Growing business remains the priority of Middle East’s wealthy
A new report by Standard Chartered Private Bank highlights the remarkable growth in the wealth of high net worth individuals in the region but warns of a general lack of personal wealth management strategies, particularly in terms of transferring wealth to the next generation.
The Standard Chartered Private Bank (SCPB) report – Business Before Wealth shows that growing their business remains the primary and dominant goal for such high net worth (HNW) business owners in the Middle East. The report surveyed stakeholders in family businesses with a 2012 turnover and family net worth in excess of USD100 million (QAR364 million), as well as stakeholders in non-family businesses with a 2012 turnover and individual net worth in excess of USD25 million (QAR91 million).
The past decade has seen remarkable continued growth in the wealth of HNW individuals in the region (see chart on next page). This is set to endure, with private wealth in the Middle East and Africa, projected by SCPB to grow at a compound annual growth rate of 6.5 percent (to an estimated USD7.2 trillion or QAR26 trillion) by the end of 2018, with most of the increase coming from new wealth creation in oil-rich economies.
In this vein, 82 percent of the Middle East business owners surveyed have already internationalised their businesses (compared to 58 percent of their Asian counterparts, and 42 percent of their African ones). However, almost half lack formal plans to transfer their wealth to the next generation. Given this, and the fact that 85 percent of respondents are heavily involved in the daily management and financial affairs of their business, little time is left for personal wealth strategies.
According to SCPB’s regional head of private banking for Europe, Middle East, Africa and South Asia, Stephen Richards-Evans, for HNW in the Middle East, structures for wealth transfer are more likely to be found among respondents who were not part of the founding generation of the business (in other words, the next generation), with some 67 percent of this group having such a structure in place. Overall, the role of the family business in the Middle East remains paramount, with this strand constituting around 75 percent of the region’s entire private sector, creating 70 percent of employment in the region, and playing a critical role in helping to diversify a regional economy dominated by the public sector and the oil and gas industry.