Amidst a dynamic economic landscape marked by rapid wealth accumulation, an increasing number of Middle Eastern family offices are opting for greater professionalisation. Ultra-high-net-worth individuals (UHNWIs) in the region are also transitioning toward formal family office structures, prompted largely by the growing need for a corporate-inspired structure to manage their wealth.
In this article, we’ll explore this transformative trend, highlighting the key drivers of change and how increasing professionalisation is sculpting the future of wealth management for Middle Eastern family offices.
Why is professionalisation a focus for the Middle Eastern family office?
The Middle East has become a thriving hub for both individual and family wealth accumulation. A recent survey of wealth managers in the 2023 Knight Frank Wealth Report showed that 37% of respondents saw the wealth of their clients in the Middle East increase “significantly” in 2022, a figure well above the global average of 17%.
As wealth in the region continues its meteoric rise, UHNWIs and families are increasingly drawn to formal family office set-ups, a transition nudged by the considerable percentage of first-generation wealth and the corresponding focus on succession planning. Family offices in the region are stepping into crucial roles, helping to facilitate the smooth transition of an anticipated $2 trillion of wealth over the coming decade.
Transformative family office trends
The Middle East is undergoing a transformative shift in its family office landscape. Where family offices have historically been run like traditional family businesses, rooted firmly in legacy, today they are expanding their horizons.
One significant shift is the diversification of asset allocations and investment strategies. Family offices are expanding from traditional assets like real estate into venture capital, private equity and digital assets, shedding their traditional wealth preservation mindset and exploring new avenues for growth.
The increase in IPOs has also introduced a lucrative avenue for wealth diversification. Family businesses are at the heart of the Middle Eastern economic tapestry, contributing to over half of the region’s GDP. These businesses are experiencing an upswing that often includes IPOs, necessitating the adoption of professional corporate-like structures such as family offices to adeptly manage post-IPO windfalls.
Finally, the Middle East has embraced a focus on sustainability, which often resonates with the core principles of Sharia. More than half (56%) of Middle Eastern family offices are investing with ESG principles in mind as they revise their values and objectives with increased due diligence and a more professional approach.
The benefits of increased professionalisation
The adoption of more formal family office structures and governance has a wide range of benefits to UHNWIs and families in the Middle East, including:
- Effective management: Professionalised private institutions operate with structured governance frameworks, robust risk management, experienced advisors and leading-edge operating platforms to manage and generate wealth. They also avoid procrastination, establishing wealth transfer plans and investment strategies before they’re needed
- Streamlined governance: Governance is one of the most important considerations for international investors, and Middle Eastern family offices are avid investors overseas. An average of 36% of their property portfolios are held overseas compared to the 19% global average
- Independent advisory: Independent investment advisory committees are recommended at or above $1 billion, and getting the right people on those committees—with the right expertise—is essential
- Integrated technology: Professional services provide far more than centralised administration. IQ-EQ, for example, provides an integrated technology platform to streamline reporting across a global investment portfolio. Our technology platforms are all connected, driving efficiencies and contributing to superior service
How IQ-EQ can help
IQ-EQ is a trusted local partner on this transformative journey, offering a holistic suite of services to family offices, including global structuring, risk management reporting and compliance and regulatory reporting. With innovative, integrated technology platforms like IQ-EQ Cosmos (a portfolio monitoring tool), family offices can foster informed decision-making and strategic growth.