Nearly two-thirds (62 per cent) of single-family offices – the structures established by multi-generational business-owning families to manage their affairs – in the Middle East are now led by second-generation family members, a study has revealed.
The research by Tharawat Family Business Forum and LGT Middle East showcases the profound shift underway as family heads begin to involve next-gen family members.
The study shows that 41 per cent of single-family offices have next-gen family members making investment decisions and contributing. Findings also reveal that investment decisions are being taken by third-generation family members in 35 per cent of family offices. “This focus on the future is reflected in the reason behind why these family office structures were first established, with 88 per cent of respondents citing succession planning as a key factor, second only to centralising family investments and managing financial risk,” said the study report.
Sebastian Goeres, CEO of LGT Middle East said contextualising the Middle East’s changing approach to managing capital within the rich legacy of its past is essential to properly understand its future evolution.
“This research represents the first in-depth review of the region’s rapidly growing family office landscape, conveying that the immense generational transfer of wealth in the Middle East is well underway. As family offices begin transferring their assets to the next generation, establishing robust governance structures will prove the defining success factor. Implementing effective succession plans is not just a financial necessity but a stabilising force for the family members involved and the region’s broader economy,” said Goeres.
While the research indicates high levels of next-generation engagement, these family members are also very interested in pursuing their careers (63 per cent) and starting their businesses (67 per cent), meaning families will need strong governance to support these ambitions, alongside ensuring sound management and stability of family affairs. Suggesting a preference for autonomy, family office principals have to maintain familial engagement – identified as a major consideration by nearly one third (32 per cent) of family offices.
The report noted that as the governance of family offices in the region evolves and the next generation becomes more heavily involved – in parallel, new strategic trends are cultivating conditions for change.
“The development of new technologies is part of this vanguard and for 71 per cent, AI is set to change the way they operate. At the same time, the importance of social responsibility has been identified as a decisive investment factor in the region with 88 per cent citing it as an important element of their decision-making,” it said.
Farida El Agamy, general manager of Tharawat Family Business Forum, said the research reveals the relationship between the operating business and both embedded and standalone single family offices in the Mena, and shows that they look to strike a delicate balance between preserving important family legacies and adapting to the fast-paced complexities of the 21st-century marketplace.