Succession planning: Getting it right the first time in the Middle East

The Middle East is on the cusp of a profound economic and cultural shift. Family-owned businesses, responsible for generating 60 per cent of the UAE’s GDP, are preparing to transfer a staggering $1tn in assets to their heirs over the next decade. While this transition reflects the economic vitality of the region, it also introduces a set of challenges associated with the transfer of wealth on such a scale.

As these families look toward transitioning their wealth, the initial focus has been on establishing robust governance structures. This is essential for the neat transferral of vast wealth, often between large families, to avoid potential disputes that can arise from complicated and contentious generational transfers.

While the prospect of inheriting significant wealth might seem enviable, it brings its own psychological and emotional challenges.

Children of high-achieving parents who have built considerable fortunes from nothing face immense pressure to succeed and a sometimes-powerful fear of failure – the shadow of successful parents can sometimes eclipse the personal achievements of children.

Planning not only helps wealth preservation but also enable legacy creation

The transfer of wealth between generations could also raise philosophical differences. Younger generations are more likely to prioritise sustainable practices and socially responsible investments than their parent’s generation and as families navigate the transfer of wealth, they also need to reconcile these differing values and goals.

Through decades of experience, LGT has developed deep expertise in guiding high-net-worth families through the complexities of passing on their legacies. This knowledge is particularly vital at a time when we are poised to experience one of the most substantial wealth transfers in its history.

LGT is owned by the Princely Family of Liechtenstein, where long-term thinking and responsible stewardship have guided the transferral of their assets across 26 generations.

For almost 900 years, the family has managed the transfer of its wealth from generation to generation, and this continuity and legacy remain the cornerstones of LGT’s approach to wealth management today.

This heritage – and the platform offered to connect like-minded families to exchange knowledge and experience – make the firm a trusted partner for families when it comes to planning and preparation for the transfer of intergenerational wealth for the first time.

Experienced in transferring wealth across 26 generations

The human instinct towards short-termism is in many ways at odds with the ambition of intergenerational wealth transfer. Earlier this year, during the Milken Institute Global Investor’s Symposium in Hong Kong, HSH Prince Max von und zu Liechtenstein, the chairman of LGT, underscored that point, stating that “annual returns are just relatively meaningless. You should care about what you make over five, or 10 years. Short-term orientation that’s inherent in human beings is one of the root causes for a lot of problems”.

Central to LGT’s educational initiatives is the Liechtenstein Academy, where the firm plays the role of facilitator in connecting peers and families from across its network to discuss the challenges and intricacies of the succession process.

The academy provides a unique forum for family members across different generations to come together to learn about the responsibilities and challenges associated with wealth.

Wealth transfer is more than just a financial transaction; it is a complex intergenerational exchange that will shape the Middle East’s future landscape. It requires a delicate balance of respecting tradition and embracing innovation, ensuring that the next generation not only inherits wealth but also the wisdom to manage it effectively.

Through this, the Middle East can continue to build on its legacy and foster a future that respects its past achievements and future potential.

The writer is the CEO of LGT (Middle East) Ltd.