By Lorna Tan, Finance Correspondent

There are many reasons the super-rich choose to apportion part of their wealth to charity. For the Sydney-based executive chairman of ipac financial planning, Mr Arun Abey, 50, it is a way to bond the family and engage in an activity that he is passionate about.

Six years ago, he set up a private foundation with A$2 million (S$2.45 million).

Growing up in Sri Lanka, he experienced poverty first-hand. His two boys, Ajantha, 13, and Ashan, 10, on the other hand, are growing up in affluence.

Mr Abey does not want to spoil them and has already told them that most of the money they stand to inherit is going to the foundation he has set up. Instead, Ajantha and Ashan are expected to control and manage the foundation when they grow up.

'I don't really want these boys to inherit much money, possibly none at all. I've already told them that my money goes to the foundation. They're being groomed to think about causes. I want to share the experience of the causes I'm passionate about with my boys. When they become older, I will appoint them as directors to the foundation, so that they will have a formal vote,' he explained.

Mr Abey noted that Asian parents tend to mollycoddle their children because they do not want to see them suffer.

'The danger that affluent parents can do to their children is to end up robbing them of any sense of achievement,' he said.

Mr Abey started out working as a development economist at the Research School of Pacific Studies at The Australian National University with an ambition to help eradicate world poverty. He became an entrepreneur instead, when he realised that that route was not going to solve world poverty.

With his current philanthropic effort, he is returning to his original interests.

Although he has achieved financial independence, he is still actively engaged at ipac. Looking back, it has been a rewarding, albeit long, journey for Mr Abey, who founded the firm with three friends in 1983 when he was just 25 years old. They were 'outcasts' at that time because while other financial planners charged commissions on transactions, ipac charged an advisory fee.

'The initial investment was the biggest I ever made. The amount was A$25,000, and I had to borrow some of it. We had virtually no salary for the first 12 months. It took 10 years before the directors got paid more than the office manager,' he recalled.

The turning point came in 1997, when the Commonwealth Bank of Australia took a stake in the firm. Six years ago, ipac was sold to French financial group AXA for some $220 million.

Q: What's your attitude towards money?

Money is a means to an end. There is no point in collecting money for the sake of collecting money. In fact, there's a need to be clear about what you are trying to achieve. Money is a fantastic thing if it fits into a broader philosophical framework of life - being clear about what you are passionate about, what inspires you and what gives you a sense of well-being. Money, in isolation, is not important, apart from avoiding starvation.

Q: What causes does your foundation support?

Once the money is in the foundation, it has to go to registered charities, and there are 30,000 of these in Australia. I've narrowed them down to four areas: microfinance, education, medical research and the performing arts.

A beneficiary is one of the oldest charities in Australia, The Smith Family, which offers scholarships to children and sets up family day-care centres in the poorer suburbs in Australia.

Q: How is the foundation organised?

Australian rules are that from, say, a donation of A$1 million, a minimum 5 per cent of your money in the next year has to be given away. Investment earnings, over and above the inflation rate, have to be spent as well each year. This is why the foundation's funds are invested in a more defensive income portfolio.

About one-third to half of the money is in a long-term growth portfolio, while the other half is in cash, fixed income and fixed deposits. The reason for doing so is that we have entered into long-term funding commitments, and these are causes that can't afford to have us switching the money on and off.

Q: When did you make your first million?

This was in 1997, when the Commonwealth Bank of Australia bought half of ipac's business, and some shareholders each got a bit more than a million. Financially for me, it was the most significant transaction in my life. I was 40 and up till then, my life had been financially insecure.

Q: What are your financial investments?

What I do is the same as the advice we give to our clients. The core portion of my personal investment is in a globally diversified portfolio, which invests in 2,000 different companies around the world. They include energy firms, Reits, industrial firms, et cetera. The objective is to preserve and increase the real value after inflation and tax as much as possible, without risking permanent loss.

I have another portfolio that invests in unlisted instruments, like infrastructure and property funds, on a long-term basis. They carry more risks but offer potentially higher returns. I'm hoping to get a premium by forgoing liquidity. Six years ago, I became the owner of a cattle farm. There are about 800 cattle spread out over 2,500 acres (1,012ha) of farmland.

Q: What money lessons did you learn while growing up?

My parents were journalists. My father represented the Sri Lankan Tea Bureau, so we used to travel back and forth between Australia and Sri Lanka from the time I was four. We settled in Australia permanently when I was 17.

They were educated and very sophisticated, but financially they were hopeless. I was the only child, and I was brought up with no money. They didn't own a house. We were always renting modest housing. The first family car was the car I bought when I was at The Australian National University. I took three part-time jobs while studying for two degrees, a Bachelor of Arts (First Class Honours) and a Bachelor of Economics.

I was brought up in a background where thrift was very important. When I select the causes for my foundation, I'm fastidious about putting money in organisations that don't squander the money away but put it to good use.

Q: What's your retirement plan?

I've no intention of retiring. Even my father, who is 79 years old, is still writing, out of Canberra, Australia, where he lives. However, my portfolio of activities may change over time. Currently, I have the luxury of not having to be in paid employment. About 20 per cent of what I do, like writing, is unpaid. It can be 100 per cent if I wish. The reason I'm still part of the AXA group is that I'm also learning a lot, apart from doing something worthwhile. Learning is my passion, and it challenges my mind.

Q: Any tips to investors?

Establish a financial plan based on your authentic life goals, not goals that someone else says you should have. People who have a plan report greater satisfaction with life and the greatest investment success.

Understand 'the prize' that long-term investment in a globally diversified portfolio of equities offers, and don't get distracted by short-term volatility. You'll make money in equities by buying into good-quality companies at reasonable prices, being diversified and patient, rather than by chasing fads.

Be generous of spirit. Giving with a sense of appreciation is the greatest enduring source of happiness. People who develop such generosity end up with the mental discipline to be more successful investors as well.

Q: Where's your home?

It's a two-storey house in Sydney.

This article was first published in The Straits Times on August 31, 2008.