[MUSIC PLAYING] Welcome back to the purpose of wealth, the podcast on the secrets to protecting and growing intergenerational wealth, brought to you by Mutual Trust. I'm N'Rill Hooper, your host. [MUSIC PLAYING] What's the most important document you might have as a family? The first thing that probably comes to mind is a will. But have you heard of the family constitution? It's a document, kind of like a book that sets the ground rules for being on the family highway. It guides and supports decision making, and probably ensures there's no unexpected by-lubs. In this episode, we meet Nicola Michelle, physiotherapist and director of Michelle Wall, the oldest exporter of Aussie Wall. Nicola's the sixth gen member of the family, and she thinks the family constitution is the bee's knees, or whatever physio equipment works for her. Someone else who finds family constitutions equally fascinating is Jeff Steiner. Jeff is head of family office at Mutual Trust, and has been an essential force designing family constitutions for almost two decades. If you remember back to episode one of the podcast series, you'll already be familiar with Jeff's insights and his voice. Nicola and Jeff, welcome to the purpose of wealth. Thanks very much, N'Rill. Thanks, N'Rill. Great to see you again, Nicola. Yeah, you too. Jeff, let's start with some basics. What is the family constitution, and why is it so important? The family constitution is really, in simple terms, a family rulebook, which some might call even a family Bible. And it's an overarching document which clearly defines the family guiding principles that it is designed to support them to simply manage and grow their wealth successfully across generations. It addresses some of those key issues that many families talk about, such as how they make decisions together, manage and invest capital, access to income, and the really important ones of succession and the transition of assets to the next generation. So the family Bible, in one sense, is it a bit like the rules of the road to stop me running off? Absolutely. Speeding too much, not giving way at the give way sign. Yeah, it is a good document. And what it does is it sets up the foundations for the family to work together. And it helps them with the direction of their wealth over a period that could be 10, 20, 30 years. It helps them have all the frameworks in place. So when they don't know how to make a decision, they can refer back to it and follow a process that simply makes good sense. It's not like our shareholders agreement or anything like that, where often families will put in place to govern their wealth. It's actually a lot more than that. And its contents are quite broad. And as I say, I've never seen the same family constitution. Every family is different and will have their own set of rules or guidelines. But really importantly, it helps document the family vision so where they want to go in the future. It outlines the values, how they want to behave along the way. And it outlines their purpose of wealth. So what will the wealth be actually used for? Important areas are the constitution should define who family is, doesn't include bloodline, non-bloodline, children, stepchildren, adopted children, and all those blended families. That is a ever-changing landscape that we have to manage and deal with. So there are principles that we put in place as to how we define family. It's also a great document to document history and legacy, especially for new family members and the younger ones coming through so they can read up and refer back to where their families come from, why they're unique, and it sort of gives them that connection to the past, which is really nice and can be lost if it's not documented or the family don't practice storytelling. That's very broad and very deep. Is it in fact a binding legal document? Typically in a lot of the constitutions, they won't be legally binding because they're a guidance document and they're there to evolve and change over time. However, some constitutions of families may opt to have an agreement attached to those where they will sign off on a set of obligations that they will follow the rules in the family constitution. Others may just have a separate legal document that works to bind the family together from a legal perspective. So you don't get like demeret points if you, you know, doctor that I think. Oh, no, you do. Well, no, we have, there's actually a great section that we do explore with each family. And normally we would have an area where we'd list family privileges. So if you're part of the family, you could obtain access to income capital, you'll be able to be part of the family and understand all the things that are going on in the family. So you'll have a right to communication on board meetings, on family cancel meetings. You'll have a really good access to information. In return for that, you normally have a set of obligations. That doesn't have to be onerous, but it's almost like, what am I required to do as a family member? And it would be follow the values, turn up to meetings on time, add value and really take that role of stewardship seriously. And we have a set of guidelines that each family member can follow in order to do that. You've done a lot of work for Mutual Trust, a lot of foundational work in this area. How did you get started on it? Oh, gee. Oh, that's awesome. Take you back away, I know. I wrote my first family constitution about 20 years ago. And I look at it now and think how the world's changed and how it's evolved. Why I did it was that there were so many families still with unanswered questions about, well, if this scenario occurred, how would we make a decision together? We understand our ownership structure now, but what does that look like in the future? How do we make distributions to family members? How do we support them to enable them to grow their own wealth even independently from the family? How can they take on a family role within family council or within the family business or even in the philanthropy committee or the foundation? So all of these questions were posed to us. How can we pull all this together in one document that is user-friendly? So any family member can pick it up and understand it and read it. It's not necessarily a very thick legal document, but it's something in the family's words that they can follow. And I wanted to capture all these things in one place centrally. That was my motivation and the firm mutual trust as to why I should be generating these documents for families that we work with. Sounds like quite a lot of work. How do you go about bringing a family constitution to life? Normally we start with thinking through the family's purpose of wealth. What is the point of the money or what will the wealth be used for? And we use a framework and we have a gemstone framework that we use to explore with the family what's most important to them across a whole range of areas. And that can include things like financial prosperity. How do we grow our wealth and deal with distributions with family members? Entrepreneurship. We may have a family business or we may have sold a family business and be looking to buy other businesses. What is important to our family? Do we want to be in a business or we don't? Looking at family education, learning, engagement, the starting with those individuals. How can they personally be fulfilled and add value and contribute to the family over time? Community, obviously, is a large one. How do we want to make a philanthropic contribution to society? And most importantly, as a family, how can we be unified? How can we communicate really well and build harmony over generations? Many successful families have shown that they focus on these key areas. Once they are understood and the family has alignment, you'll have a purpose of wealth. So this is what the money will be used for. And then you can then start to go about developing a strategy or an action plan over time to deliver on that. And then obviously, the ownership and governance structures and all those sort of things follow. And the mutual trust gemstones quite famous now for those five facets. But it does sound like a piece of work over time surfacing those issues. Absolutely. And to uncover a family's purpose of wealth and a strategy to deliver on that, they can take six, 12 months, 18 months, two years. Because families need to one think about these issues as to what they want their wealth to be used for, how they want to engage with their wealth, how they want to be a steward of that wealth. And what that means from respecting the legacy of the past, but also what does it mean for the future and the family members that will be part of that family going forward? It is a long process, but I think it's important to know that if it's followed with everyone's views that can be tabled and you can achieve alignment, then you've got a really good solid foundation for the future. Well, we happen to have a live case study in the Michelle family, and we're really fortunate to have with us today, Nicola Michelle, to help us bring it to life. Nicola, you're a sixth generation Michelle family member. When did the constitution become important in your family that you recall? I was going back through the constitution with my sisters just a couple of days ago, and the last time we edited it was 2018, but I think it had been around in some form, maybe in many forms, before it actually became a constitution. So Jeff could probably correct me on when it first started, but it's been a sort of a work in progress, and it probably took a different form before it was the constitution for our family. Just Paul Jeff in there, what's your memory of that? Preliminary discussions started back in 2009, or changed. That's what I was thinking. I was like, there had been some big changes within the wall business and some legacy changes on that side and some ownership changes, and we kind of went back to the beginning.
Okay, well, what's the structure? What are the rule books? Who's going to be engaged when and why? It took us about three or four years of those conversations to really get it to a point where we had all the key foundations that we could then document that in a constitution. I would say it has changed hasn't it? Nicholas. And I'm the author of three girls. So my two sisters, when we first started, weren't over 18. And so I was involved first and we were picking through some pieces, but then everyone became of age or old enough to be brought into the circle. We got more complex yet richer at the same time as we sort of uncovered layers of nuance. And my sisters and I are very different. And so looking at the same topics from different eyes, just kind of created levels of nuance within a sort of a topic or an area of focus that I hadn't considered or my dad hadn't considered. I just wanted to go back there a bit because there's 150 plus years in the Michelle ball business. How do you see where you sit in the family history and the work of this next generation that you're involved in? The interesting part is that I don't consider this a wealth document. I consider this a legacy document. To me, the constitution represents the IP of our, I referred to as a nebulous family. As our sort of the nebulous of our family is these are the rules, these are the rules of engagement. Here's who can come, here's who can't and this is when that would change and it's a living document. It changes. It's even now we're going, oh hang on, we never filled that in. That wasn't relevant at the time. Now I have a four-year-old. We now have to talk about this next Gen 7 part. It doesn't really begin or end. It just formalises itself and continues to go through. So when did you learn about the family wealth and legacy? And how was that introduced to you? Oh, now, Nora, we're really going back in time. I don't think it was a time point. I think it was always. So these sorts of discussions were always had at the dining room table. So for me, it was transparent. I remember when I was in primary school or middle school when they were, you know, the GFC and all of those changes through the family business. There were always ongoing discussions, but they were tailored to appropriate age levels of information. So then as I became older and now running my own business, I get different perspectives of the same topic, but it wasn't a time point. We heard in episode 13 from your uncle Peter Michel, your dad, David's brother, what's your take on the strengths and the responsibilities of the family investments and the family business, the elements of the nabilis, if you like? I consider it to be a privilege and that you need to be wise and intentional with what you do with it. I consider myself to be a vehicle for legacy, not as someone who's out there to sort of, I don't know, spend it all or buy shiny things or consider it to be something that I'm supposed to be responsible for. And this is an ongoing conversation with my sisters and I when we're looking at the constitutions next edit on what do we do from an ethical framework? What's the social responsibility of what we're doing, whether you want to call it philanthropy or just ethical investing or whether you want to be intentional with entrepreneurship? Those sorts of things are probably top of my list for things, but that's I'm the black sheep in my family, so that's an ongoing discussion. That sounds to me like you're an out of the box thinker. I think coming from the healthcare side of things in my job as a physiotherapist I work at chronic pain every day, words are important, intention is it really important. I think that having a legacy like this you should be responsible and intentional with what with everything you do. Jeff talked about getting clear on the purpose of wealth which underpinned that document. What's your reading of that purpose of wealth? How would you describe it? I don't know and I don't think I'll ever probably have a good answer on this one for us. The most important thing in our constitution was the legacy of the Michelle Wall business. Now we've gone through so many recessions or big drought. There's a lot of strain on the wall and history at the moment, so that conversation is changing in how we'd be involved with will, but the primary part of the constitution was to preserve the relationships with Peter and his side of the family, preserve the relationships within our family, but also have that legacy piece carried through. So to maintain that to the next generation. The endurance of that intergenerational, the resilience that's had to transfer down through their family through those generations. You can see why that's such a substantial backstory. We've talked about the mission and the vision and how we wanted that to go. It changes bits at a time, but essentially it's the carry on. It's the next generation piece. It's the sustainability and the legacy part that's the centre. If I could add from my recollection was really to preserve and grow the family wealth, which included a large part of that was the business. So that we could leave it in better shape than we found it for the next generation. On those terms, so if you start with that big picture, visionary statement, everything else sort of flows from that. But that'd be fair, Diggler. Yeah, absolutely. You just this week had a family meeting. Can you tell us the story of how you came to call your family constitution the million dollar document? About a decade plus ago, I approached David and Peter and said that I wanted to be on the wall board for Michelle. And they said, "Okay, no problems. Hear your criteria. You need to complete a relevant degree. You need to do an AICD course and you need your family business course." So done. Did a finance degree at Sydney Uni? I went and did my AICD course. I think it was under 25 at the time, so I only did the three day one. And then I went to a family business course that was run down at KPMG in Sydney. And I think by about 10 or 11 a.m. on that first day, I realized very, very quickly that the room of about 30 people, I was the only person who was in a family business beyond second generation. And so it became a bit icky for a little while because a lot of the conversations were about how most businesses fail between generation one and two or two or three. And then the question came up or, "Dickler, you're in a family business. It's greater than that. What generation are you?" And so generation six came out and everyone was very interested. And I can't remember what we were talking about, but there was something around, "Oh, Dickler, how would you handle that in your family?" I'm like, "Oh, well, we have a constitution. So if this particular conversation went south, we'd have to decide who came to Christmas." And someone said, "You can't do that. You can't unenvite someone to Christmas." And I was like, "Well, you can. We have a roof walk." And if we get to the point where person A doesn't go with person B and we have unanimous decision making as the rule, then we go to mediation and then if someone says they want out, then they're also out for Christmas. Because what happens in a family business carries on to the dinner table. And then someone said, "So wait, you have a rule book." I was like, "Yeah, we have this thing called the family constitution." And it sort of maps out these frameworks. And then someone said, "Oh, can I buy it?" I said, "Oh, sorry, no. It's not really for sale. It's ha ha." And he was like, "No, no, I'll give you a million dollars for it." And it was, I was like, "Oh, hi. No. Thank you. It's very generous. It's not for sale. It's the IP of our family. We've spent years developing this. It's not really a document for sale." And then someone else asked me if they could buy it. And that's when I realized we had something that people didn't have or didn't think about. And that when you are dealing with a family, it does carry to the dinner table. So if you haven't set out the rules of engagement, who's coming and when? And if you want to get out, how do you get out? It's going to become a really emotive conversation later on. And you've got to plan your exit before you enter into the partnership. Why is it so important to be able to sit around the table comfortably and have a harmonious Christmas? Didn't go to last Christmas, but that wasn't because of this, but you were elsewhere on holiday. I was on holidays. But the whole goal of the family constitution is legacy. And so for us, it's about maintaining that central pillar. And that's the important part. So if the wheels are fallen off on the business, it's still families. So how do we preserve both parts? Or at least the sanity on the way through? What was the reaction of those other families to other than the fact that you could have made several million dollars on their occasion? Was that an enlightening insight for them? People were really horrified at the fact that you would not invite someone to Christmas. But when I sort of gave them the information that majority of family businesses don't go past generation two because of disruption, that is in your future. If you're not planning for the divorce, how are you going to maintain the family on the other side of the business? It also then came out to light that a lot of the people in that course, their children who they wanted to get involved were under 10. So it wasn't a family business. It was mum or dad or both. People hadn't really considered that if you have a spat at the board table, that's still dad or your brother that has to be accounted for. Jeff? It's really, really important that there's a set of guidelines and families not only sign up to it, but they understand how it works in practice because Nicola just explained a perfect scenario that families in business will have different views. But it's how they can reverse those views and arrive at a decision one way or the other, not have a dispute, throw their toys out of the cart, walk out of the boardroom and then say, "Oh no, I've actually got to go to their house on Sunday for lunch. How am I going to deal with that?" And then all of a sudden, you've got this business disagreement moving into the family disagreement. And obviously that is a real risk to family unity and harmony. And then sometimes if that's not resolved, it can bubble under the surface for years with the view that the family will then just fall apart. And we've seen that so often happen out there in the media and you've seen all those stories. So that something to avoid is by having this family.
constitution implies and a guidelines that everyone agrees with and how they just make decisions together and respectfully disagree but have a process to deal with that so the emotions don't interfere with the decisions that they're trying to make. And to add to that most of mutual trust have been on the the front line of most of our family disputes. Definitely been situations where either myself or my sisters we've got a call time I'm going on the block I've got to I'm this is we have to call it circle the block and kind of come back clear headed for you know 10 minutes later and go I understand that if we don't so in our family we have unanimous decision making it's not two against one so my true sisters and I we call it a sort of a dictatorship but it's a unanimous dictatorship and if we don't all agree nothing happens we go to the next layer of mediation if for example I don't agree and my true sisters do that's two against one so I have to go to mediation and convince them or get on board and so there's been situations where I've got no do not want to do that it's been a blow up arguments go how arguments go with your siblings and your family we'll walk down the block and we've gone okay I know this document is not legally binding however I don't want to go to the next layer of mediation so I'm going to concede but can we please minute it and we'll talk about it next time on this for us it's a rule book yeah what I've really liked about what Nicola does is Andrew Siblin's is when they do have that disagreement or that just a difference of view I call it they will go a difference of view they'll walk out and get ready for the next meeting where that decision will be put up on the table for discussion again but what they'll do is they'll then go and seek before that meeting they'll seek some objective or independent advice based on what they're wanting to do so it's almost like providing some evidence or substance to why they're making a decision and then that's shared with the family so they can understand better of where people are coming from but also have that independent advice there to support whatever it is that they want to make a decision on so Nicola who's in the meeting are your mum and dad in these meetings and who else can you give us a bit of a description of how that looks and plays out we decided back in the original constitution when my two sisters and I were all single no one had any sort of partners or children or anything that we were going to stick to bloodline so in the meeting which we refer to as men's Meg Emma Nicola David Susanna is the acronym is my mum my dad and my two sisters so no spouses are invited how long does it take to mediate usually so we've never actually gotten to formal mediation it's been threatened I've thrown down my documents and stormed out my sisters yelled at me someone's cried that's not uncommon but we've never actually gone to proper mediation so we have steps in the middle so we might go with Brad and say Brad I can't I'm not budging on this and then two weeks later you've had a big chat and you do budge a bit or something when the emotions have cooled down but when we get to the next meeting there's normally something has shifted either whether it was just headspace evidence time and someone's willing to concede and there's usually an agreement but we do have an extended sort of mediation process that goes all the way to out and if you are out you are out out Christmas is on so that's a big step for us considering that the legacy that we're trying to protect is the nebulous family and the business within that so everybody knows the emotional components that you're going to be buying out of if you do proceed through but we're all adults and it's all on table. Now if we go back to that original piece of research by Adelaide Business School why the family office matters and what you're both described today is that fundamental importance of communication, clear communication in in supporting family harmony. Just hearing how forthright you are Nicola you talked about not allowing things to fester when there's disagreements or conflicts do you see any sort of generational difference in the capacity for different generations to be forthright? Absolutely. I had an argument with my dad literally on Monday about the social responsibility behind investing and how it needs to be geopolitically considered and we had a conversation on whether you would prioritize profit over that and I said no and so we had a stalemate and paused the whole argument. We need to come back to this. This is something that hasn't been considered by him and he's I know he's been quite stoic because personality and background and I'm of a much different generation to this but this question has never been asked of him before. So I went okay we'll talk about this next and everyone disagreed to sort of minute that and put it to the next painting but yeah huge intergenerational swings. What insights have you developed on how a younger generation member such as yourself might deal with these communication differences within that family? Not just your family but beyond in other families. In my day-to-day work I work in chronic pain I'm a pain physiotherapist so intuition and reading the room is number one for me and so I'm quite big or going pause let's come back to this this is not feeling good which is not necessarily top of mind for others. Sometimes I describe it's like you've got to package it you got to put it a bit of PR box and so I've since gone back to my dad after that conversation I've gone these are the things that are important to me because and I've packaged it and explained it in a different way and so I think that people forget that nuance and tone and intonation in your communication and your body language is just as important as the message you're sending. If I had to sit through one other meeting with my dad going like this and crossing his arms and go stop crossing your arms at me it's not reading well. Yeah Jeff is that resonating with you and the other family dynamics play out that you've seen? Yeah absolutely we say it all the time but in a positive way just on Nichols family I've got to say that they are invested and really believe in their legacy and they put the time and energy into this respectfully so they've already streaked ahead of some other families out there. You're very kind Jeff. No but you should have been there on Monday it wasn't like this all. Everyone was open to everything and I think that's what really allowed them to put their processes in place have these discussions and be respectful of each other and it wasn't a check the box exercised for them so let's buy some a rule book over here from a legal firm and that's what our constitution is going to be. Every word in that document is theirs and we've been able to pull that together but in that document for example you will have processes as to how each family member no matter what generation they're from how they can canvas a view and what I found is the next generation coming through like people like Nicola they are ultra ultra intelligent. They are socially aware they've got great emotional intelligence that is a new dimension that's brought to the table it's not saying that the older generation is not like that but it is a different connection or communication technique that we're finding all the time so it's really how you meet in the middle and facilitate those discussions so every person put their view on the table and have time to just understand where the other person's coming from. Such deep work. It's a minutiae on this so I'm imagining a family constitution. How big is it? How many pages is it bound in leather? Is it e-copies? Where's it kept? Where do I find it? So I actually don't know how many pages were up to now Jeff. As is a PDF document that gets attached to an email and every now and again you'll flick through a page and there's a yellow highlighted section where we've gone adult later it's not relevant now. I think it's some 52 pages. Yeah it's got to say 50 pages is kind of where we're at. Big chunks of it are work in progress. So for example my sister has a nearly two year old. I have a four year old. We are now in the discussions on is there an education contribution? If so how many children does it max out out? Is it one person can have 10 children or one person can have zero and they're going to be financially biased? How do we keep that level? And then the differences between states. So my two sisters live in Adelaide and I live in Sydney. School fees are very different when you're looking sort of between states. So is there a reference point? Is there a contribution? Percentage? Is it an amount? So we're working through that at the moment and my sisters and I are actually looking for a lot more transparency and fairness than actually my dad is. So he goes, oh no, just we'll pay the whole thing and my sisters and I go, hang on a second. One of us doesn't have any children. One of us has nearly like one in a heart. Well one's pregnant. I have one. That's not fair. Let's cap it at this amount. So I think that the generosity and fairness is also an intergenerational difference between the layers. So you've described your mum and your dad and his sisters and then the next generation. How does that legacy piece look looking back to the other generations that go before you in this document? Do you use it every meeting? It's reference to most meetings and when we look at the generations prior to I think we can see particularly with my dad and my uncle Peter, we can see what worked and what didn't work and then if we go even higher again to my grandfather John, how the transfer of information and what worked and what didn't essentially. And so David and Peter are about 10 years apart. So there's a big sort of generational piece in there where communication and how their parents transferred information to them was different. And so trying to learn from those things and apply them in a way that's relevant to our family is really important. If you've done it and it didn't work do it differently. If it did work great, let's lay our upon it. Jeff, I had a question for you on the intergenerational differences.
how have you seen things changed? - Well, I think Nicola touched on it. - Yeah, well, no, but it's a really good one. I think Nicola touched on it just then about the transfer of information and just the transparency of everything around the family affairs and how decisions are made, ownership, distributions, all of these things. Obviously, if we go back 20 odd years, people don't even speak about their will. If you think of that, it's very conservative and it just was not the thing. Where today, families like Nicola's, they know the importance of legacy, they know the importance of wealth, they know everyone needs to be aligned and on board and learning over different phases of their lives, if they're going to be successful in the future. That is a real key difference between generations in my view. - Yeah, just to add to that, the probably the biggest difference that my dad has imparted is access to some of that legacy in wealth. My dad didn't get access to any of it until his mid-late 30s. I was involved a lot earlier than that, but I own my own business and in 2016 or 2017, I actually did a whole business proposal to the family business and said, this is what I want to do. I want to take over this clinic, I want to do X, Y and Z, here's the business plan and I actually consider them to be shareholders when they let me the money at the startup capital for that. And then I had to in those board meetings back again, report back on the successful failures of the business until I paid my debt down. Obviously that's a very different landscape financially pre-COVID, but it was an opportunity for me that wasn't afforded to my father. He had learned from what he didn't get access to and is now probably earring on the side of two generous and we stop it. My sister's an aisle, like hang on a second stop, that's not following the legacy. So I borrowed from the family some startup capital, got the business often going and considered them shareholders during that, but then I paid it back. It wasn't a gift, it wasn't anything like that. It was a transfer for a minute and then back through again. And how do you figure out potential scenarios that might need to be covered? So we mapped a lot of this out with Jeff and what if my poor sisters became the scapegoat of when Emma's rowed husband. So take in mind that Emma wasn't married, she was about 20. Emma's husband wants to invest in a chain of bakers delight. Can he come to the meeting? Can he borrow this? Can he, and we basically workshopped every scenario? Can he set up the yoga retreat in Byron Bay, blah, blah, blah, can he do this, this and this? And we sort of mapped out every scenario as extreme as it could go and went, no, we're out. This is when he can come in. This is how much of the meeting he can stay for. Is he involved in the decision making process? Went through the whole thing. This joke about my sister's bakers delight chain that she doesn't have. A great way to have a whole pathetic or-- Good to say too, that we followed the principles of what a bank would probably follow. However, a lot more lenient than that. Because obviously we don't want to go through a bank process. But you just follow the key principles and then sort of say, well, what would be appropriate? Yeah. And I think that worked really well. It must have been pretty funny though. Yeah, you know, he's a mud blood. He's not one of ours. He's not one of the blood blind. He can't come to the meeting. What is mud blood? It's a Harry Potter reference for someone who's not a pure wizard. Now I'm really showing my history. Thank you for filling that gap. Because a partner would not be of the blood line, they can come and they can pitch, but they need to leave. They're not part of the decision making process. Wow. Approximately what's it cost to set up a family constitution? It's definitely not one or two million dollars. Should have sold it. They're a nickel. You would have made a fantastic profit on that. It's probably-- it's hard to quantify because to get to a point where you've got an actual family constitution, it does take years to get the foundations understood and agreed upon. So there's a whole variety of work that goes into a constitution. So I would sort of suggest each family is going to be different. They're going to have different sets of affairs, different structures, all these sort of things. So I'm sorry, I can't give you a definite number. But be less than 10% of any of that. If that's a God. I will just add, there's a big emotional cost, though, that does come through when you are fleshing out all these conversations. So when I had to say to my sisters, like, no, I don't think you should do that in this hypothetical scenario. I think we fought more times than we-- I mean, fighting at least you're communicating. But there were a lot of conversations that didn't go well to come to an answer. So there's an emotional cost. There's a time component there. There's some disruption on the way through to find that common ground. That's the deep work. What's the most important thing you think your family constitution does, Nicola? I think I'm going to come back to the legacy part. So I don't live in Adelaide. My whole family live in Adelaide. So we check in probably once a quarter at the moment on these family meetings, I guess. And it has a common thread that keeps everyone on the same page. So we're all in very, very different phases of life. We've got very, very different risk profiles and wants and likes and hobbies. So for us, it is a central guiding north star on what was. And while we're still putting nuance to some of those pillars, they're going to keep growing with us. It is where we were all together. This is what we all agreed on. Well, I want to be communicating my corner when it comes to that record. Jeff, we've seen family constitutions are really critical. But what proportion of families actually have one? I would say 30% of families would engage on a family charter or a family constitution to document all of the things that we're talking about. I know that there's plenty of research in Europe and the US that suggests that those. And I think there was a business study with over 550 families in Europe undertaken where it showed that the families that had constitutions or key governance documents in place returned double the capital over a period of 10 years than those that didn't, because they were really well organized. And they knew what the wealth was for and how they would invest. And they had decision-making processes so they got on with the job. Those that didn't have that and were more making it up as they go, but still successful and fine, they just lagged the other families. So you wouldn't think just a document like this would make such an impact. And I think from hearing from Nicola today, you can see that it's made a great impact for their family because it's legacy focus, which is really the success of their family seventh generation now coming through and hopefully more generations to come. When you go back to the early days, when they didn't like to plan, they liked to be. Right. That was the last thing that they wanted to do. Our family constitutions becoming more popular. I think so definitely. And if we think of the wealth transition on our doorstep in the next decade, where there's 4.9 trillion or something, again, just Australia, alone that's going to change hands. And the fact that there's a lack of succession plans and formality around that transition. Constituutions will play a key role. And I think the demand for them will really increase substantially in the next five years. As people think about how this wealth will transition, how will ownership work through, when change, how will management change all of these things. And it's pretty exciting. I mean, who would have thought a family constitution could be exciting? Look how nickel is outlined. Right? There's a lot in there. And it's fun making up the rules. Just to add to that, it also for me allows a huge education piece for me on the understandings of what's involved. So I barely scraped through my finance degree. Sydney Uni, but I would like to believe that I'm excelling on understanding the documents through our own family. When you live it, you understand it. And so it's a huge sort of lived MBA, essentially. I don't think you can get that unless you're in it. There's road rules. There's official road rules and there's our road rules. What does an Aussie-centric family constitution look like? How might that template be different from some of those examples in Europe or the US? Because Australia is probably newer to organising family wealth in a formal way. And if you think we've been looking at this for 30, 40 years and it's really coming to a position now where I think Australian governance and documentation are probably the best in the world, in my view. The European and the US-based type families, they're dealing with constitutions that were created 150, 200 years ago. And some of them are rules that they cannot break even today. There's a lot of trust structures that are set up in perpetuity for the next eight generations. Australia, we've got a lot more flexibility to make it our own and evolve with time where they are constrained a little bit more so in the US and Europe. And for families that don't have a constitution, how keenly are you suggesting they set one up or start the process? If they really want to maximise their chances of success to engage their family members, bring on the next generation and transition their wealth successfully over the course of the next few decades, my professional view is that these documents or this process to follow in at the very least are critical to that success. What are the risks for families that don't have these guidelines, these family Bible, these kind of road rules? Look just from my viewpoint, if you don't have a framework to make decisions or communicate well or. or as Nicola would say, transfer information, then there's a real risk that the next generation will not be engaged, and they potentially will most likely exit the family at some point in time. If you want to maximize success, lay the foundations down for everyone to be aligned and engaged, then I would say that undertaking this top of process and getting these documents in places really important. But maybe Nicola, what would happen if, for example, your family didn't have a constitution and didn't have processes to follow? What do you think would happen? I can give you a really fresh example. So two days ago, we had our most recent family meeting, and my sister's an I/or clash on a topic. Big time, we couldn't get past it. So we went back to the constitution. We all agreed on what we had put in the constitution, but our individual inputs were all different. So we've piped that conversation, we're going to come back to it because the central pillar we agreed on, just how it was actioned, was very, very different. And so I don't think without that constitution, we would have had a stoplight that go, "Hang on, you're on the same page." That would have exploded. You've seen sisters fight, it's brutal. You've got to leave the room. So without that pillar to go, "No, no, no, you're here. You're still here. I don't think we would have stopped." Great example. You've told us a bit about your work in physio and pain management. Can you tell us a bit about your own business and your own aspirations given the family legacy? I took over a clinic in 2017, which was far smaller than the room I said it now. And at that time, I borrowed the startup capital to take over and get it running. That was with a business proposal to the family. I basically addressed them like a bank. Said, "This is my idea. This is what I'm projecting out." And I paid that debt back in full within two years. So that's sort of my proudest achievement today. From there, we managed to prove a business model that it survived through COVID. And now I have more than quadrupled the business with some bigger growth plans towards the end of the year. Having the backing of a family business and a family legacy piece gives me a little bit more of a buffer in terms of taking those risks. So I can pitch, if I needed to, I know I've got access to a little bit of flex on capital. If I need to, if I need to have more of a guiding light, I'll go back to the constitution and apply it to my business. Because the constitution was built around our family goals, aspirations for the world transfer. But they're also my own. Those pillars will also underpin my decision making within my business. So they're not different to me. To me, it has to be one and the same. I'm a big believer that what happens at the board table comes back to the dining table in most scenarios because your moral compass should be relatively similar. So when I'm not sure what to do with the business, I'll go back to the family constitution and go, right? OK, I really want to do this. What would I do if this was a family conversation? What would it be like? And I'll apply it and go, OK, let's go. Did your partner or your husband have any input to this process? So he would rather run far away from health care, which is fair enough. It's nuanced and highly legislated. So he has nothing to do with it, but he's very supportive. And I'm thinking back 150 plus years behind, and even dare we imagine 150 years ahead. Do you ever feel a bit of the weight of the family history? Absolutely. And I think that when we first talked about creating the constitution, I was probably the biggest vocal piece, probably more so than my father, to say no, no. The whole point is the wool business. The whole point is the legacy on that. I think because he has lived potentially some of more of the burden, he's quite like, I don't want a burden, you guys, with this, but where quite vocal or no, no, no, that's the point. That's the middle. So how do you reconcile that with your own needs? I think you just got to work it through every day. Every day is a different conversation. The wool industry is highly turbulent. It's affected by geopolitics, by global recessions, and shipping issues to recover. And all of those things even currency risk. So it's a very, very dynamic and multifacted conversation that I don't think you can encompass it in a minute. We talk about the constitution being a living document. I think the conversation around the family business, even since our last edit in 2018 has changed. So we're now re-termining what we would define the wool business. Do we re-term it to textile? Do we re-term it to, is it wool exclusive? And how would we frame that? Jeff, I have just a question, I know in terms of communication styles. And we've talked about the differences in intergenerational communication styles. Do you see a male versus female difference? It sounds like Nicola and her sisters are great communicators. What have you seen with some of the other gender differences in the families? That's a good question. And that's changed over the years as well. I just think that female family members, board members, they are very proactive. They put forward their views and their voices. They're a challenge, I can tell you. They're in a good-- You're welcome, Jeff. Yeah, in a really good way. But it's actually the discussion has changed. So if you go back 30 years, it was probably one way. Today, it is not like that. I'm finding a lot more female voices being put on the table. And the women are going to be the majority of the wealth inheritors in the future. That's the statistics say that. They have a voice. And quite frankly, they've got some great views. And so having that gender diversity in the mix that's fair and equal, I think that's where you get the best outcome. Nicola, what's that future look like from your perspective with more women at the table? I mean, I'm coming from a background of two sisters. So it's always going to be women at the table and our household. I think that coming through this next generation of women as Jess talks to, we're realizing that if you don't say it, it doesn't get said. And I've often said in a meeting, like, I understand where you're coming from, but that doesn't feel good to me. And surely there's a better way, or there's a nuance that I'm seeing that you're not seeing. And I think that we're probably getting this skewed representation of women who have witnessed women not having a voice. I'll often get told that I'm too upfront, or I'm too direct on things. And I don't necessarily think that's a bad thing. We've got a couple of questions before we round up. Nicola, what's the best advice you've ever received? Ooh. My motto with most things is fail fast. That comes down to communication. Say it loud, say it once. Give it a go. Get out of, if it doesn't work. And our constitution has really worked for that. We've tested a lot of it and tweaked as we've gone. Jeff, best advice. Don't procrastinate. Just get on with it. And there's a final question on the purpose of World Podcast, which is what matters most. Nicola, I'm going to have to say family, but that feels really icky to say it in that context. Why is that feel icky? What do you mean? I feel like when you say something is all about family, it comes down to the emotion, the metaphorical version of family. But in our context, family is the point. It is the central pillar. It's the legacy. It holds the IP. It's the North Star. It's the moral slap across the cheeks when you need it. So for me, family is all of the pieces, the good, the bad, the ugly. Jeff, what matters most? I've been in this regard just seeing families do what matters most to them. And Nicola has mentioned the legacy and the business and make the impact with their wealth that they want to with the next generation in tow. So I just think that's critical. And it's rewarding when you say it in practice. From a more personal perspective, Jeff, what matters most to you? Happiness, health and well-being, and individuals being fulfilled personally and making a great contribution. And I know it sounds very high level, but I actually believe that I've got two daughters of my own. More women. More women. And a female dog. So we have these conversations around the dinner table as well. And when there's any questions, I say, as long as you're happy and you're doing what you love and you're making a great contribution, that's the key. And the rest is really secondary as well. Nicola Michelle and Jeff Starner feeling better hands all ready. And I'm sticking to the road rules and not running off. Thank you both for a really great conversation on the purpose of wealth podcast. Thank you, Nero. I'm hoping Christmas dinner and Christmas lunch, whichever it is, is going to go well this year. I'll call you Nero. I'm probably homeless this year, so unlikely I'm hoping. That's it for this episode of The Purpose of Welfth. If this conversation has sparked more questions and you'd like more info, head to metrotrust.com.au or email us at
[email protected]. You can also find out more about the groundbreaking research why the modern family office matters. I'm Nero Hooper, I'll catch you next time.
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