Dubai: The most critical issues facing family businesses in the GCC relate to succession planning (55 per cent) and legacy planning (23 per cent), according to a recent research conducted by Jersey Finance and Hubbis, an international wealth management firm.

“Ensuring that wealth is transitioned properly from one generation to the next is vital for the long-term sustainability of any such business and our research shows that the biggest challenges HNW individuals in the GCC face in this regard relates to family disputes [50 per cent] and incorrect advice [30 per cent],” said Geoff Cook, Chief Executive of Jersey Finance; in an interview.

It is crucial family businesses do their research and speak to multiple wealth management companies before deciding how they will plan for the future. Nonetheless, it is vital that these individuals recognise firstly that they do need professional advice given well-developed structures and trusts available in the market today.

While passing on the wealth to the next generation is on the minds of most first generation HNWIs, in terms of legacy planning, it is essential that members of family businesses talk openly and frankly in order to reach agreements and avoid conflicts. “They need to be able to listen and take different opinions constructively, as well as seek professional advice. Most importantly, they need to do sufficient research, not be afraid to ask questions, and select a partner that they can trust,” Cook said.

Family disputes

Many families in the GCC are concerned about a perceived loss of control when using wealth managers to transition capital to a younger generation. Wealth managers must be prepared for any issues that arise in estate or succession planning including family disputes, or clients being given bad advice.

In terms of what they should avoid, Cook believes the region’s wealthy should not plan to circumvent the Sharia principles in place in the region, or make assumptions when it comes to inheritance planning. Another important point is that they should not exclude family members from airing their views, and they must be careful to never mix family and personal ownership of assets. Increasingly future business leaders are globally-minded, well travelled, predominantly educated abroad, and highly individualistic. Research from Deloitte shows that 80 per cent of the next generation’s leaders say their leadership style will be different, while over half want to change their company’s strategy (56 per cent) and corporate governance structures (56 per cent). “Innovation, particularly in terms of the digital revolution, is vital for tomorrow’s leaders. At the same time, we do see that there are some successors who do not want to succeed their parents and rather, are intent on starting their own businesses,” said Cook.