15/01/2010 - 00:00

Wealth management an age-old skill

15/01/2010 - 00:00


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Holding on to your money can be as difficult as making it.

Wealth management an age-old skill

THERE is a strong perception in the wider community that the rich get richer at the expense of everyone else.

It is a sort of mixture of the politics of envy and socialism that allows people to feel bitter that they have been unfairly left behind and, if only they had a leg up, they’d be wealthy too.

The only grain of truth in this is that the rich should be in a better position to extend their wealth because they have better resources at their fingertips to improve their position. The ambitious in the community understand that the first part of any fortune is the hardest to make.

It is a myth, however, that wealth in itself creates the means for perpetually getting richer. Like good looks or sporting prowess, it takes discipline and effort to maintain your assets.

The recent global financial crisis should have reminded everyone that fortunes, too, can be lost.

A recent example is reclusive businessman Ric Stowe, whose private empire appears under threat due to the troubles in its energy business.

Mr Stowe has made a fortune in the duopoly that controls the Collie coal deposits, for many years the primary energy source that secured Western Australia’s south-west corner.

In WA, Mr Stowe is considered an old-style magnate compared to the swags of new millionaires that have made fortunes in the recent mining boom and associated industries.

By European or east coast US standards, however, the Monaco-based businessman would be nouveau riche compared to the old money that has learned how to preserve itself through generations of careful asset management.

Mr Stowe is still largely an entrepreneur, which is why he was prepared to risk so much chasing the development of power generation to ensure the future of his coal assets.

Just how badly damaged his private empire is from this difficulty, which can be linked back to the deleveraging brought on by the subprime scandal, is not fully known. One thing is certain, though, private business people like Mr Stowe don’t appoint administrators to important assets unless they are in significant difficulty.

Some of WA’s other wealthy entrepreneurs have avoided such post-crisis problems by learning long ago that, once their fortunes were made, the time for big bets was over.

The obvious ones that come to mind are Stan Perron and Ralph Sarich.

While Mr Perron maintains his WA Toyota franchise and has steadily grown that business, the bulk of his assets are in property, especially CBD office and shopping centre assets. Mr Sarich famously made his wealth from engine technology but now is almost completely focused on property, including development.

It gives me no great pleasure to point out that those most successful at preserving wealth have concentrated on property ownership – as opposed to highly leveraged development as we have seen in the listed sector. This form of conservative investment, combined with low sovereign risk, has been the tried and true methodology throughout history.

Entrepreneurs find that difficult to stomach and, I have to say, so do I. I think it is one of the great disappointments of our society that so many people are focused on property development ahead other fields of endeavour. Even worse is the fact that such a concentration of effort has not helped make housing more affordable.

Nevertheless, the lesson for us all is that wealth, once attained, requires its own special management techniques, and a tempering of the entrepreneurial spirit.

One of the great tragedies of entrepreneurs is that they often believe they have the Midas touch, which makes them confident of repeating their wealth creation – sometimes more than once.

The nature of things

LIKE much of the population I believe I am a nature lover and want us to better look after our planet, but I am also quite cynical about how that general desire to look after our world is constantly tugged at by political agendas masquerading as ‘green’.

With 2010 emerging from a year of very hot climate debate I thought I’d make a few more observations on some of the big stories of the past few weeks.

Firstly, I took my son to see Avatar, the blockbuster movie while in Sydney on holidays. Being a closet science fiction fan I really enjoyed the spectacle created by the cutting edge technology. But the terrific effects could not mask the simplistic plot, which borrows heavily on the most fundamentalist of environmentalist dogma.

Let me run them past you.

• Miners are despicable people who will not let anything get between them and their treasure.

• The military can be privatised to help the industry achieve its objectives.

• Primitive people are physically connected to the land, which gives them energy.

• The world, Gaia, is the interconnection of all living beings, which will repel any threat to it.

I like science fiction because, at its best, it is a form of futurism through which talented minds have tried to understand where we are headed and the threats we face. But it should not be forgotten that it is fiction and shouldn’t lecture from the pulpit – Hollywood already has enough science fiction masquerading as religion.

And while Avatar warns about privatising the army, down in our southern waters we have pirates masquerading as our fisheries management and navy all in one.

The actions of anti-whalers are embarrassing and against a much older code of maritime behaviour. While whaling techniques may be cruel, I find it odd that environmentalists are putting so much effort into a fight that they won three decades ago.

Whales are no longer threatened with extinction as they were in the 1970s and if environmentalists want to stop Japanese people eating them then I’d argue what is occurring in our southern waters is quite counterproductive.



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