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Family Offices: Balancing Vision and Tradition within the Mena region

Family offices have adapted to the challenges and opportunities of regions across the globe

Published: Thu 12 Sep 2024, 10:02 AM

  • By
  • Sebastian Goeres / Industry Insight

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As the Middle East navigates a colossal $2 trillion wealth transfer, family-owned businesses are set to navigate an unprecedented generational shift. These businesses have historically formed the bedrock of the region: about 60 per cent of global GDP in the Middle East is now estimated to be generated by family-owned enterprises, with 80 per cent of the Middle Eastern workforce also employed by the same companies. These family businesses have traversed decades of change by committing to a long-term vision that prioritises legacy and family heritage.

However, the past few decades have seen immense wealth creation within the region, and a further influx of around 6,000 UHNWIs is bringing even more capital into the Middle East. Whether historic or newly formed, many single-family offices are struggling to reconcile heritage and legacy with the demands of a global business marketplace.

The rise of single-family offices in Mena examines the remarkable evolution of wealth management across the Mena region, utilising expert analysis to delve into data gathered from 34 family offices and offer a fundamental understanding of the mindset operating these structures. Ultimately, in a region that has long entwined business with family legacy, the report shines light on how family offices have evolved to help businesses balance their roots with their ambitions.

Building the Foundations

First popularised by legendary dynasties like the Rockefellers and Rothschilds, family offices have adapted to the challenges and opportunities of regions across the globe. Aided by local natural resources, the Middle East has seen significant wealth creation over recent generations, and family offices have proved popular to aid the integration of modern business into family legacy.

Sebastian Goeres is CEO of LGT (Middle East) Ltd, part of LGT Group.

Sebastian Goeres is CEO of LGT (Middle East) Ltd, part of LGT Group.

Nearly 80 per cent of respondents to our survey reported that family members actively worked in the office, 81 per cent of which specifically present in a committee role, reinforcing the direct familial oversight of wealth management. This integration is exemplified in the family offices’ manifestos: more than 60 per cent of surveyed offices cited that their office’s mission was documented in the family constitution, underscoring the fundamental alignment between business principles and family operations.

This deep integration between family and business ethos correlates with one of the primary priorities of family offices within the region: succession planning. Following immediate economic benefit, succession planning emerged as the most compelling reason to establish a family office, and surveyed respondents identified it as the top priority in day-to-day operations. Second and third generations are already actively involved in investment decision-making, meaning that the future inheritors are a part of crucial financial decisions. Indeed, in only 30% of family offices does the founding generation remain influential, indicating a significant generational turnover.

More interesting, perhaps, is that over three quarters of respondents cited ‘family governance’ as a priority for their family office. It appears that families are not only thoroughly integrated into the workings of the office and business, but that the office structure is similarly felt within the family organisation; a reciprocal relationship indicating the fundamental integrity of business to family legacy. Ultimately, this thorough entwinement between family governance and business practises appears fundamental to the preservation and growth of wealth across generations.

Passing the Torch

Despite this integration, however, younger generations aspire to move beyond the familiar pastures of familial wealth. Respondents noted that all next-gen family members had some degree of interest in joining the operating family business, yet what most interested these family members was establishing their own business or pursuing alternative career pathways.

These attitudes are also reflected within the changes brought by second-and-third generations to their historic family offices. Founding generations built their wealth with a conservative approach: in the words of Haleema Humaid Al Owais, CEO of Sultan bin Ali Al Owais Real Estate and Family Wealth Manager, “they started small and never compromised their core operating business,” remaining committed to their central strategy and refusing to consider an exit plan. These family offices were ‘operators’, entities that solely oversaw the family-owned business and assets. However, with the increasing globalisation of the marketplace, aided by the reaches of technology, younger generations are pushing offices into an ‘operator and investor’ model.

This evolution allows family offices to invest in businesses and opportunities outside of the founding business, enabling families to diversify wealth, expand revenue streams, and increase community impact. Perhaps because of this generational distance, over 60 per cent of respondents value next-generation mentoring as important functions of the single family offices. Still, whether inside the family business or out, inheriting generations are seeking new ways to leave their mark on the family legacy.

— Sebastian Goeres is CEO of LGT (Middle East) Ltd, part of LGT Group, a leading international private banking and asset management group that is still operated as a family business. Views expressed are his own and do not reflect the magazine’s policy.



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