The New Era of Wealth Planning in the Middle East
How do you see generational differences shaping Middle Eastern clients’ attitudes toward their businesses and wealth? How do younger generations’ strategies differ?
The younger generation in the Middle East is typically more involved in the family businesses and active in entrepreneurship. This is unlike their peers in other regions, who tend to be more «hands off». They take great pride in their family’s legacy and are grateful for the access to opportunities that this may bring, but are also driven to create something of their own.
«Older generations are increasingly open to ideas from the younger members.»
LGT’s joint survey with Tharawat Family Business Forum found that 59.3% of next-generation respondents want to join the family business, but an even larger share (66.7%) prefers to establish their own businesses. One possible driver behind the entrepreneurial urge is the presence of traditional leadership structures in this region, which can sometimes make it difficult for the next generation to assume greater responsibility.
However, the good news is that we are seeing a gradual shift toward meritocracy, as opposed to traditional primogeniture considerations. Older generations are increasingly open to ideas from the younger members and are willing to integrate their ideas into the family’s overall governance frameworks.
This may mean adding ancillary services – such as a real estate company investing in a restaurant operator that augments its core business or expanding into entirely new segments that still reflect the family’s values. As an LGT wealth planner, it is fascinating to observe and to be involved in helping our clients build family governance and wealth structures around these evolving wealth strategies.
As Middle Eastern family offices become more sophisticated and globally diversified, how has the role of wealth planners evolved?
The role of wealth planners is expanding rapidly. Traditionally, wealth planners focused on standalone but important mandates such as setting up family trusts or tax-efficient international holding companies. Now, they must also support family offices in developing governance mechanisms that cover all family members, define ownership qualifications, and align corporate affairs and wealth management strategies. Their expanded role requires a delicate balance between long-term strategy and short-term tactics. They must also build up a network of competent third-party providers, including lawyers and fiduciaries, to implement these governance mechanisms.
The days of the solitary wealth planner managing such projects alone are long gone. The complexity of the subject matter and the regulatory environment make such solo efforts impossible. Fortunately, the number and quality of third-party providers in the region are high, and this support network is poised to keep growing as clients adapt to modern challenges.
From your experience, what is the biggest obstacle to implementing effective family/ business governance in Middle East today? How can a wealth planner help?
From my experience, the two biggest obstacles are the belief in «form over substance» and a sense of entitlement among some family members who lack appreciation for the values behind the family’s success. A family may invest in a costly constitution and set-up, but if key principals only pay lip service to the family office’s requirements, then an informal weekly chat over coffee can prove more effective. Entitlement is a tougher nut to crack because of its deep psychological roots. If left unaddressed, it can undermine trust, disrupt decision-making, create resentment among other family members, and ultimately threaten the long-term stability and success of both the family and its business. An experienced wealth planner can make a difference by introducing enforcement mechanisms to strengthen governance discipline, as well as advising on how to identify and manage «entitled» family members in a transparent manner while setting a good example for others.
«A wealth planner should be genuinely interested in the region’s history.»
What is the most important skill a wealth planner needs to have in this region today?
While not strictly a skill, curiosity is essential. A wealth planner should be genuinely interested in the region’s history, the unique values that drive each family business and the ever-expanding toolkit available to internationally active family businesses.
Intellectual curiosity is also a must-have to address unconventional needs. For example, we were recently asked how best to integrate the value of «defiance» into a family constitution – something not taught in traditional law or business schools, but an opportunity to demonstrate our ability to meet clients’ requirements at every level. Wealth planners must therefore be able to draw upon their knowledge and experiences across psychology, history, religion and business management to offer truly tailored advice.
Are Shariah-compliant products becoming more or less popular among the wealthy individuals and families in the Middle East?
We have observed not only strong growth in volume of Shariah-compliant products in the region, but also a significant increase in their sophistication and diversity.
A report by the General Council for Islamic Banks and Financial Institutions revealed last year that the global Islamic funds market has grown by more than 300% over the past decade. Industry research also points to an interesting development: the increase of Islamic variants of well-known investment vehicles that do not have their roots in Islamic finance.
«We have observed not only strong growth in volume of Shariah-compliant products in the region.»
International trusts and foundations are finding favour with families engaged in dynastic planning and seeking Shariah-compliant estate planning mechanism. This leads to a broader range of products and more intricate ways of holding them in a way that joins Shariah requirements with after-tax efficiency for business families’ international investments.
How do digitalisation and technology change the wealth planning process or landscape?
Digitalisation and technology make it easier for wealth planners to carry out strategic and tactical mandates through transparent enforcement mechanisms, comprehensive asset consolidation systems and much faster execution of fiduciary transactions. All these advantages foster better governance and more comprehensive wealth planning capabilities. Wealth planners have long championed the use of aggregation software for decades now, as it provides a reliable, complete picture of all the assets they need to plan for.
«The GCC’s development since the Asian financial crisis in the late 1990s is nothing short of spectacular.»
Technological innovation is moving beyond asset consolidation to support family offices on their day-to-day non-financial tasks and operational needs. Specialised providers with experience serving prominent family businesses over generations are now building dedicated operating systems for each family they serve, giving each stakeholder real-time access to financial information and corporate documents germane to each family member. This helps in streamlining governance and improving oversight for the family.
How do you see the development of GCC as a global wealth management hub evolving? Can the GCC compete with other key financial centres such as Zurich, London, Hong Kong or Singapore?
The GCC’s development since the Asian financial crisis in the late 1990s is nothing short of spectacular. The long-term success of any financial centre fundamentally depends on trust and proximity. The Middle East earned its name due to its strategic location and proximity, bridging multiple economic regions that have engaged in mutual trade for millennia.
GCC governments continue to consult with entities that support family businesses to implement policies that engender the trust of family businesses from around the world – trust that brings active and passive investments to the region. The GCC is already competing with other major financial centres with considerable success, as shown in the increasing flow of both human and financial capital to the region – in some cases, to the detriment of those established financial centres.
An interesting example in the UAE is the international recognition of foundations and trusts established in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM). Bottom-up efforts are well underway, supported by respected and seasoned providers that continue to strengthen the region’s framework.
If the UAE were to sign and ratify the Hague Convention on the Recognition of Trusts in addition to signing and ratifying a Double-Taxation Agreement with the United States, it could stand on equal footing with leading financial centres and perhaps even offer a more attractive combination of proximity to investment opportunities and desirable lifestyle elements.
Given the ubiquitous influence of the US, what role does it play in shaping cross-border wealth management or family office strategies in the GCC or Middle East?
The US is a major factor in the Middle East’s family office sphere. As the world’s deepest, most liquid and advanced capital market, it is a source of cross-border investments into the region, as well as a destination for family offices looking to diversify their investments in a vibrant market. In the human capital aspect, it is a place where family members gain valuable education and professional experience, while gaining network and a global perspective. The US market also offers opportunities for family offices to structure their after-tax infrastructure on both the investments and the personal side, including generational planning involving US beneficiaries. While US-related planning may be complicated, the increased availability of qualified US legal counsels covering both commercial and private family business matters makes this much easier than it was even 10 years ago.
«The US is a major factor in the Middle East’s family office sphere.»
What do Middle Eastern clients feel about philanthropy and impact investing? Is their growing interest primarily led by next generations’ values, or is it a pragmatic response to external factors or government policies, such as Saudi Arabia’s Vision 2030?
Philanthropy and impact investing have long-standing roots in the Middle Eastern culture, inspired by religious traditions and a strong sense of community responsibility. Islam, like many other religions, advocates the obligation of giving through zakat, and strongly encourages voluntary giving to the poor and needy. We also observe that philanthropy in the GCC region is becoming more strategic, based on findings from the «Giving in the GCC report» published by LGT Philanthropy Advisory in partnership with Cambridge Centre for Strategic Philanthropy.
While giving has traditionally been rooted in less formal charitable giving, the new generation of philanthropists is increasingly seeking to contribute with a more long-term, sustainable impact through more strategic means.
This trend is visible in their greater focus on measuring outcomes, using innovative and entrepreneurial solutions and aligning giving with national development goals. The scope of charitable activities continues to expand, driven not only by top-down government-led initiatives such as Saudi Arabia’s Vision 2030 and other similar initiatives undertaken by the GCC members, but also by Muslim and non-Muslim charitable initiatives of all sizes created to address diverse societal needs. Today, both personal passion and strategic considerations are shaping a more dynamic and innovative philanthropic landscape in the region.
What sets LGT apart when it comes to supporting the wealth planning needs of clients in the Middle East?
LGT has a natural predilection towards long-term growth and diversification due to the path taken by our owner and largest client – the Princely House of Liechtenstein. When one can draw upon the experience of a family currently transitioning leadership from its 26th to 27th generation, and who drafted its first family constitution in 1608, it gives our wealth planners both credibility and real-world use cases that may be used in every client interaction.
Operationally, we are blessed to be able to collaborate with experienced in-house wealth planners covering all major regions, allowing us to share this global know-how with our clients in the Middle East.
Another important differentiator is LGT’s open architecture approach—we provide objective and holistic wealth planning by sourcing the best available solutions for each client’s unique needs. Where necessary, we help our clients source for the most suitable advisers externally. This ensures that our clients receive truly customised advice and access to the broadest range of solutions and strategies tailored specifically for them.
Leo Charitos is Senior Wealth Planner, LGT Middle East
