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Middle East HNWIs do not have a wealth succession plan in place

The overwhelming majority (90 per cent) intend to keep their wealth in the region for the foreseeable future.

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Lombard Odier, a leading global wealth and asset manager with a 50-year legacy in the Middle East providing wealth planning solutions, today revealed results from the second installment of its Middle East Investment Survey, which focusses on succession planning among high-net-worth individuals (HNWIs) in the region. Key findings reveal that HNWIs are aware of the importance of effective succession planning, but less certainty lies in whether wealthy families have implemented the succession plans required to meet the varied needs of their complex family structures.

“The results of our survey reveal several important factors in the realm of succession planning amongst HNWIs in the Middle East. Chief among them is a consensus that intergenerational wealth transfer is of great importance, yet an absence of estate planning across both older and younger respondents is also present," said Arnaud Leclercq, Partner Holding Privé and Head of New Markets at Lombard Odier.

"The findings around geographical wealth placement are encouraging though, with a majority of respondents planning to preserve their wealth in the region, reflecting positively on the Middle East’s investment environment. At Lombard Odier, we will continue to encourage wealthy individuals to prepare for their family’s future by delivering tailored wealth planning solutions structured around their specific objectives. As our 50-year legacy in the region has demonstrated, we have an ongoing commitment to providing Middle East families with trusted banking and wealth planning solutions.”

Given the outsized economic contribution of family-run businesses in the Middle East, strong family governance is critical for the region’s continued economic success. However, whilst 87 per cent of the 300 HNWIs surveyed believe their family business is structured to allow for efficient intergenerational wealth transfer, only 24 per cent say they already have an estate plan in place for all of their private assets.

The difference between younger and older business owners is significant. Over half of older respondents (55 per cent) say they have a full estate plan in place, compared to just 9 per cent of younger respondents. Conversely, more than one third of younger respondents (36 per cent) do not have any kind of estate plan in place at all but are interested in it, while a further 26 per cent expressed no interest. The remaining respondents have a partial estate plan in place.

In a region where family is the dominant social institution, the wealth of HNW individuals is often intertwined with their family business, its governance and Islamic values. This topic of family governance reveals a discrepancy between younger and older HNWIs: 66 per cent of older business owners said they had a formal and rigid system of governance in place, compared to 50 per cent of younger respondents.

Younger HNWIs also show a greater degree of openness to change: nearly half (45 per cent vs. 28 per cent older respondents) say they have a formal and flexible system of governance, evolving over time to reflect their family’s values.

A lesser degree of divergence is found in HNWIs’ views on Islamic values. Having a succession plan that complies with Sharia principles is important for two thirds (67 per cent) of respondents, with a tilt towards older respondents (74 per cent vs. 62 per cent younger respondents). This was also found to increase with wealth: 79 per cent of those with more than $10 million in assets say that Sharia principles are important to them, versus 61 per cent of those with assets between $1 million – $3 million.

Yet a consensus was revealed between the respondents on the geographical placement of family wealth. The overwhelming majority (90 per cent) intend to keep their wealth in the region for the foreseeable future. — business@khaleejtimes.com

• Dubai