Australia’s 50 Wealthiest Families

Australia's 50 Wealthiest Families

It is great to see successful multigenerational family businesses gaining recognition from the media. BRW has this week dedicated an entire stand alone issue to family wealth including Andrew Heathcote’s excellent article below naming the Top 50 Rich Australian Families. Read the article to find out why, even in difficult times, these family groups manage to continue to increase their wealth. David Harland – Family Business Advisor

Away from prying eyes, a small but powerful group of families is working harder than ever to maintain its stranglehold on the country’s most secretive fortunes.

Unlike billionaires Gina Rinehart, Clive Palmer and James Packer, the ultra-wealthy on the Rich Families list are not widely recognised.

Names such as Tieck and Spooner are rarely mentioned in newspapers. They invest quietly when no one’s looking, which makes the unravelling of their investment secrets all the more valuable.

Previously, the BRW Rich Families ran as an accompaniment to the Rich 200, but the growing differences in how individuals’ and family fortunes are managed has led to BRW splitting off the families and giving them their own dedicated issue.

The total wealth of the Rich Families is $35.6 billion and the average wealth of each family is a considerable $712 million. The top 10 all have billion-dollar fortunes.

While there are only 50 names on the Rich Families list compared with the 200 on the individuals’ equivalent, there are many more people featured in the Rich Families list.

More people means more agendas, more discussions and, sometimes, more trouble.

Different Investment Styles

Families face the challenge of diversifying assets and accommodating expanding pools of claimants. Wealth maintenance without growth is not an option.

As a consequence, rich families invest differently to the Rich 200. Of the top 50 members of this year’s Rich 200, 70 per cent hold more than half of their money in a single business. For the 50 richest families, it is just 48 per cent.

In other words, more than half of the entries on the list represent something other than “family businesses”. In most cases wealth is built in a single company before it is sold and split across asset classes.

Disparity in assets suggests the notion of succession as a “once every 40 years” event is much less accurate than it once was.

Wealth is under continual review and reorganisation due to improvement in management processes and the engorgement of family sizes. More and more of the wealthiest families are moving assets to fourth and even fifth-generation family members.

Demographics are playing a big role. People are working and living longer and younger generations are sick of waiting for a patriarch or matriarch to die. The term “succession” no longer encapsulates the breadth of what the Rich Families are charged with achieving, in transitioning assets and responsibilities.

One wealthy investor, who is nearing 70 and worth well above $500 million, explains the problem he and others like him face.

Still firmly in control of his family’s wealth, his children are of adult age and hold different opinions on how to best manage the money. He is considering a major reallocation of his wealth but understands it won’t be easy to please everyone.

“My father’s generation would have died at their desks by now,” he tells BRW. “I plan on living for several years yet.”

The Challenge of Growth

Families face the challenge of diversifying assets and accommodating expanding pools of claimants. Wealth maintenance without growth is not an option.

The widening gap between the people in control of a fortune and the person who first built it increases the management challenge for wealthy families. They are all well aware of the idiom “the first generation build wealth, the second maintains it and the third squanders it” and are charged with ensuring it doesn’t happen to them.

The Rich Families typically have well-defined chains of command. The use of non-family managers is becoming more common as fortunes grow in size and complexity.

In a difficult year, the average wealth of the returning members of the Rich Families list is up 1.5 per cent.

Just one new family debuts on the list this year. The Brisbane-based Hutchinson family joins the list in 47th spot with a $260 million fortune, due mainly to Hutchinson Builders, which will turn over about $1.3 billion this year from its residential and commercial construction projects. Jack Hutchinson founded the business in 1912 and it is now under fourth-generation control.

Low turnover on the Rich Families list is common and testament to how good they are at protecting their money. They tend to ride out bumps – such as the global financial crisis – much more smoothly than most investors.

In 2008, the top five families on the Rich Families list were Smorgon, Liberman, Besen, Wilson and Myer. While the order has changed slightly, it is the same names on the top five this year and the Smorgons remain on top.

Playing It Safe

The difference in the asset allocation preferences of the Rich Families, compared with the Rich 200, gives insight into their respective objectives. They have less of their wealth in volatile classes such as shares, and more of it in safe investments such as property and at-call cash investments. While there is a clear difference between the charts, they show that both groups are seeking a healthy mix of high growth and defensive investments.

Rich families also have an apparent fondness for unfashionable industries. Take the Richards family. They have been in the rubbish collection game since 1932. Like some of the other family businesses on this list, JJ Richards & Sons has derived considerable benefit from an uncomplicated share register and a willingness to invest for the long term.

Consolidation in the industry has left the Richards family business as the biggest waste management company in the country. Last year, it turned over $544 million and made a $69 million net profit. The Richards rank 29th on Rich Families with $390 million, up from $305 million last year.

Concrete and cement form the basis of the Wagner and Barro family fortunes.BRW’s estimate for the net wealth of the Barro family has risen 26 per cent this year to $910 million on the back of strong growth at Barro Group and publicly listed Adelaide Brighton Group. The Wagner family is up 16 per cent to $540 million.

The cooling of the resources boom has hurt some of the Rich Families. The Wright family is down $420 million to $1.53 billion due to a fall in royalty payments from Rio Tinto. Their fortune comes from Lang Hancock’s former business partner Peter Wright, who discovered iron ore in the Pilbara in the 1960s. Peter’s son Michael Wright died in 2012.

Cattle farmers the Kidman family are down 10 per cent to $355 million, reflecting a difficult 12 months for the beef industry. Farming families have always had a strong presence on the Rich Families list. Others to have most of their money in rural investments include the Baiada, Menegazzo, McDonald and Casella families. The only family among this group to enjoy an increase in wealth this year are poultry farmers, the Baiada family.

Rejoining the Rich Families after an absence of at least one year are the White, Chan, Pellicano, Farrell, Young, Schwartz and Mitchell families.

The Youngs provide the list with its most unusual inclusion. Angus and Malcolm are founding members of legendary rock band AC/DC, while their brother George is a highly successful songwriter and producer.

To find out more about growing and maintaining family wealth across the generations contact FINH on 07 3229 7333.

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