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By Saod Mohammed Obaidalla, Executive Vice President and Head of Private Banking - June 2022
Regional trends indicate that Millennials and Gen Z are taking their place in the boardrooms of family businesses, even as the law evolves to support the continued contribution of this sector. It is crucial that wealth advisory be customized for the new generation, says Saod Obaidalla, Executive Vice President and Head of Private Banking, Emirates NBD
The world is currently experiencing the Great Wealth Transfer, during which the world’s wealthiest individuals, each with a net worth of more than USD 5 million, will transfer an estimated USD 18.3 trillion to their children by the year 2030. This figure represents one-fourth of the global wealth of USD 62 trillion held by high-net-worth individuals (HNWIs). - we add the infographic talking of this line here, instead of the text.
The UAE’s leadership, from the time of the founding fathers, has always believed in the potential of youth to change the world for the better, entrusting the young with a place in the driver’s seat when it comes to development. The Emirati model of youth empowerment treats the young as the most cherished assets for ensuring creativity and innovation, while enshrining the positive values of society.
A different approach
The generational wealth transfer has implications for wealth managers so that the great potential of this transition can be realized. Wealth advisors must adapt to the many ways in which the Millennial or Gen Z investor differs from older counterparts, particularly in view of findings that suggest that one in five businesses have a next generation member (aged 40 or younger) on the board or on the management team.
Millennials, for instance, are starting out with the greatest amount of formal education of any generation in history. Coming of age in a digital, borderless world, their concerns are more global than those of previous generations. In a multi-cultural nation such as the UAE, it is not surprising that this generation has embraced diversity in investments, markets, and in management styles. These inheritors have the potential to globalize a business; in fact, 58% of Middle East family businesses consider expansion into new markets a top priority.
As Millennials and Gen Z begin to accumulate wealth, their investment needs are likely to transform the institutional wealth management function. Impact investing, which combines financial returns with social and environmental benefits, is seeing an upsurge in interest, with 59% of the region’s family businesses ready to take the lead in sustainable business practices. Investments in emerging technologies and digital transformation and assets are also gaining traction.
With preservation and innovation as the two pillars ensuring the future of family businesses, UAE laws have kept pace to support and enhance the role of family offices in the diversification and growth of the national economy.
The Onshore Trust Law introduced in 2020 puts in place frameworks for the organization of family offices in the UAE and abroad to ensure stable and sustainable asset protection and succession planning. Also in 2020, Dubai introduced an opt-in law to regulate family business ownership. The law not only underscores the importance of family, enshrining a collaborative approach, but also provides for the new generation’s entrepreneurial vision.
Dispute resolution too has been in the spotlight, with Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre (DIAC) making significant changes to arbitral institutions in Dubai. Issued in 2022, Abu Dhabi’s new family business ownership governance law addresses the issue of continuity in the contribution of the thriving sector to the economy even as it facilitates a smooth transition to the succeeding generation.
Globally, family businesses and family offices remain the the largest contributors to GDP, and the largest employers in the private sector. They hold the key to economic growth and well-being. Being attuned to the needs of those who will be entrusted to manage these businesses in future will usher in better business practices, while delivering results that ensure the continued relevance of advisory services across generations.
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