The rich are increasingly managing their fortunes professionally, which is good for our economy.
I RECENTLY took a deep dive into the world of family offices. Well, as deep as this pool allows.
While the local sector has exploded in recent years and represents about $95 billion in wealth under management in one way or another, it is still a very specialist niche that takes its privacy very seriously.
While Business News is very respectful of those who wish to keep their private lives out of the limelight, there are some very good reasons to share what we do know about this sector.
The first is that the rise in true family offices, where a significant diversified portfolio is managed by investment professionals who earn a living in that role, represents the scale of the economic change that has taken place in Western Australia in the past 10 to 15 years.
A decade ago, the number of family offices could almost be counted on one hand and could be covered if you stretched it to two. In our last edition, Business News found 26 entities where families with an estimated wealth of $200 million or more, held their wealth and had external management.
A few exceptions included were second-generation management over a portfolio that was vastly different from the business that created the fortune.
That is a staggering rise. It is also notable that not all that wealth is derived from mining.
That is my second point.
Naturally, resources wealth represents the vast majority of that select group, especially given the presence of the Hancock and Forrest fortunes at the top of the tree here.
Below those though are fortunes derived from other sectors. It would be fair to say that some of that wealth still bears a strong connection to resources.
The Stokes’ media and mining services empire, Perron’s Toyota and property holdings and the Buckeridges’ position in construction have all got some indirect links to the wealth generated in this state by mining and gas, which drove population growth and retail spending.
However, there are other examples which reflect a different story.
The Escalante and Sarich fortunes came from technology, the Wynne wealth from human services, the Jones’ fortune was founded in international education and Steinberg’s was from founding the arcade game centre Timezone.
It could be argued the wealth of mining that underpinned our society created indirectly the environment for such success.
Innovation is much easier when you live in a place where the basics identified by psychologist Abraham Maslow’s hierarchy of needs are met most easily.
I am not one to claim there is something in the water that promoted the growth of WA entrepreneurs but I will argue conditions were better here than in many other parts of the world.
We should celebrate that and, as we consider tinkering with the conditions on which our success was derived, take stock of that part of our history.
A third reason to highlight family offices is because the management is based in WA.
That has two major benefits: more high-end, well-paid investment sector jobs that ensure talent is attracted or retained in WA, and investment decisions are local, which inevitably means greater opportunity for the next generation of entrepreneurs to receive funding and build their businesses here.
And it is worth mentioning that such investment is not just in direct business activity.
There is a significant philanthropic side to many of these family fortunes and the offices they employ, which has a significant spin-off effect in the local economy and community.
The Forrest family’s Minderoo operation is huge and well-known but there are several others at various levels of public engagement.
Perron money funds the Stan Perron Charitable Foundation, which in turn supports the neurological and translational science research-focused Perron Institute.
Both the Bass and the Steinberg family office founders have chosen to direct considerable effort to encouraging entrepreneurship, on the basis that more understanding of such behaviour will result in a better and more diverse economic outcomes.
Bass founded and supports the Centre for Entrepreneurial Research and Innovation aimed at educating academics and scientists on how to commercialise their work.
The Steinberg backing via its Malka Foundation is even more grassroots, funding the teaching of entrepreneurialism in schools as well as universities.