How family governance impacts wealth and succession planning

In the realm of family businesses, effective governance is crucial for preserving wealth and ensuring long-term success.

Presented by Mutual Trust

Mutual Trust provides integrated family office, wealth and professional services to several hundred of Australia’s most successful families, family businesses, trustees, not-for-profits and individuals. In this Q&A with Jeff Steiner GAICD, Head of Family Office, we explore the significance of family governance and the benefits of partnering with Mutual Trust.

Why is family governance important for family businesses?

Family governance is vital because it aligns the family’s wealth with their values and goals. It provides a framework that ensures the family’s legacy is preserved. Without proper governance, families risk jeopardising both their wealth and legacy.

How does Mutual Trust approach family wealth management?

Mutual Trust adopts a purpose-led approach, focusing on defining a family’s purpose of wealth. This extends beyond financial prosperity to include fostering entrepreneurship, building family unity and harmony, sponsoring learning and engagement and contributing to the community. By aligning these elements with a multi-year family strategy, Mutual Trust can assist families with achieving their long-term goals.

How does Mutual Trust assist families in establishing governance structures?

Mutual Trust’s Family Office Advisory team works closely with families to develop sound governance structures, including a family constitution or charter. This outlines the family’s purpose, values and strategy. The team also helps create a management framework to implement the family’s strategy effectively.

Every family operation should consider four things:

• Do we have a clear purpose for our wealth and are we aligned?
• Do we have the family strategy in place to deliver on that purpose?
• Is our ownership and governance structure fit for purpose now and the future — does it set clear guidelines the family can follow to oversee their strategy to deliver on their purpose across generations?
• Do we have the right family office model (people, processes and systems) in place to ensure the plan is delivered?
• What makes Mutual Trust a preferred partner for company directors?

Mutual Trust offers integrated services, providing all necessary advice and support under one roof. This seamless experience is both independent and objective. The focus remains solely on the family’s best interests, ensuring sustainable wealth management. One of the many facets of good family governance is understanding the importance of family unity and harmony. How do family members govern their assets? How do they get along? How do they make decisions together? We help build transparency in decision-making, with communications enhanced and decisions depersonalised. Families inherently have emotional barriers, which can create complexities in decision-making. By having clear processes in place within their governance model, these barriers can be overcome.

What challenges do family businesses face without proper governance?

An update to the Productivity Commission’s 2021 estimates forecasts an impending $5.4 trillion wealth transfer over the next two decades in Australia. A lack of preparedness can lead to pitfalls that jeopardise both the family’s wealth and its legacy. Families can fail to transfer their wealth successfully across generations due to poor communication, not enough preparation at an early stage and no clearly defined purpose of wealth. Ensuring a sound family governance model is in place, where all family members are aligned, is key to success.

What role does philanthropy play in Mutual Trust’s approach?

Philanthropy is a key aspect of Mutual Trust’s purpose-led approach. The firm encourages families to make a positive impact through community involvement and social responsibility. This commitment ensures families not only grow their wealth, but also contribute positively to society. Community is a big part of what families do. We help to put strategies in place to help families make their desired impact across generations. We have a big focus on purpose, learning and engagement, so family members can fulfil those roles in the future and build stewardship.

What advice does Mutual Trust offer to company directors regarding family governance?

The best time to have thought about family governance was yesterday. The next best time is today. By taking proactive steps now, company directors can ensure their family’s wealth is preserved and continues to make a positive impact on society for years to come. Partnering with experienced firms like Mutual Trust is crucial for achieving long-term success and prosperity. Every family is different. We work with each one to ensure what is developed is tailored. You don’t want family wealth management and the governance that surrounds it to be cookie-cutter in its approach. That will not bring the outcomes families need to build wealth, keep wealth and provide for a successful wealth transition.

Prepared in Australia by Mutual Trust Pty Ltd (ACN 004 285 330) (AFSL 234590). It is general information only and has been prepared without considering any particular person’s objectives, financial situation or needs. It does not constitute, and should not be relied upon as, personal financial product, taxation or legal advice. Before making any decision, you should obtain personal financial, taxation and legal advice.

To learn more, visit Mutual Trust.