LGT Crestone preparing wealthy clients for super tax and more

Wealth manager LGT Crestone warns Labor’s attention on the wealthiest Australians is ‘only focused in one direction’.

Jim Chalmers in Brisbane. Picture: Tertius Pickard

Labor’s crackdown on the retirement savings of rich Australians could be just the beginning of a broader tax grab aimed at the wealthy, as some worry family trusts could be next in line.

The Albanese government, emboldened by its historic re-election last month, wants to double the tax on super balances above $3m despite heavy opposition on the most contentious aspects of the new policy: that it will tax unrealised gains, also known as paper profits, and that it will not be indexed, meaning it will capture more Australians in time.

LGT Crestone chief executive Michael Chisholm said Labor’s attention was “only focused in one direction”, and his firm was now preparing clients for the possibility of more tax attention on the wealthy.

LGT Crestone CEO Michael Chisholm.

“There has been talk by Labor about looking into these other areas (like family trusts). They’ve had a special focus on some of the wealthiest families in Australia, about precisely how they’re managing their tax situations, succession planning, intergenerational wealth, their tax structures. Family trusts are a big part of that,” Mr Chisholm told The Australian.

“We don’t know what’s going to happen. But if you look at the trend over the last few years, it’s all pointing in one direction, and so clients need to be aware of that.”

The government came under fire on Sunday as it admitted defined benefit super schemes, including the Prime Minister’s, would be treated differently to the defined contribution funds most Australians participate in.

While the government has yet to confirm how these legacy defined benefit plans will be treated differently, it is widely assumed politicians and public servants on such schemes will not have to pay the tax until they retire. Many are estimated to have balances above $3m but no official figures exist.

Mr Chisholm said his firm, which has $40bn under advice following the acquisition of Commonwealth Bank’s private wealth arm – the deal was finalised on Monday – was making clients aware of all possible variations Labor might contemplate.

Jim Chalmers in Canberra. Picture: Martin Ollman/NewsWire

“We want to make sure that we’re thinking of all the potential outcomes so our clients will have already thought about what they might do in these different scenarios (if they eventuate). Some of those scenarios might be low probability, but you just don’t want to get caught out,” he said.

More of the firm’s clients are seeking institutional-like investments, particularly in private markets, which are far less liquid than traditional stocks and bonds. Newer funds in these asset classes, known as evergreen funds, have an element of liquidity and appeal to investors, Mr Chisholm said.

Alternatives such as private equity, venture capital, private credit, infrastructure and real estate now account for about 22 per cent of LGT Crestone’s total assets under management.

After putting the CBA acquisition to bed, Mr Chisholm doesn’t expect consolidation in the once-crowded wealth management industry to slow down.

“Looking forward, we think this trend of high-net worths investing more in private markets is going to continue. We see there are going to be more structures that allow some level of liquidity when investing in private markets and that’s a really important evolution to allow high net worths to participate more in that segment.”

The wealth industry has undergone dramatic change as the major banks moved out of the industry and deep-pocketed private firms moved in. Notable deals currently in play include Perpetual’s sale of its $500m wealth management arm and the takeover of Insignia Financial.

LGT Crestone is backed by LGT.

Originally published as LGT Crestone preparing wealthy clients for super tax and more