment. The vast majority of us are hard workers. This is not a generation of bludgers. This is not a country where people are even thinking about relying on government handouts. This is a country of achievers, basically. And this is what makes me so proud, obviously, of being Australian and very passionate. So for me, we've got so much great stuff that's going on in this country. And I'm a very optimistic person, and I am very optimistic about the future of this country. For me, what we really need, and I'm not just talking about it, we're definitely hard at work every single day, is just creating more and more opportunities for Australians, basically. This is what we need, and this is what I'm very passionate about, and this is what motivates me.
00:31:12
Speaker 2: Just looking back, you've had quite an incredible life, really, coming to Australia as a teenager and betting your house on this huge empire that it's become now. How do you think those lessons earlier in your life have shaped what you've done and what you've achieved?
00:31:31
Speaker 1: I would say probably one of the biggest lessons is just resilience.
00:31:40
Speaker 2: I had to.
00:31:44
Speaker 1: I had to learn resilience pretty early on. I, you know, sort of both in terms of my upbringing as a child in Soviet Ukraine, coming to Australia and being immersed in this new society, a new language, a new way of life. But resilience is actually not just something that immigrants experience. I mean, I look around our country and, you know, we all, you know, we all bloody resilient. You know, yes, again, some people criticize, like, you know, the young generation say, oh, people are entitled. That's actually not true. I mean, I'm surrounded by young colleagues, basically, in my business. I talk to young Australians all the time. I mean, we are resilient as a nation. We had to deal with COVID a few years ago. I mean, you know, if that's not, you know, resilience, I don't know what is, basically. So, yeah, I would say the big lesson is definitely be resilient and, you know, take, take setbacks on your chin basically, and get up and go, uh, you know, don't give up. Um, you know, keep going, um, you know, have conviction, have conviction and be prepared, uh, you know, to deal with, with adversity and be prepared to deal with, you know, people disagreeing with you. I think that's okay. Um, look, the big one for me is, is really about dreaming big, uh, as well. I think, um, Again, I've never known any other way, but dreaming big is actually really cool. You know, imagining the future and imagining what things could be is really fun. It's actually really fun. And, you know, we live in an incredible society here in Australia where everything is possible. A lot of things are possible. Yes, we have challenges, and, you know, I certainly would not, you know, deny those. We have real challenges and cost of living issues. I referred to before, is definitely a great example of one. But this is still a country where having a go is possible. And dreaming big is incredible. And I'm a huge fan of this country. I'm a huge fan of the opportunities that it's offering. And it will offer to generations of people from here. And I really want to make sure that I do my bit to keep it that way.
00:34:11
Speaker 2: Well, I think you're a living and breathing example of how you can turn that opportunity into something special. So thanks a lot for joining us on the podcast today. It's been a fascinating chat. Thanks, Alex.
00:34:21
Speaker 1: Thank you, Ben.
00:34:22
Speaker 2: Don't forget to subscribe to Stress Tested on YouTube or your podcast platform of choice. It helps us grow the show and get even bigger guests.
