With recent decades having seen a rapid rise of many fortunes in emerging economies, the focus is shifting toward ensuring wealth retention and continuing growth amid generational transitions – especially within the Muslim community.
Fairway Group Managing Director Aslam Shareef shared with IFN Investor that there is a critical need to address concerns over business continuity as many of these economic powerhouses are family-run and dealing with transactional assets valued in billions.
A major concern is the patriarchal focus of many Islamic succession laws, where ownership would pass after deaths along male bloodlines – which could potentially be detrimental if it led to arbitrary decisions by new owners without consideration for operational policies and strategies.
“A survey conducted to gauge the impact of such concerns found that over the next decade, there was high likelihood of around US$1 trillion total worth of assets would be passing from one generation to another in the Middle East.”
To avoid such upheaval, Aslam said more Middle Eastern families with large businesses are looking to engage astute wealth managers to implement the best Shariah compliant investment structures for business continuity while caring for future generations.
Noting that a lot of families have created charter documents where every blood relative would sign their agreements, Aslam said this method would still be of no guarantee. “When the patriarch passes and everybody later rip up the document, chaotic tussles occur. With a clearly-defined Shariah structure, you cannot do that.”
Associate Director Chris Mourant explained that having the right structure in place gives families peace of mind and avoid issues with the Shariah courts – like assets being frozen amid proceedings to identify which heirs who may take over the family business.
“These disruptions to the business may cause huge losses and becomes a contentious issue in terms of day-to-day management.” This is among the expert advice provided by this Jersey-headquartered financial advisory firm, which also has offices in Dubai and Kuwait.
As death and succession planning is a sensitive matter for discussion, especially when the head entrepreneur is still young, Chris said the Fairway Group adopts the strategy of engaging in constant education and dialogue with the families having intergenerational wealth in the GCC region.
“One of the biggest problems we encounter is that members of a family business come to us when it is too late, by thinking that since they are in their 40s, there is still time to make the necessary arrangements to plan for their inheritance.”
On the potential ripple impact of the wealthy not having clear succession plans, Chris said the GCC region will experience significant growth in the next five to 10 years – with catalysts like Saudi Arabia Vision 2030, Kuwait Vision 2035 and Qatar Vision 2030.
“These strategic national policies will be beneficial to big family-owned businesses, who are the main drivers of these economies. So, the actual impact from any impaired wealth of these families will expand across all the GCC.”
Chris added that other major challenges ahead for businesses and heirs without meticulous legacy planning include the complexities of cross-border dealings, international laws and tax implications. These issues can be addressed only when the full extent of assets is made transparent for wealth management professionals to better outline the succession for scions with legally-enforceable solutions for such families.
