The impending great wealth transfer is poised to redefine the financial landscape of the Middle East. Kidbrooke, which offers outcome-driven analytics and data management for wealth management, recently explored how firms can navigate the great wealth transfer in the UAE.
In the coming years, high-net-worth individuals (HNWIs) in the region are expected to bequeath an astonishing AED3.67trn (£820m, $1trn, €980m) to their progeny, it said. This monumental shift not only highlights the importance of meticulous legacy planning but also casts light on the intricate challenges associated with intergenerational wealth transfer. From the complexities of cross-border business operations and international legalities to tax considerations, families stand at a crucial juncture requiring adept guidance to navigate these waters.
The UAE, with its robust economy, absence of infrastructure debt, and international appeal, presents a fertile ground for wealth management. Despite this, the journey towards efficient wealth transition is fraught with obstacles. A survey conducted by Lombard Odier reveals a striking dichotomy: while 87% of Middle Eastern HNWIs believe their family businesses are primed for seamless wealth transfer, a mere 24% have established comprehensive estate plans. The prevailing transactional and compartmentalised service model amongst regional wealth advisors falls short of addressing the breadth of challenges poised by the anticipated wealth reallocation.
Kidbrooke has delved into the unique landscape of legacy planning within the UAE, exploring how financial advisors can harness technological advancements to aid clients in realising and planning their legacy aspirations amidst this significant wealth transition.
The process of wealth transfer is universally challenging, often marred by clients’ reluctance to engage in discussions about legacy planning. Nuno Matos, CEO of Wealth and Personal Banking at HSBC, articulates the emotional dilemma faced by entrepreneurs, likening the succession conversation to relinquishing their identity. Additionally, the importance of Sharia-compliant succession planning cannot be understated, with varying degrees of emphasis placed by different age demographics, as highlighted by Sean Kelleher, chief executive of Mondial Dubai.
Moreover, the scale of regulatory and tax implications remains a blind spot for many in the UAE, a sentiment echoed by Hannah Greenwood, managing director of Finsbury Associates. The familial dynamics and the potential for conflict over entitlement further complicate the dialogue around legacy planning. The Dubai International Financial Centre’s (DIFC) initiative to establish a global family business and private wealth centre in August 2022 signifies a governmental push towards encouraging proactive legacy planning, accommodating the region’s growing expatriate and diverse religious demography.
Kidbrooke highlighted the hurdles impeding the evolution of legacy and succession planning services in the UAE, underscoring the necessity for international expertise and a collaborative approach across various financial service sectors.
A paradigm shift towards a hybrid advisory model post-pandemic, blending in-person consultations with digital platforms, offers a glimmer of hope. The introduction of unified financial analytics, such as those provided by Kidbrooke®, empowers wealth managers with tools to facilitate discussions around legacy planning, offering a comprehensive view of clients’ financial landscapes.
Kidbrooke® has introduced KidbrookeONE, an analytics suite capable of simulating and projecting financial outcomes, thereby aiding in the formulation of tailored estate planning goals. This technological prowess not only aids in demystifying the implications of various wealth planning strategies but also fosters transparent communication between wealth holders and their heirs, potentially mitigating familial disputes.
Highlighting the collaborative efforts in the UAE, HAYAH Insurance, an Abu Dhabi-based insurer, has partnered with Kidbrooke® to leverage KidbrookeONE’s simulation capabilities, enhancing their investment planning services. This partnership exemplifies the strides being made towards integrating advanced analytics into financial planning, aligning with the demands of a digitally-savvy consumer base.
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