Gulf heirs shift focus from family businesses to wealth management

In the Gulf region, family-owned businesses constitute about 90% of private companies in the UAE and nearly 60% of private enterprises in Saudi Arabia. Traditionally, these businesses have engaged in a variety of sectors, including retail and automotive sales. However, a trend is emerging among the younger generation, especially those returning from overseas education, who are more inclined towards wealth management and investments rather than maintaining and running traditional family-run companies. They come equipped with modern finance degrees and financial certifications, making them better suited for managing investment portfolios. This shift indicates a significant change in priorities as heirs show a preference for investments in private equity and real estate. The rise of the wealth management mindset among the heirs is being driven by various factors, including changing personal aspirations and a desire for independence. The elders in these families are starting to recognize the necessity of succession planning due to the anticipated global wealth transfer, projected to be around trillions of dollars over the next two decades as the Baby Boomer generation ages. The UAE has responded by urging family businesses to prepare for these generational changes, emphasizing the importance of replacing informal governance structures with formal family offices. These family offices serve to professionally manage and distribute wealth among heirs, aligning with their investment inclinations. The conversation surrounding family governance gained urgency following the death of Majid Al Futtaim, a notable Dubai businessman, who left behind a substantial empire without clear directives for succession, prompting the formation of a special judicial committee to navigate the complexities of asset transition. His case highlighted the potential pitfalls of unplanned transitions and has pushed for reforms in family business governance within the UAE, ensuring that heirs are prepared and that businesses remain stable through generational shifts. This developing narrative marks a pivotal moment for family businesses in the Gulf region. With increasing numbers of heirs prepared to embrace investment as a career path rather than taking on traditional roles within family enterprises, there is an indication that the landscape of wealth management and family business structures will see substantial transformation in the coming years. Such changes not only reflect a localized shift but also play into a larger global trend of evolving business environments, where operational roles are increasingly divided from investment strategies.