Wealth creation and preservation in a rural setting can be challenging for primary producers owing to changeable environmental and financial variables. Uncertain weather, variable production levels, shifting commodity prices and sporadic cash flows can all provide management challenges for a farming enterprise.
Amid increasing corporatisation, most farming enterprises are still owned and managed as family farms. Success requires decades of commitment, resilience and significant flexibility when plans need to change. Family involvement in the business also presents unique considerations and requires careful planning for generational succession.
This contrasts with the lifestyles most will experience in metropolitan areas, where weather plays little role in working patterns (even less so in the work-from-home era), income, cash flows and working hours are mostly predictable, and few would anticipate their children taking up their profession.
I have experienced both ends of that rural-urban spectrum. Born and raised on a family farm, I have a strong understanding of the significant uncertainties and competing priorities that farmers face day to day. Equally, after more than two decades providing financial advice – from working with major wealth management firms in Sydney to establishing a financial advisory business in rural NSW – I have seen first-hand the benefits that a detailed financial plan and strategic thinking can bring to farming businesses and the families that run them.
A Myriad of Issues
While there are many issues that farmers and graziers manage operationally, the financial face of this can be variable cash flows. Practically, this means balancing the need to reinvest in the enterprise, replacing plant and stock, meeting loan and finance commitments, along with other family priorities such as planning for boarding school fees and accumulating capital for retirement via superannuation and off-farm investment.
As financial advisers, we understand the need for flexibility from year to year, while still sticking to a long-term plan. Furthermore, understanding the tax planning landscape and unique tax planning rules available to primary producers to manage abnormal primary production income and lumpy cash flows is important. Annual tax planning is best done alongside and with consideration given to broader wealth creation plans. In this respect, we work closely with a client’s accountant to ensure the best use of the tax concessions available to them.
Retirement, family succession planning and estate planning also pose distinctive challenges for farmers. Planning for the next generation of family members to take the reins of the business requires thorough consideration of the legal (tax) entities through which the business operates and plans for the ownership of land. To the extent there may be an inter-generational transfer of land and farm assets to the next generation, this requires significant planning for each unique family situation. At the heart of this is striking the right balance of equity and fairness between family members – for instance, where one child is keen to make a career in farming and may inherit rural land, while other siblings seek a future off-farm.
And, of course, every family is different. No one solution fits all and tailored planning is required to achieve successful outcomes.
The Benefits of a Plan
As Principal Adviser and Partner for Minchin Moore, based in our Tamworth office, I advise farmers and graziers across the New England and North West region. Part of a highly experienced team including Angus Warden, Principal Adviser and Partner and Lucinda Mulligan, Senior Adviser, we are well placed to service the advice needs of the region.
While all farmers face a degree of uncertainty, there are significant variations in circumstances and seasonal experiences from one to the next. One farming or grazing enterprise can be having a completely different experience to another operating just a short distance away. While weather variability is a given, the focus of production; the specialisation in cropping, grazing, breeding, or mix of these are influential.
Understanding the variables in each farmer’s business and how these can influence their wealth management plans is key. The potential benefits to each client of structure, forward planning – including flexibility for external influences that impact profitability – and a taking a more holistic view of their situation are significant.
A Consistent Approach
While circumstances for each family group may vary, the Minchin Moore approach is consistent. We focus first on taking a holistic view of the client and all the needs they may have, often including considerations they may not have been aware of.
A rural wealth plan is distinctive, but like any plan it needs to take account of the broad circumstances, goals, values and aspirations of the individual families. Strategic planning is the initial focus, followed by ongoing education and working closely with a client’s accountant and legal adviser to achieve a more holistic advice solution.
Alongside Minchin Moore’s independence, broad advice capabilities and deep experience with rural families, what distinguishes us from other local firms is our ability to provide tailored individually managed account solutions to assist with growing and maintaining wealth.
The bottom line for our rural and regionally based clients is that our team understands their world and the significant variables that can affect their wealth plans now and into retirement. Generally, we say the earlier you consult with us the better, so we can get to work on a plan that provides you and your family with greater clarity and confidence in achieving financial goals.
