When I returned to the UAE after four years in France in the late 1990s, I joined my father and brother in our family business. Back then, I found myself encountering a number of challenges related to something that most business schools in the 1990s did not prepare us for: succession planning in family businesses.
I signed up for a series of family business conferences in Dubai, and fortunately I was able to learn from some of the most seasoned business families in the region, including WJ Towell in Oman, the Sultan Group and Bader Group in Kuwait, Al Muhaideb and the Kanoo Group, both of which are Gulf-wide, Al Shirawi in Bahrain and Al Fahim in the UAE, among others. One recurring topic was the challenges faced by many of the region's family businesses when a founder passes on.
Over the past few years, the UAE has realised the importance of family businesses in the economy. This is no abstract matter. According to a report by the UAE Ministry of Economy, 70 per cent of the UAE's private sector workforce is employed by family businesses, which also make up 90 per cent of all private companies in the country.
Yet their importance is not a guarantee of their longevity. For example, one study by the Harvard Business Review estimates that "some 70 per cent of family-owned businesses fail or are sold before the second generation gets a chance to take over."
The Gulf states, and certainly the UAE, are not immune to such challenges. Over the past three decades, a number of families in the UAE and the Gulf have either been challenged by or succumbed to the disputes that arise following the passing on of a founder. Even today in the UAE, many are keenly awaiting to see what the outcome will be of a transition in one of the country’s leading family businesses.
Although more needs to be done, there are positive steps being taken in the country, including the setting up of the Dubai Centre for Family Businesses under the umbrella of the Dubai Chamber and the DIFC Family Wealth Centre. In 2015, my own family endowed the Sheikh Saud Bin Khalid Al Qassemi Chair in Family Business at the American University of Sharjah, now held by Prof Rodrigo Basco. The class has proven to be so popular that there are now multiple courses offered every semester.
But succession planning does not only apply to large businesses. Each one of us is responsible for making sure our loved ones, whether tied in a family business structure, or not, can be made aware of our assets and liabilities and the final wishes which we would like to be carried out.
On my part, the first will I wrote was in May 2011, and I have revisited and updated the text twice since then. As priorities shift and new causes emerge, I had to modify and amend it. In my own will, I mention what assets I have and to whom I owe money (in one case it is a friend who loaned me 700 Francs in 1997 and has refused to allow me to pay him back since). I also mention which charities I would like money to be donated to, and what happens with the vast art collection of which I am currently a custodian.
The case for updating wills was made clear to me when my own father passed away in 2005. Although he had left a hand-written will, it was neither notarised nor were there witnesses to it. We then found out that there was another will written a few years before that, and that some adjustments were made.
Again, in this field some positive developments are taking place in the UAE, such as the setting up of the Dubai Courts Public Notary, where expatriates' wills can be notarised or the DIFC Wills Service Centre. In this case, as well as in family businesses, laws could be streamlined and it could be made possible to assign assets at will, regardless of gender and nationality for those who wish.
Islam gives its followers the right to decide the allocation of up to a third of one's assets after their passing on, while the remaining two thirds must be allocated as per Sharia (Islamic law).
Planning for a succession of a large family business or writing a will for an individual are not easy or quick processes. They can take a few hours or weeks of your time. But they can save loved ones a lifetime of uncertainty.
MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
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%3Cp%3EEncourage%20innovation%20in%20the%20metaverse%20field%20and%20boost%20economic%20contribution%3C%2Fp%3E%0A%3Cp%3EDevelop%20outstanding%20talents%20through%20education%20and%20training%3C%2Fp%3E%0A%3Cp%3EDevelop%20applications%20and%20the%20way%20they%20are%20used%20in%20Dubai's%20government%20institutions%3C%2Fp%3E%0A%3Cp%3EAdopt%2C%20expand%20and%20promote%20secure%20platforms%20globally%3C%2Fp%3E%0A%3Cp%3EDevelop%20the%20infrastructure%20and%20regulations%3C%2Fp%3E%0A
Desert Warrior
Starring: Anthony Mackie, Aiysha Hart, Ben Kingsley
Director: Rupert Wyatt
Rating: 3/5
Scores
Rajasthan Royals 160-8 (20 ov)
Kolkata Knight Riders 163-3 (18.5 ov)
It Was Just an Accident
Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
