Preserving cultural legacy: Family office dynamics in the Middle East

The Middle East has diversified away from petroleum and emerged as a global player.

The Middle East is currently facing a unique challenge. In our rapidly changing global economy, financial success requires adaptability and innovation. However, throughout the region’s rich history, commercial success has long been intertwined with heritage, and many family businesses are now challenged to balance their heritage with the demands of a modern, interconnected world.

LGT (Middle East), 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, 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 has undergone a significant transformation, with the region diversifying away from petroleum dependence and emerging as a global player. In 2022, the UAE adopted the Monday-to-Friday workweek to bridge Eastern and Western markets, and by 2024, the country is expected to attract 6,700 new millionaires, reflecting its growing global appeal.

With families and investments now spanning continents, globalisation has left similar marks on family businesses. 53% of respondents now include a global outlook in their risk assessments and international portfolios increasingly require tailored solutions. As a global business with regional expertise, LGT offers individual solutions that honour local legacies while addressing international opportunities. Its expansive global network also enables families to connect with peers and experts worldwide, enhancing strategies while reinforcing the importance of shared values.

Trust and Family Legacy

Family businesses now face a vastly different marketplace than their founders, and questions around legacy often arise: older generations hope to see their efforts safeguarded, while younger generations remain conscious of their responsibilities.

Drawing from the 900-year history of the Princely House of Liechtenstein, LGT Group understands that success requires commitment to family cohesion. LGT’s research found that Middle Eastern families accordingly codify 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. These family bonds are enriched by shared social and religious values, and like LGT, Middle Eastern family businesses have a strong history of philanthropy. Social responsibility continues to influence 88% of respondents, and this data underscores that financial decisions remain entwined with Middle Eastern culture.

Practical Considerations in Generational Wealth Management

As wealth drivers diversify over generations, differing opinions can arise within families. Fundamental questions should be addressed, 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 ambitions necessitate an individual approach to their office. A range of structures can help ease potential tensions around generational transfers, with the most common including a Board of Directors, Investment Committee, Executive Committee, and Family Office Advisory Board.

External support is another factor that can often prove vital to long-term success. 44% of respondents 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.

LGT (Middle East) Ltd. is regulated by the Dubai Financial Services Authority (DFSA).

Find out  more about LGT in the Middle East at www.lgt.com/me.