Getting finances in order may be a top priority for many millionaires, but a majority of them don’t have a plan in place on how their fortunes and businesses will be passed on to the next generation, according to a new survey. 

Global wealth and asset manager Lombard Odier recently conducted a survey on wealth-planning issues among high-net-worth individuals (HNWIs) in the Middle East. 

The survey found that, out of 300 established HNWIs, only less than a quarter (24 percent) have already put a full estate plan in place for their private assets.  

A third (30 percent) do have an estate plan, but only for some of their assets, while 27 percent have not created a succession plan at all, although they are interested in doing so. 

Importance of succession planning 

In its report, the wealth management firm highlighted the importance of succession planning, citing that rich families in the region are “fast approaching a major transition”.  

The Middle East is not only attracting a growing influx of millionaires from different markets, it is home to wealthy individuals with businesses owned by large dynastic families. Private fortunes are, therefore, intertwined with family businesses. 

“After a period of considerable wealth accumulation since the 1970s, many older [HNWIs] are preparing to pass on their wealth and their business to the next generation. However, this process is not without its challenges,” said Arnaud Leclercq, Partner Holding Prive and Head of New Markets at Lombard Odier. 

“Preparation is key. Effective estate planning and a robust succession framework for the family business that includes formal governing documents can ensure that private wealth and business ownership are transferred smoothly and without conflict.” 

Older HNWIs, however, tend to think more about estate planning than the younger ones. Over half of older respondents (55 percent) said they have an estate plan for all their assets, compared to just 9 percent of younger respondents. 

More than a third of younger respondents (36 percent) do not have any kind of estate plan in place at all, but are interested in one, while a further 26 percent expressed no interest.

Will they move their wealth? 

When asked about moving their fortunes somewhere else, wealthy families showed a strong sense of loyalty to the Middle East region. 

An overwhelming majority (90 percent) of HNWIs said they are planning to keep their assets in the region and this is expected to remain largely unchanged over the next three to five years. 

A small number of wealthy families in the region (10 percent) do have assets outside the Middle East. About five percent of them hold their wealth in Europe, 3 percent in North America and 2 percent in Asia Pacific. 

The COVID-19 pandemic has also not prompted the HNWIs to migrate to another country, with 89 percent saying they have not changed their fiscal residence in the wake of the health crisis. 

(Reporting by Cleofe Maceda; editing by Seban Scaria )