Recent data from Campden Research suggests that the number of family offices worldwide has experienced a 38% surge over the last five years, with around 7,300 currently in operation. Not only that, but the global wealth under management by these family offices is about $5.9 trillion.

This robust growth is underscored by the increasing prominence of family offices serving ultra-high-net-worth (UHNW) individuals.These offices are significantly contributing to economic growth in the Middle East, where they manage the assets of some of the region’s most wealthy families.

With an almost 25% increase in UHNW individuals expected in the Middle East region over a five year period, 224,000 millionaires in Saudi Arabia alone and Qatar having the most millionaires per capita in the world, it’s not surprising that the number of family offices to service this wealth is also growing.

The Middle Eastern boom: what factors are fuelling this growth?

1. Rapid wealth accumulation

One of the major catalysts of this expansion is the extraordinarily rapid growth of wealth in the Middle East.

This surge is creating a corresponding increase in the number of family offices in the region. Almost 6,000 UHNW individuals in the Middle East possess a combined net worth of $995 billion and this figure is set to increase.

2. A growing need for professional wealth management structures

Family businesses are the economic heartbeat of the Middle East. They’re an integral part of the social and economic landscape and contribute 60% of the region’s GDP, benefiting from a highly supportive regulatory environment. Many of these families have experienced significant growth leading to more Initial Public Offering (IPO) events. These liquidity events necessitate a corporate-like structure, such as a family office, to effectively manage post-IPO wealth creation.

Naturally, as wealth has grown, there has been a polarisation between the risk appetite and investment strategies for the personal wealth held by the family and that generated by their business, with distinctive approaches required. This scenario has led to the rise of family offices to help both bridge this gap and help families professionalise and institutionalise their wealth. They also allow families greater control over investment decisions and increased privacy than they may otherwise expect if their wealth was managed by a larger institution.

3. First time focus on wealth transition

Wealth transition and succession planning are now major focal points in the Middle East. Most wealth in the region is first-generation, making the establishment of structures for managing wealth transition necessary.

With nearly $2 trillion projected to move from the current generation to the next in the GCC alone in the next decade, family offices are playing a crucial role in organising this significant wealth transfer amongst family stakeholders.

The COVID-19 pandemic and our increasing awareness of mortality has further compelled families in the Middle East to plan for wealth transition to the next generation and professionalise their family office setups.

4. Diversifying family holdings

Historically, family offices held a more wealth preservation mindset – but this is now shifting towards identifying real opportunities to grow wealth. Real estate has always been a key asset class for MENA families, however today, family offices are evolving their investment outlook as the influence of the next generation grows.

As an example, private investments into the digital and fintech sectors are becoming increasingly attractive, along with sustainable investment practices. This is reflected in a recent survey by Lombard Odier who noted that 81% of regional investors now already consider environmental, social and governance (ESG) factors in their investment decisions.

Recruitment into the family office space

Recruiting top talent has historically been challenging for family offices as they haven’t always been viewed as a long term career choice. It is a common tale that bankers who joined family offices over a decade ago found themselves providing something akin to a concierge service for their clients, whether it be overseeing their children’s university applications or making travel arrangements and restaurant bookings, alongside the day job of managing the client’s wealth. This in turn led to staff churn and a lack of continuity.

Today, as family offices establish better corporate structures, I believe this tide will turn and they will now compete with the largest private banks when it comes to attracting talent.

Family offices will also be the beneficiaries of the shrinking landscape of international firms in the region. The consolidation that has taken place amongst the larger international banks has meant that there are effectively fewer alternative employers for bankers wanting to move to consider. In addition to this, there is an increasing perception that some of the larger banks are no longer as stable or committed to the region as they once were. This, I believe, will further underpin the ability of family offices to recruit top talent.

Against this backdrop, family offices can provide a compelling proposition for bankers looking to enhance their careers. They offer bankers an opportunity to be even more client-centric and have greater independence in decision-making with swift outcomes as compared to some of the larger banks. Some family offices have also started to allow bankers to co-invest with them, ensuring they have real ‘skin in the game’ and can benefit from the firm’s growth.

This is all helping to increase the attractiveness of family offices as a legitimate career choice for those who have experience of working at big international banks and are looking to take a more entrepreneurial step with their next career move.

If you are a family office looking to recruit senior executive candidates with a proven track record of building businesses and strong performance delivery, please contact me directly and let’s set up time for a chat.