Building wealth to last centuries

Mutual Trust brings long-term planning to the next level, developing succession plans for wealthy families that look ahead a hundred years.

The ‘three-generation curse’ is a widely held belief across countries and cultures. Family wealth generated by hard-working entrepreneurs is dissipated or squandered by its inheritors – or so the belief goes – rarely surviving beyond the grandchildren. 

But it doesn’t always have to go that way. Wealth can be smoothly transferred to well-adjusted inheritors who successfully take up their own entrepreneurial or charitable endeavours and later pass the baton to children of their own. 

Australia’s largest multi-family office, Mutual Trust, wants to make smooth wealth transfers much more common, pointing to the flow-on benefits to the Australian economy that come from the lasting prosperity of wealthy families. 

The enterprises of wealthy families employ 6.32 million Australians and annually pay $294 billion in wages – just under half of the total private sector wages–according to a white paper commissioned by Mutual Trust and based on first-of-its kind research by the University of Adelaide. 

The white paper, ‘Why the modern family office matters,’ found that every one percentage point improvement in annual return on wealth managed by Australian family enterprises will result in the creation of over 45,000 full-time jobs, $3-4 billion in annual wages and $6-7 billion in gross domestic product. 

Tracy Conlan, Head of Strategy at Mutual Trust with decades of experience in strategy and business consulting for firms including McKinsey & Company, Deloitte and EY, argues the next few years are a critical window to ensure smooth wealth transfer between the generations of wealthy families. An estimated $4.9 trillion in Australia will be passed between generations until around 2030 as part of a ‘great wealth transfer’ from baby boomers, according to CoreData research. 

Conlan says that the critical first step for the family is to achieve clarity and agreement over the purpose of their wealth. This alignment can then be used to build a long-term family strategy that will evolve over the coming generations. 

“It is important that these families obtain good advice, and this is more than just financial advice,” Conlan says.

“We need to start with family dynamics and what matters most to the family.”

Tracy Conlan

Clarity of purpose

A smooth wealth transfer is no simple task. There are usually multiple new inheritors, and these siblings are not always on the same page. Elizabeth Goldfinch, Partner at Mutual Trust with almost 20 years of experience working in family offices, says there are several known reasons wealth transfers fail to achieve good outcomes. Goldfinch says, “Some of the common reasons we see can be attributed to non-financial causes. A lack of communication or breakdown of trust amongst family members or insufficient preparation of inheritors. The common mistake many families make is to focus only on the financial advice and financial drivers – having the best investment and tax advice, yes, it’s important, but it’s the non-financial reasons which generally cause the erosion of wealth.” 

Some families simply don’t have a plan, she says. Some families have a plan but do not have the necessary resources or expertise to cover all the details involved in succession. Others have multiple, sometimes contradictory plans without alignment between the family members. This can lead to a further breakdown of communication and trust within the family. 

“We help families set in place a plan because it is a matter of ‘when’ and not ‘if’. Wealth transfer will happen whether or not they plan for it,” Goldfinch says. 

Mutual Trust was established in 1921 by William Lawrence Baillieu and his siblings to provide accounting and trustee services to the Baillieu family. In 2017, it merged with The Myer Family Company Limited. 

Now Australia’s largest multi-family office, it has more than $15 billion of assets under administration, including about $5.6 billion of funds under management across all major asset classes, with around 200 employees and four offices across Australia. Its clients include several hundred of Australia’s wealthiest. 

Mutual Trust begins by working with families to establish a clear vision for the purpose of their wealth. This requires a tailored approach as families differ widely in their priorities, but Mutual Trust has grouped the recurring themes it has faced over its century of history into five categories: learning, engagement and fulfilment; community impact; family unity and harmony; financial prosperity; and lastly, entrepreneurship. 

The purpose of wealth is developed by inviting all adult family members, where feasible, to have a seat at the table and voice their views about the future direction of the family. A short-term view is 20 years, Goldfinch says, while the medium-term is 50 years, and the long-term is a century. 

Some family members may wish to work together on entrepreneurial projects. Some see charitable projects as a way to bring family members closer together. Others may want completely separate financial lives so they can come together at Christmas without business matters dominating the conversation. 

“These are not easy discussions, but families that can have courageous conversations and plan early are more successful,” Goldfinch says. 

Strategy and support

Once families have agreed on a purpose of wealth, the strategic work begins, and Mutual Trust’s support is wide-ranging. 

Mutual Trust is one of only a handful of licensed private sector trustee service providers in Australia and can be appointed as executor, trustee financial attorney, administrator or manager on its clients’ behalf. It holds an AFS License, is a licensed custodian and is an ASX CHESS participant. It has a transparent business model with salaried, non-commissioned professional investment advisors without affiliation to any major financial institution or broker. Mutual Trust is the only provider in Australia offering all these services under one roof. 

The organisation offers investment advice, portfolio management, custody and administration and curates investment opportunities across all asset classes.  

Its investment reporting massively reduces the administrative burden of collecting, verifying and analysing financial information that family offices face. 

It has specialists in agribusiness, superannuation, tax, bookkeeping and personal cash-flow management. It is the Trustee for numerous Native Title trusts. It plays a strong strategic and supporting role in philanthropic endeavours and works with charitable foundations and boards to manage financial assets for the long term. 

It also provides educational programs tailored to family members in areas ranging across investment, leadership and entrepreneurial skills. It even has programs for kids as part of family retreats. 

Additionally, Mutual Trust offers curated networking opportunities with like-minded peers, giving access to exclusive events, communications and insights. 

Goldfinch finds it particularly rewarding working with the growing number of female benefactors and entrepreneurs in wealthy families and supporting their aspirations. 

“They want to help their children and support the community, and giving is very important to them,” she says. “The challenge sometimes with women of wealth is not feeling economically empowered or confident around that wealth.” 

With wealthy families bringing substantial economic benefits to the economy and communities, Conlan says it is critical they receive good advice and support in directing their wealth. “It is in all of our interests that wealthy families prosper so that more of this benefit can occur,” she says. 

Contact Mutual Trust via purposeofwealth@mutualtrust.com.au\ 

This is general information only and has been prepared without considering any particular persons’ objectives, financial situation or needs.  It does not constitute and should not be relied upon as personal financial product, taxation or legal advice from Mutual Trust Pty Ltd. Before making any investment decision, you should read the relevant disclosure document and obtain personal financial, taxation and legal advice.