The Middle East has a rapidly rising ultra-high-net-worth (UHNW) population. Knight Frank’s 2024 Wealth Report revealed an astonishing 18,800 UHNW individuals in this region. This significant growth has fuelled a corresponding increase in Family Offices in the Middle East.
These Offices face a distinctive challenge – balancing traditional values with modern business practices.
The Cultural Importance of Tradition
Deeply tied to their cultural and religious traditions, Family Offices in the Middle East often focus on keeping their family heritage, values and reputation intact. Islamic financial principles and Shariah-compliant investments are crucial in their decision-making. While these traditions are a solid base, they sometimes pose challenges in keeping up with the fast-paced changes of the global market.
Generational Wealth Transfer
According to Finance Middle East, a third of Family Offices across the globe are currently undergoing a generational wealth transfer, with more than a quarter expecting to action this imminently. In the Middle East, an estimated Dh3.67 trillion ($1 trillion) in assets will be transferred to the next generation during the next decade.
The generational shift offers a unique chance for Family Offices to mix tradition with innovation. Traditionally, Middle Eastern Family Offices have a hierarchical governance structure with a single decision-maker from the family. This usually has a very clear chain of command but often leans towards a conservative mindset. However, as more young family members get involved, there have been more adaptions to the governance structure to include various committees to improve the governance process. This has also led to more openness to new investment strategies. While the older generation may focus on maintaining the status quo, the younger members are often more willing to take risks and explore new investment opportunities.
To survive in today’s business landscape, Family Offices in the Middle East are increasingly using new strategies. They are incorporating technology, ESG (Environmental, Social and Governance) investments, and global diversification into their investment portfolios. Younger generations are driving these trends, seeking out opportunities in sectors such as technology, sustainable industries and emerging markets.
Who is in charge?
Our 2023 Global Family Office Compensation Benchmark Report shows that 75% of CEOs of Middle Eastern Family Offices are family members. This is very high compared to their global counterparts – only 10% of USA-based Family Offices CEOs are family members and only 31% of Asian Family Offices CEOs are family members. Family Offices in the Middle East prioritise maintaining control within the family. However, given the increasing complexity of wealth management and Family Office operations, it warrants professional expertise in areas like investment management and governance. The separation of management from ownership can infuse businesses with new ideas while preserving the family’s strategic oversight.
In recent years, many family businesses and Family Offices have begun to separate management from ownership, delegating responsibilities to qualified professionals while maintaining family control. This approach can infuse businesses with new ideas while preserving the family’s strategic oversight and long-term vision.
Governance
Strong governance structures are essential for maintaining a good balance between vision and tradition. The adapting governance practices by incorporation of boards and committees, and decentralisation of decision-making through a proper process, is setting clear guidelines and roles within the Family Offices.
By setting clear guidelines and roles, Family Offices can create an environment where all family generations can contribute effectively. The recruitment of professionals with expertise in both traditional and modern approaches can further facilitate this balance.
Agreus is a well-established full-service resource and recruitment consultancy specialising in Family Offices. With a presence in Dubai and extensive experience with Middle Eastern clients, we offer a deep knowledge base.
At Agreus, we understand how important the right team is for the success of Family Offices. Our recruitment and compensation consulting services are designed to help you attract and retain top talent. With a strong understanding of the Middle Eastern market and an office in Dubai, Agreus is ready to be a trusted partner for Family Offices in the region. For a more personalised conversation, please feel free to get in touch.