April 4, 2024

How wealth has repurposed ‘The Great Australian Dream’

HNWs have evolved beyond 'The Great Australian Dream' of owning a home, so what do they seek in life? We turned to generational wealth managers JBWere for insights.

HNWs beyond home ownership

We know the Great Australian Dream of owning your own home is getting harder for many younger Australians. But if Australians are suffering, so is the rest of the world, because depending on how you measure it Australia has the richest population on the planet.

Each adult Australian has an average net wealth of $US273,900 – the highest worldwide – according to the 2022 Global Wealth Report published annually by Credit Suisse.

Our friends in New Zealand came in third at $US231,260, while the United Kingdom was ninth at $US141,550, and the United States 18th at $US93,270.

From a different viewpoint, if you split the population in half, the wealth of the top 50% of Australian adults jumps to US$550,110. Although the global ranking drops to fourth with Switzerland, the US, and Hong Kong taking the top slots respectively.

It is one thing to crunch numbers and come out top of the world’s rich, but it’s another when your lived experience is a rising cost of living and the daily news cycle is focused on household wallet pressure from high inflation.

A competitive marketplace

It is also not a level playing field. Australia has an abundance of wealthy individuals, often referred to as High Net Wealths (HNWs) and Ultra High Net Wealths (UHNWs). This cohort is not only cocooned from cost-of-living pressures, but many are getting a turbo charge on their wealth as the property market pushes higher, particularly in the premium end. High interest rates also mean higher returns from fixed income – which is where many HNWs have traditionally parked large sums of cash to preserve wealth.

For HNWs property ownership is not usually an issue. But that highly desirable waterfront mansion is not within every HNWs reach. Also, when it comes to helping the children into home ownership not all HNWs can afford to secure a dwelling close to their own home. But regardless, home ownership for HNWs remains within easy grasp.

What are HNWs seeking?

You can’t dissociate a HNW from their wealth, it is what makes their dreams and aspirations a bit different to the average Australian. It is not just about ‘how much can I spend,’ it’s about protecting their wealth and they plan to utilise it.

JBWere Family Advisory Director, Peter Roach, has been in the wealth advisory game for decades, and says for older generations it’s often not about investment returns and maximising portfolios, it’s more about keeping the family together and ensuring wealth is preserved.

“Keeping it together is not just about having your family close, although that is a big part of it. It’s also about having a bigger pie that gets better returns rather than having it dissipated by siblings and others as they spread out and do their own thing”, says Roach.

“Generational families also tend to place great weight on governance structures and other disciplines to keep wealth together in a way that is not going to foster conflict,” he says.

Kim Venter, also a JBWere Family Advisory Director, says outside of wealth preservation is a strong desire within families not just to see younger generations thrive, but also contribute to society: “We have lots of conversations around the next generation’s identity and values and what they want to achieve.”

Of course, there are increasing numbers of wealthy individuals that have acquired their wealth more recently, particularly in the technology sector, and they bring a different viewpoint to wealth aspirations.

“By nature, younger entrepreneurs are creators and controllers, says Roach. “When talking about family wealth it gets to a point where it has to be more collaborative and not dictated. It will be interesting to see if the upcoming tech personalities have the DNA to be more collaborative or take a ‘my way or the highway perspective’ – time will tell.”

Venter says it’s a different mindset: “For those new to wealth with a younger family they may not be thinking about long term generational wealth. In comparison, someone coming from third generational wealth at the same age may already be looking at stewardship and thinking of all those in the broader family.”

Shifting the goal posts

Co-founder of JBWere’s Philanthropic Services, John McLeod, says the wealthy face the same difficult choices as other Australians, but the obstacles are different.

“We all have a set time of hours in life, so for the wealthy it’s still choices within that time timeframe, but there are wider parameters in that choice, so it’s about how do ‘I want to prioritise what is important to me’,” says McLeod.

“It’s about values, legacy and how you want to be thought of. It’s also ‘which holiday place do we go to’? Its choice, rather than can I afford it? For inherited wealth its typically influenced by what has happened before and the challenge to keep that going. For new wealth, the experiences are all new, so they tend to use it more to get those experiences,” he says.

Wealth does bring privilege

There is no doubt wealth helps most people achieve their goals, whether it is capitalising on experiences, owning a premium home, helping the extended family achieve their dreams or contributing to society through charity or the pursuit of social causes.

Andrew Bird, JBWere General Manager Advice, says the very wealthy may have some pain points but “generally it’s a charmed life.”

“It may be buying a compound style property in a beautiful location or a luxury boat or whatever is required to make the family come together.”

Shifting sands

But when it comes to the handing down of the business that may have created the wealth in the first place, Bird says there is increasingly a greater preparedness to liquify wealth if the next generation is not interested in the business.

“It is not as taboo to talk about what will happen to a business, wealth, and how it will be distributed as perhaps it was decades ago. Younger generations have always challenged their parents but now it’s very open,” he said.

We have businesspeople like Gina Rinehart still expanding their business empire, well known identities like Gerry Harvey spending on life experiences, while others like Mike Cannon-Brookes and Andrew Forrest pursue green energy for commercial gain but also societal change. We also have older wealth like the Myer family, where wealth and philanthropy have always gone hand-in-hand.

Wealth comes in all shapes and sizes, and so does the purpose it is put to. Not everyone can field the level of wealth as those above, however, for a typical HNW with perhaps several million dollars invested outside of the family home, there are a few more pressure points.

NAB Private Wealth Private Client Director, Gurj Basrai, says even with ‘The Great Australian Dream’, priorities are changing: “The younger generation tend to be more investment savvy, but they also have simpler investment tools at their disposal, like ETFs and Index investing. They are not as prone to link financial success to property.

“Since the pandemic, there is also a noticeable shift in younger generations taking time out to enjoy their lives, says Basrai. “The money side is more geared towards investments that create savings to carry on the desired lifestyle, and that is being enabled outside of property by technology which opens up easier and cheaper access to things like shares, but also to new investment opportunities in areas like private capital markets.”

Bird says while sometimes the wealthy are portrayed in an unfavourable light in the media or by politicians it’s important to remember that wealth helps to build the country, and always has.

“Earlier generations put most of their money into fixed income, bonds, property, and equities. The latter provided a lot of the investment that helped create Australia’s biggest companies, like BHP and Rio Tinto, Westfield, Woolworths and CSL. Those large lumps of capital benefited everyone, and it’s still occurring today.”

Bird says dealing with wealthy clients today is more like “sitting in a room with a bunch of investments bankers, compared to the old days when it might be a client saying ‘I will cut you a cheque and see you in four months’.”

“Technology has enabled people to become more self-reliant, and with the dramatic increase in access to tools, information and advice, it has awakened the wealthy to investing, interrogating where funds go, and the returns and risks of each trade.”

Dreams are different

Does the Great Australian Dream vanish with wealth? The answer is no, but it does change. McLeod says it expands and becomes ‘The Great Global Dream’, where the kids may wander off to different parts of the world, but in return the world is much more accessible, providing opportunities for parents to remain in contact via social media but have the international venues planned for get togethers.

He says although the ‘work-till-you-drop’ mentality is a thing of the past, people wanting to ‘live the dream’ still need to have the passion to make what they want happen. Whether that be experiences, philanthropy or a hobby that becomes an obsession, the aim is to work out what will bring fulfilment, and the path to make it happen.

Important Information

This article has been prepared without taking into account any person’s objectives, financial situation or needs. NAB and JBWere recommend that you seek independent legal, property, financial and taxation advice before acting on any information in this article. Past performance is not necessarily indicative of future results. No warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither NAB, JBWere or any related entities accept liability to any person for loss or damage arising from the use of this information. ©2023 NAB Private Wealth is a division of National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. JBWere Pty Ltd ABN 68 137 978 360 AFSL and ACL 341162.

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. NAB does not guarantee the accuracy or reliability of any information in this article which is stated or provided by a third party. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, property, financial and taxation advice before acting on any information in this article. You may be exposed to investment risk, including loss of income and principal invested.

You should consider the relevant Product Disclosure Statement (PDS), Information Memorandum (IM) or other disclosure document and Financial Services Guide (available on request) before deciding whether to acquire, or to continue to hold, any of our products. 

All information in this article is intended to be accessed by the following persons ‘Wholesale Clients’ as defined by the Corporations Act. This article should not be construed as a recommendation to acquire or dispose of any investments.