Speaker 1: 0:03

Hello Finance Friends listeners. Today we have David Werdiger. Welcome, David, how are you today?

Speaker 2: 0:10

I'm well, thanks, Fabian, and thanks so much for having me.

Speaker 1: 0:13

Well, thank you for being on. I went to an event a couple of weeks ago where you were the MC for, and spoke about, family dynamics and family office and intergenerational transfer of wealth, which was really interesting and something that you do. You're a specialist in this field at the moment.

Speaker 2: 0:32

Yes, so that was the Prime Financial Group event. I think we can give them a mention. Yeah, we can, and yeah, it was a lot of fun, nice crowd and I love talking about what I do, but it took me a long way to get to where I am now, which is itself an interesting journey, I guess.

Speaker 1: 0:49

Yeah, and that's what we're here for today is to understand that journey, because you don't start off as an 18-year-old wanting to give advice advice to families around structure and dynamics and, potentially, policy and whatever might involve in governance. So let's talk about the start. Where did you when you were finishing high school, what did you want to do? Did you know what you wanted to do and what did you study at university?

Speaker 2: 1:24

Oh gee, when I was finishing school. So I grew up in a business family, I grew up around that and at the time that was textile manufacturing and commercial property and my dad was very successful and it was sort of expected that I work in the business as a student, which I did, and I'm the youngest of five by a long gap. And in the business already my dad was running it. But I had three others brother, brother-in-law and cousin, all of them 10-plus years older than me. And there's little me, the youngest, the spoiled one, working in this business and thinking what do they think of me? You know, am I going to be their boss one day?

Speaker 1: 2:02

I had no idea.

Speaker 2: 2:05

And in school I was very, very good at maths and science, really bad at English. I actually failed my trick English, and so, you know, I went to university, studied a little bit after school and then went to university, and by the time I finished university I thought you know what? I don't want to be in the family business. It probably took me 30 years to work out why. But one thing that was very important to me at the time was to get a job on my own merits, and that's probably become a bit of a theme. So the first thing I did was I got a job for Macintosh Securities a stockbroker, but not a stockbroker. I was a software geek. I was developing real-time stock market information systems, and then I was a quant analyst. So a lot of your listeners might be familiar with Iris. I was one of the developers of the predecessor to Iris.

Speaker 1: 2:59

Oh interesting, I didn't know that. Yes, because obviously software development now is a big thing and everything with tech, and obviously ai seems to demand a premium in terms of human capital, skill set, but also business growth opportunities. So I'd imagine software engineering when you started, macintosh security is very different to what it is today.

Speaker 2: 3:23

Oh my God, we had a big computer room which was air-conditioned, okay, and we had this big data general computer and a hard disk. And my boss at the time, who was later one of the founders of Iris, he said to me disk space is cheap and this is in the late 80s and we had, oh I don't know, we were so excited we might have had like a 20 meg disk drive, like a washing machine size, and it was just. Software development was something completely different. We were spitting out, sending data over leased lines to dumb terminals which were displaying 80 by 25 characters. That was our space. We could work on the guys who were doing the graphs. They were doing them with little lines, with vertical bars and plus signs to simulate a graph. It was a very, very different age of software development compared to these days cloud and screens and user interfaces that we'd never dreamed of back then.

Speaker 1: 4:27

Yeah, so when you so, you were at Macintosh Securities for how many?

Speaker 2: 4:32

years, I think three, four years in those two roles software role and then I was a quant analyst with the research department, which was tons of fun, yeah. So I tended to find myself gravitating towards software jobs that revolved around making sense of a lot of data, and that was something that I really enjoyed doing. But even though I was in a job, I wasn't comfortable. I wasn't working nine to five because I grew up. You don't work nine to five, you just do whatever needs to be done. But even though I was an employee, that's how I was looking at the place and I thought this is not for me. I don't want to climb any corporate ladders, I want to be in business. So I left that and started a business.

Speaker 1: 5:14

So how did you come to the decision of the business to start and talk us about that business?

Speaker 2: 5:21

So in Robert Kiwasaki Harance I owned a job. I didn't own a business. I left full-time employment and I started developing custom software for people. So I thought about that and I thought, okay, look, I've got a business, I'm my own boss, but what am I selling? I'm selling my time. Yeah, and you know, time that's the most precious resource we've got. We don't want to be selling time because there's only so many hours in the day and all of us have exactly that. But I continued to do that for a while and I went from one job to the other and I realised you know how am I going to scale this business? The only way to scale a business that's selling time is to sell other people's time and take a margin on it a professional services business. And I didn't want to do that because I wasn't comfortable doing that. I was comfortable coding and writing software and that was an expression of creativity for me. And I was fortunate in the mid-'90s to stumble across a software development opportunity of a telco billing system. And after I had the opportunity to do that, suddenly I had a lightbulb moment because one of the people I met said you know, I've got some other people who need billing systems.

Speaker 2: 6:31

This was a time in Australia of telco deregulation and all these baby telcos were popping up and they all needed billing systems and I thought, oh, okay, this is my opportunity to pivot from selling time to selling IP. Okay, this is my opportunity to pivot from selling time to selling IP. I'll redevelop this billing system as my own IP and I will own that and sell it many times. And that was a good in concept. But then, you know, I had these companies starting telcos and they said we're not going to spend big money on a billing system. Well, we don't want to. Some of them did. But one of them said I'd rather lease it from you, I don't want to pay for it. And so, with this customer, I developed a model, a business model now known as SAS, where they leased the system and they paid for it through a percentage of turnover, that was bill through the system.

Speaker 2: 7:25

And that was really a turning point for the business and really enabled us to grow and pick up all of these young telcos. And and in a way we were investing in them because some of them turned out to be duds, you know, we had some cost to set them up and onboard them, but once we did, we had low cost to serve eventually and and it was a nice business because it had recurring revenue and that sort of kickstarted me into probably the larger phase of what I now call, in hindsight, my second career as a tech entrepreneur, because I started two other telco businesses and I partnered in two others and I had what I called a Lego set of telco. And I say that because when I was little I used to play with Lego and I wanted to be an architect and I guess I was an architect, but I was an architect of businesses and that was a lot of fun. And the other thing I did at the same time or in parallel with that was I joined a couple of non-profit boards in my community, which was a fantastic learning experience learning about non-profits and my family was very philanthropic and hands-on in non-profits so I grew up around that, so familiar with that space but really learning about it as a director learning about director's obligations, learning about non-profit governance, learning about strategy, learning about how boards worked, and also one of the roles was an opportunity to meet a number of other families from my community and learning about all the things that they were doing in terms of intergenerational wealth, and it was a real eye-opener for me. I loved it and I thought, wow, this is something my family ought to do. But my family wasn't particularly interested. My dad knew what was best for everybody, as people of his ilk did, and that was his way of doing things, but nevertheless I knew that at some point I would be responsible for a share of significant wealth, or however that would pan out, and I felt an obligation to continue to prepare myself. And then so we're now sort of at what ended up being towards the tail end of my second career as a tech entrepreneur.

Speaker 2: 9:47

A few things happened some business related, one health related sort of got me thinking what I want to do with my life, and I developed this mental model of time and purpose, time being our most important asset and therefore the decision how we spend our time is really one of the most important decisions we make where we want to be spending our time, and I thought you know what I don't want to be an owner-operator of business.

Speaker 2: 10:16

Until the day I die, I was already on a journey in that business to be more working on the business rather than in the business on a journey in that business to be more working on the business rather than in the business, and I felt it was really important to delegate and empower others to do that, because I couldn't do it myself. And I thought, well, what should I do with my time that could make a difference and that could leverage my skills, sort of like a bit like the Japanese concept of ikigai. Yeah, and what I came up with was was I thought you know what I'm from a family. I understand families inside and out. I understand technology. I understand entrepreneurship, I understand governance and strategy. I'm developing more and more knowledge about family dynamics and intergenerational wealth transition. I thought you know what? What I'd really love to do is advise other families on how to navigate it, because it's not simple and that's you know. I ended up writing a book about it.

Speaker 1: 11:16

So what's the name of the book? So can you share that with us? Yeah, sure.

Speaker 2: 11:20

So the book is called Transition how to Repair your Family and Business for the Greatest Wealth Transfer in History. I wrote this now in 2015, 2016 or thereabouts, and you know there was a lot of talk about this great wealth transfer because, you know, people had calculated the significant wealth that was generated by the baby boomer generation and they started reasoning well, these baby boomers, they're going to start retiring at age 65 because that's retirement age, and what are they going to do with this wealth? They're going to give it to their kids, probably. And then people started to quantify it and you know we're talking trillions of dollars and you know it started to become a thing and people are still talking about it today because it hasn't really happened yet and one of the assumptions is that people would retire at 65. But if you are, you know, a blue-collar worker, then you do retire around about the age of 65. But if you are an entrepreneur, then you can work well into your 70s, 80s and beyond. So we're seeing this thing extending in duration more than people expected and some interesting effects out of that. We live in a time when four, sometimes five, generations of a family are alive at the same time. My mother bless her, she'll be 90 shortly and she has three great-great-grandchildren. I call it the 5G upgrade, but that's going to become more common. And uh and and. For families to navigate this it starts to get very tricky and you get various effects. People are living longer, people are being are healthier.

Speaker 2: 13:12

So think about king charles. Okay, so, for a long time he was Prince Charles. Some people might say too long, charles, one day you'll be king. How many times would he have heard that and how many times would he have thought to himself mummy, when is this going to happen? And it didn't happen until he was 73. You know, I really feel for him because he's sitting there waiting to become king and you know he's got all of his royal duties and obligations and you know, and he's next in line. I think, oh, you know that's a tough gig and now he is king and good on him. But you know those years his best years, you might say perhaps in his you know 40s and 50s. Where were they? You know, why couldn't he be king then?

Speaker 2: 14:07

And we're seeing this King Charles, prince Charles effect in families where the incumbent generation are in their 70s and 80s and still active in the business and the next generation are in their 40s and 50s and saying you know, do I have a role? And then their children are in their 20s and 30s and bursting with energy and wanting to do their thing, and so this wealth transition is not necessarily from one generation to another, but really has to consider three generations simultaneously in some families. So it's a very interesting space. So it was in that context that I wrote a book and crafted a career and started writing a lot, which I really enjoy and working with families, and I work with families helping them navigate wealth transition, navigate succession. But I do it not as a lawyer, not as an accountant, not as a wealth manager. It's probably easier to describe it in terms of what I don't do than what I do, because some people don't get it. They say oh, you do structuring? No, no, no, no, no. I work on non-financial family capital.

Speaker 1: 15:26

Yeah, so it's about opening up the conversation with the family and ensuring everyone has a say and everyone's on the same page, spot on.

Speaker 2: 15:35

Exactly. I liken it to building a castle, and this is what families are building. They're building something that is going to last, hopefully for generations, and any such building needs a foundation, and so the foundation of a family that lasts a long time are three things. The first one is communication everybody having a voice. Communication is strongly correlated with trust. I was thinking on my way here and some stuff that I'd read. One of the biggest problems I encounter are parents that don't trust their children, and how that manifests is oh, I'm worried that the kids aren't ready, I'm worried that the kids are spoiled, I'm worried that the kids are not going to do the right thing, and those are all ways of saying I do not trust my children.

Speaker 1: 16:35

So how do you overcome that then? If they don't trust their children and that one part of the discussion, but obviously it is important with what you do, how do you overcome that?

Speaker 2: 16:47

You need to get them on board, okay. So I think about, sometimes, a spectrum. I don't want the kids to be spoiled, and this is a concern, because when you are raised with wealth, there is a risk, and the risk is that you do not end up being resilient, that you don't have drive, you don't have purpose, and you grow up with plenty having everything you need, and that can be a disincentive to do anything productive with your life, and this is a concern of parents. So that's one extreme. So how do people respond to an extreme? They go to the other extreme. They'll say we are going to hide our wealth, we are going to withhold it from our children, we're going to be really tough with them. And that is also not a healthy extreme.

Speaker 2: 17:40

I've seen families that have the King Charles effect, that the kids find out in their 70s that they suddenly inherited significant wealth and they're filled with resentment. They're saying hang on, why the hell did I struggle in my 30s and 40s when I needed it most, when you guys had all this money? Okay, you didn't have to shower me with it, but help me out. So that's the opposite extreme. We don't want that. Or the other thing you have is the sandwich generation, the parents who say, oh look, you know our kids who are in their 50s. They're sitting there, but really we want to empower their children. So the children end up being what's called a sandwich generation and being pushed out, where they say, well, no, we thought we were doing this for our children, but maybe we're doing this for our grandchildren. And the children become the meat in the sandwich. So those are two extreme approaches either shower them with wealth and spoiling them, or withhold wealth.

Speaker 2: 18:38

And I say, what is the risk? Each one of these has a risk. What is the risk of sharing the wealth with the kids and that means trusting them and that means talking about it and what are the risks of not trusting them and not sharing them? And how do you find what I call the Goldilocks zone? That's going to be, you know a bit each way where you use that wealth to tell a more positive narrative.

Speaker 2: 19:07

Not, this wealth will ruin you and spoil you, but this wealth can empower our family. This wealth can bring our family together and help our family develop other forms of family capital. So wealth firms they deal with financial capital assets. I deal with non-financial capital. Probably the most important is social capital. A social capital is the ability of a group of people to work together towards a shared purpose. I help families create and nurture that capital so that they can be a family, not just a bunch of people who share some genetic material and some assets, but a family who together can do amazing things for their family, for the community, for the world around them.

Speaker 1: 20:00

Yeah, and, if you like, I'm 37,. I've got a pretty open relationship with my parents about their wealth and helping them. Given my finance background, would you recommend is it up to obviously know the family doesn't have an advisor to bring the generations together would you recommend you know the parents start having that discussion with their children early? Is it up to the children to bring that? You know? Ask the parents to have that open discussion. Is there a solution, an easy solution like that, if you don't have someone like yourself that can open up that discussion?

Speaker 2: 20:41

Some families are open enough to be able to do it themselves, but very often it needs somebody external, outside the family, because you know, when it comes to parents and children, parents are too emotionally involved. Outsiders, outside advisors, can be objective and therefore can give better quality advice. That's untainted. But you raise a really good point. Where does it start? And sometimes it starts from what I call the rising generation. Some people call it next gen. I prefer rising gen, the rising generation coming to me and saying our family's got a problem, can you help? And and I I say the rising generation coming to me and saying our family's got a problem, can you help? And I say you've got to. You know, I'd love to help, but we need everybody on board.

Speaker 2: 21:30

And you have in families, a power dynamic. You have and I'll shortly be publishing, with my friend Betsy, a paper on power dynamics in families and a tool to analyze them. A lot of this comes down to not money but power, and money is just an instrument of exerting power over children and over other family members, and so if the process does not have the blessing of the people, of the family members in power, it really can't go ahead. So it might be initiated by the children, or it might be initiated by the parents, but it needs the buy-in of the key people in the family to say this is going to happen.

Speaker 1: 22:21

If there is someone in the family that is just not interested. You know, I want to like you as a young child, a young professional. I want to create my own destiny. That must happen often. And how do you navigate that? When someone says you know what? I don't want to be part of this discussion. I'm going to build my own wealth, I'm going to empower myself Does that happen often? If so, how do you navigate that?

Speaker 2: 22:48

Absolutely. It happens often and it's very important for families to be a family because they want to, not because they have to. So again, you don't want to end up as a bunch of people who are bound together by shared assets and that's what keeps them together. So the families that do it well, allow the children the space if they want, to do their own thing and even to leave, and this optionality being able to leave is one of the most powerful things. It's like and I also do work with operating business.

Speaker 2: 23:25

It's like having a business that's exit ready, and I help business owners make their businesses exit ready. Does that mean they want to exit? No, they don't have to, but they've got the optionality. If they get a knock on the door one day with an offer that they can't refuse, they can take it because the business is in a shape that they can and they've got an emotional relationship with their business that is mature, that they're able to move on from the business. So back to your question the optionality of saying we as a family, we communicate, we identify what we have in common and our shared purpose, but that's not everything. We don't necessarily have a family identity that subsumes our personal identity. We have space for both, both the collective identity and the individual, and the families that do it well have that both the collective identity and the individual, and the families that do it well have that.

Speaker 1: 24:22

So we've spoken a lot about families and obviously this is relevant to everyone because everyone is part of the family and we talk about this intergenerational transfer. But I'm really keen to get an understanding of because you talked about. You know you've written a book Transition. You're writing another book about to publish that co-author your time within the university sector. So can you talk to me about Swinburne University and also Harvard Business School as well, and share, provide some insight to our listeners about what you do in the education space?

Speaker 2: 24:57

Sure. So towards the end of my second career I decided to do a Master's of Entrepreneurship at Swinburne. I was going to do an MBA and realised that that was not for me, and at the time Swinburne were actually one of the leaders in entrepreneurship education and that was fantastic, did it? Over four years, part-time, really a turning point supercharged my writing, my thinking, got me looking at the world differently and Swinburne re-engaged with me a few years later and I'm now on the course advisory committee for entrepreneurship and Swinburne. You know a lot of other universities are now teaching it.

Speaker 2: 25:35

Swinburne made the decision that they want entrepreneurship studies to be everywhere, to be cross-disciplinary, and that's something that we're rolling out and I'm really proud to be part of that. And I also am an adjunct industry fellow, which is a bit of a long title but it means I sort of build bridges between entrepreneurship and industry. That's Swinburne Harvard Business School. I got tapped on the shoulder to become a guest lecturer there and they run some fantastic exec education in families in business, and I was able to attend that and lecture at that. And I'm also part of another group called the Ultra High Net Worth Institute. That's a non-profit think tank of advisors to families Network Institute. That's a non-profit think tank of advisors to families and they've got 10 faculties corresponding to what they describe as the 10 domains of family wealth. So the thing about wealthy families is that their needs. With increased wealth comes increased complexity, and no one advisor can help with everything. So you know, I said before I'm not a wealth advisor.

Speaker 2: 26:40

I'm not a lawyer, I'm not an accountant, I'm not a structuring person. I work alongside those people, together in service of the family, because no one person can do everything. No one person has the set of skills. So you have these specific domains and I'm on the faculty for family dynamics and also know a fair bit about governance and preparing the rising generation. But I'm not a wealth manager and I don't want to be. But often I'll work closely with wealth managers because they'll say, well, we've got this family and they've got an issue and that's outside our scope. We'll say, well, let's collaborate, let's work together for the family.

Speaker 1: 27:25

So bring it together. Yeah, and that's. I guess there are some people like the accountant or the wealth advisor or the lawyer that might take ownership of that responsibility, but clearly, based on what you've told me, can't provide that level of depth, and you know they want to be independent to the specific advice that they can provide and their expertise.

Speaker 2: 27:47

Yeah, so there's a few really good points there. Take ownership. One person needs to be the coordinator, the quarterback, the quarterback.

Speaker 2: 27:58

I was going to say? What are they? The other metaphor they use the air traffic controller Okay. And we're seeing the development of multifamily offices who are purely that role. They say we don't do everything. We're across everything, but we do nothing. We outsource that and coordinate, but we are your one-stop shop, your single point. We outsource that and coordinate, but we are your one-stop shop, your single point. That's what we're seeing in the multifamily office industry as a trend towards recognising that integrator role.

Speaker 2: 28:27

But all of it comes from all of the advisors saying we don't own the client, we are there at their pleasure, and a shift to be more family-centric and less advisor-centric. And some advisors can be very protective of their turf and that, in my view, is not in best service of the family. That's not what the family needs, that's what the advisor needs. Hang on to that AUM for dear life rather than saying, look, I'd like to get a bigger share of wallet, but at the end of the day, I recognise that this is a competitive situation and I've got to do my best for what you need.

Speaker 1: 29:06

And is it an ongoing relationship you have with a lot of these families, or is it set up and look after yourself?

Speaker 2: 29:16

So in some cases it ends up being ongoing because I might end up chairing a committee or an advisory board or a board, and I've got a lot of experience doing that. In other cases it might be a project to get them kicked off and then they sort of run it themselves to help them articulate their shared values and purpose. Set up the governance rules, their shared values and purpose, set up the governance rules, and then, you know, just check in regularly.

Speaker 1: 29:40

What have you most enjoyed about? Ken? I'm mindful of time. I've been going for almost 30 minutes and I really love this conversation. Let's talk about what you've enjoyed over your journey at different stages of your what three career up to your third career would you say yeah, so I call this my third career.

Speaker 2: 30:00

What do I enjoy, you know, in my first career I was basically an introverted software geek, okay, but then I came to realise that developing software, developing products, is actually a creative activity and I love creating. And so now in my third career, the two things I love is one, developing and sharing knowledge, and I'm passionate about that and I speak, I talk on podcasts and other fun things. But the other thing I love is just working with families and helping them on their journey and seeing them. This one family.

Speaker 2: 30:42

We were facilitating this board meeting and at the end of it they said oh, you know, you just must think we're nuts. And I said you guys are fantastic Because, yes, the discussion was robust. It was robust because they care, because they're all at the table and they give a damn, and that is beautiful. So you know, if I'm in a position that I can help enable families to do that well, that makes my day. If I can help mend conflict situations not from we'll never talk again till we're best friends, that may not even be possible but to help families at least be talking and and be, you know, reach a, a detente, a mutual understanding and respect.

Speaker 1: 31:33

That is the most gratifying thing in the world for me yeah, yeah, it's interesting you say that I've been in situations myself where I've had to help people come together, whether it's to settle on a state or just bridge a relationship. And you know it is easy to. I find it very easy to let water under the bridge, but a lot of people find that quite difficult. But just opening up the discussion sometimes is, you know, the hardest thing. And once that discussion opens then hopefully you know, people can bridge their relationships.

Speaker 2: 32:06

Yeah, it's very hard and the stuff I deal with. It might present itself in financial terms, but it's not. It's about family dynamics. It's about the oldest things in the world jealousies, rivalries, power and getting to the bottom of that and helping families work through that. That's when you know the work I'm most proud of.

Speaker 1: 32:33

And that probably will sum up for the day. So thank you very much, David, it's been a pleasure. That probably will sum up for the day. So thank you very much, David, it's been a pleasure. You shared really good insight into your career and how you know your three careers ultimately and what you do today, which is very relevant, and spoken about a lot family dynamics, intergenerational wealth, advice and transfer. So thank you very much for coming on. The Finance Friends podcast.

Speaker 2: 32:55

Thanks so much, fabian, I really enjoyed chatting with you.

Speaker 1: 32:58

Thank you, thanks, cheers.