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Navigating the evolving landscape of family offices in the Middle East

Navigating the evolving landscape of family offices in the Middle East

23 February, 2023

Ian Rumens, Head of Private Client Jersey and Lynda O’Mahoney, Global Head of Business Development, recently met with a number of intermediaries and senior members in Family Offices in the Middle East. Here are Ian and Lynda’s thoughts and learnings on the evolving landscape of Family Offices in the Middle East:

“The Middle East is experiencing a surge in ultra-high net worth (UHNW) individuals, and as a result, the number of family offices in the region is also increasing. According to a recent report by Knight Frank, the UHNW population in the Middle East is expected to soar by 24.6% in the next five years, with Saudi Arabia set to become home to 72 billionaires and the UAE 42, according to the WealthX Billionaire Census. This significant growth in the UHNW population has significant implications for the family office market in the Middle East. 

One of the key trends observed in the family office market in the Middle East is the increasing role of women. Historically, men have held the majority of control and representation in the family office and family businesses. However, as traditional family roles evolve and more women attain higher education, it is likely that female representation at a board level will increase. This is especially true in Saudi Arabia, where women are increasingly taking on senior leadership roles. 

Another important factor influencing the family office market in the Middle East is religion. Islam plays a significant role in shaping business practices and investment decisions in the region. Family offices must take into account Islamic finance principles such as the payment of zakat, the prohibition of Riba (interest), and the promotion of halal investing (investing in industries that align with Islamic values, such as avoiding investments in industries that produce arms, alcohol, tobacco, and gambling). 

Family offices in the Middle East are also changing their investment strategies as the influence of the next generation grows. Previously, family offices focused on preserving wealth, but now they are looking to diversify their investments and enhance their wealth. Real estate has traditionally been a large part of a family's investment portfolio, but this is changing as private investments in the digital and fintech sectors become more attractive. Younger generations, in particular, are drawn to ESG investments and consider sustainability factors when making investment decisions. 

Succession planning is a significant challenge in the Middle East, and the lack of effective succession planning is a major threat to the region. The family business is the economic heartbeat of the Middle East, so it is no surprise that countries in the region are passing laws to regulate family businesses. Successful succession planning requires early planning, open communication, integrity, moral courage, and committed engagement from all generations. 

Finally, the family office market in the Middle East is facing the same talent, skills, and labour shortages as other markets. Family offices are competing with governments for the best talent, and staff churn is becoming an issue. Family offices are struggling with the lack of continuity of staff and its impact on the delivery of outcomes. 

In conclusion, the family office market in the Middle East is undergoing significant changes as the number of UHNW individuals in the region continues to grow. The increasing and evolving role of women, the influence of religion, changing investment strategies, the need for effective succession planning, and the challenge of resourcing are all factors that are shaping the family office market in the Middle East. As the region continues to evolve and grow, it will be interesting to see how these trends develop and what new challenges emerge.”

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