Banking & Finance

UAE strengthens planning support for family businesses

July 2, 2023, 8:09 AM

Financial succession planning top concern for family businesses
The Family Office expands into Dubai due to growing demand
Wise investment key to minimising potential disputes

A network of organisations in the UAE is meeting growing demand from family businesses for help with issues such as succession planning and good governance.

In May, the Dubai Centre for Family Businesses was launched at the head office of Dubai Chambers.

Inefficient governance and incomplete succession planning are the two main challenges facing UAE family businesses, Abdul Aziz Al Ghurair, chairman of Dubai Chambers, told AGBI when the centre opened.

Over the past 50 years, some UAE family businesses have evolved from small companies with single business lines to multi-billion-dollar conglomerates with interests across the globe.

Today, they account for 60 percent of the country’s GDP – and their well-being is of critical importance.

The Family Office (TFO), which opened in the Dubai International Financial Centre (DIFC) in May this year, also hopes to address the same issues.

TFO opened its first office in 2004 in Bahrain, which serves as its global headquarters today. It also has a presence in Saudi Arabia, along with offices in New York, Zurich and Hong Kong.

Amr Hamdy, CEO of The Family Office UAE, said a main driver behind TFO’s decision to expand into Dubai was the growing demand from UAE families to draw up succession plans.

“Family disputes are common,” Hamdy said. “At TFO, we don’t interfere from a legal perspective or mediate between family members.

“We assist in planning and ensuring that assets are wisely invested according to the family’s wishes and long-term goals so as to minimise any potential disputes.”

Hamdy said that older generations of families in the UAE now accept that it is important to draw up clear succession plans.

He added that between 80 to 90 percent of enquiries he receives today from family-run organisations relate to financial succession planning.

An estimated AED3.67 trillion ($1 trillion) of assets is set to be transferred to the next generation in the Middle East over the next decade, according to the DIFC.

Last summer, the DIFC launched the region’s first Global Family Business and Private Wealth Centre.

In March this year, the Abu Dhabi Global Market launched the Emirates Family Office Association, also anticipating transfers of wealth in the coming years.

TFO charges its clients a percentage as a management fee. It says its expertise lies in diversifying asset allocation across three main areas: private equity, private credit and real estate.

Hamdy said: “Since we are focusing on preservation of capital for future generations, we adopt an endowment approach to reduce risk.

“We focus on investment opportunities that are less volatile and uncorrelated to the public markets.

“That diversification means it’s not only across asset classes, but also top tier global managers in multiple geographies.”