The Middle East is currently facing a unique challenge. In our rapidly changing global economy, financial success requires adaptability and innovation. Nevertheless, for a region steeped in proud, rich histories, many families are struggling to balance the preservation of cultural heritage with the creation of financial legacies for tomorrow.
In the Middle East, commercial success has long been intertwined with heritage: family-owned businesses are the historic cornerstone of the region and to this day still comprise an estimated 60% of the region’s GDP. What differentiates these enterprises from traditional business is the centrality of legacy: a long-term vision focused on sustaining future generations and reinvesting into the community.
However, as both the regional and global landscapes evolve, many of these family businesses are now challenged to balance their heritage with the demands of a modern, interconnected world. LGT (Middle East) Ltd., part of the globally expanding LGT Group, is helping families address this challenge. Using first-hand data from its inaugural study of single-family offices in the region, The Rise of Single Family Offices in MENA, completed in partnership with Tharawat Family Business Forum (Tharawat), LGT explores how the family office structure can be leveraged to integrate traditional values into financial legacy while adapting economic strategies for an increasingly interconnected world.
Shifting sands: The globalisation of the Middle East
The Middle East’s financial landscape is undergoing a significant transformation. Wealth has historically been tied to the petroleum industry, with oil extraction throughout the first half of the 20th century providing the foundation for family businesses that continue to support the region to this day. However, over the past decade, there have been concerted efforts to diversify the region’s economy, moving away from this traditional source of wealth. In 1971, 90% of the UAE’s GDP was generated by oil; by 2023, this had dramatically decreased to only 30%.
The region’s economic evolution also attracts considerable global interest, positioning the Middle East as a key player on the international stage. Favourable economic policies, free trade zones, and world-class infrastructure have made the region highly favourable to international wealth, with an expected 6,700 new millionaires migrating to the UAE in 2024.
This influx of wealth and commerce positions the Middle East as a bridge between Eastern and Western markets, an evolution that the region continues to embrace. In 2022, the UAE adopted the global workweek of Monday to Friday to maximise its presence in the international marketplace, integrating globalisation into its core framework.
Similarly, globalisation has left definitive marks on family businesses. Portfolios are increasingly international, with investments – and families – spanning continents. Within this diversification, global megatrends are increasingly influential and LGT’s joint study with Tharawat found that 53% of respondents include a global outlook in their risk assessments to inform their financial planning. Furthermore, holding assets across diverse regions can require more tailored support from financial institutions. As a global business with regional expertise, LGT supports family offices through individual solutions that honour local legacies while addressing international opportunities.
New tools, old tasks: The role of trust and shared values in preserving family legacy
The evolution of Middle Eastern industry reflects the recognition that long-term economic sustainability requires innovation and change. Family businesses are similarly facing a vastly different marketplace compared to their founding generations; those now managing wealth across both Western and Eastern economies must consider how to retain their cultural legacy and honour earlier generations.
Trust is vital to combat these difficulties and successfully manage generational wealth. In discussions with family businesses, the question of managing legacy is frequently raised: older generations wish to see their efforts safeguarded, while younger generations are conscious of the responsibilities that accompany familial wealth and an entrepreneurial legacy.
The preservation of family legacies therefore often hinges on shared values that can bind family members across generations. Without establishing these values, future decision-makers may feel constrained by historical traditions or, conversely, may make decisions that overlook the founding values. LGT’s research found that Middle Eastern families often combat the risk of overlooking founding values by codifying their commitment to the family within their business framework, with 62% of family offices responding that the vision for their wealth is captured in a family constitution. With wisdom grounded in the 900-year history of the Princely House of Liechtenstein, LGT Group understands that success requires a deep commitment to family cohesion from all members.
These family bonds are enriched by shared social and religious values, which can prove central to maintaining legacy. Within the Middle East, family businesses have a strong history of charitable giving and philanthropy, mirroring LGT’s own commitment to allocating 10% of dividends to philanthropy. Preparing inheriting generations remains a concern for the majority of family offices. LGT’s research found that religious principles guide 71% of investment decisions while social responsibility influences 88% of respondents.
Many family offices are now led by second or third-generation family members, so these figures make clear that financial decisions remain entwined with Middle Eastern culture. While assets span Eastern and Western markets, requiring different cultural and economic contexts to be bridged, family businesses continue to act according to the ethics and philanthropic ethos that have driven the region to such success.
In today’s globalised marketplace, LGT’s expertise in cross-border wealth management ensures that clients receive tailored support to craft family offices that are both locally relevant and globally adaptable. Through its expansive global network, LGT also provides a platform for families to implement these governance structures while connecting with peers and experts around the world, strengthening financial strategies and underscoring the importance of shared values in a rapidly evolving global landscape.
Getting technical: Practical considerations in generational wealth management
As family businesses’ wealth drivers become more diversified over generations, differing opinions and occasionally tensions can arise within families. Fundamental questions should be addressed to ensure common ground is maintained, such as:
• What level of ownership should family members have to income generated from the family business?
• Should the family business pursue other objectives, such as philanthropy?
• Which legal structures should be implemented to safeguard family assets?
• How should a family’s assets be invested, and who should hold authority over this process?
Each family’s unique ambitions and challenges will necessitate a tailored structure to the family office. In the early days of wealth creation, leadership is often concentrated: the Tharawat report found that for 41% of respondents, the decision to establish the family office was taken by the head of the family while for 47% the decision was driven by majority stakeholders. The family assembly, family council, board of directors, and shareholder assembly accordingly appear to have very limited influence over this process.
However, as both the businesses and families grow, the formalised structures of a family office can help ease tensions around wealth management and leadership transitions. There is a range of such structures, such as the family assembly, family council, and shareholder assembly, with the Tharawat report finding that a Board of Directors, Investment Committee, Executive Committee, and Family Office Advisory Board are the most common internal governance bodies. Respondents spoke about the benefit of these formalised structures to help resolve conflicts and align family members on investment goals and long-term strategies.
External support is another factor that can often prove vital to the long-term success of family offices. While 79% of respondents have family employees within the office, 44% of respondents also have a non-family investment officer, recognising that outside expertise can be a strategic asset. This support can come in many forms, and LGT Group brings the lessons of its 900-year history to the modern-day realities of family businesses across regions, helping families build these structures on a global scale.
Find out more about LGT in the Middle East at www.lgt.com/me.
- LGT (Middle East) Ltd. is regulated by the Dubai Financial Services Authority (DFSA).
