I think "tutto" in this case is an adjective ("all"), it needs to be followed by a noun or pronoun to make a subject for the verb. "Ciò" is the pronoun, meaning "this" or "that." So "tutto ciò" = "all that" which can also be rendered in English as "everything." Problem is, there are other places where "tutto" is accepted as a pronoun ("everything," "everyone") itself, so....hmm.
I don't know if this helps people, but in French, the equivalent of "ciò che" would be "ce que". "Ce que" is an awful lot like "that which". As in, "that which he says" (meaning "what he says"). So you could think of it as "All that which he says is true" (of course, we wouldn't say it like that in English").
I'm not a native speaker of French or Italian, and of course, "ce que" doesn't literally mean "that which", but it feels similar so that's how I remember it.
I've spent the morning trying to really drill down into "ciò che" and it seems to me the closest English parallel is "that which." It's a construction that is grammatically correct though we don't use it b/c it's a little formal. However "everything that which he says is true" works. It's a helpful way for me to think about it–maybe it is for others as well.
That said, per this conversation https://www.italki.com/question/340614 "quello che" is more common... for what its worth.
I really don't understand the need to put cio in this sentence, if I said, tutto che lui dice e vero ...[sorry I don't have the accent] it means everything he says is true so what is the purpose of cio? what does it really mean? I looked it up and found it means what....there is no what IN THIS sentence