The Middle East stands on the verge of a historic transition of $1 trillion in wealth to heirs and extended family members. This includes High Net Worth individuals in the UAE who have seen their assets grow by 20 percent to reach $700 billion in value since 2022.
Digital technologies such as artificial intelligence, smart contracts, distributed ledger technology, and tokenization offer promising avenues to reduce friction, improve transparency, and ensure secure and efficient asset transfers.
“We stand on the crossover of a monumental generational wealth transfer in the Middle East in an era when wealth portfolio compositions are increasingly complex, driven by ever-widening asset categories and an appetite towards investments in digital assets,” stated Mohammad Alblooshi, CEO of DIFC Innovation Hub.
Inheritance cycle more complex than ever
In their latest “Navigating the Future of Inheritance” report, DIFC Innovation Hub, Julius Baer and Euroclear reveal that despite these new technologies, only 24 percent of High-Net-Worth Individuals currently have a full estate plan in place, highlighting the urgent need for improved inheritance processes.
The report also reveals that over half of families believe that it is just too complicated and too time-intensive to gather, record and plan how to allocate assets across potentially large families.
Over the centuries, the complexity of inheritance has continued to grow. What was once a castle, land and gold is today a collection of accumulated wealth spread across multiple bank accounts, residential properties, commercial real estate holdings, alternative investments, publicly listed securities holdings, art, collectibles, and most recently, crypto investments.
Wealth remains under a growing strain
The composition of wealth in the Middle East and the world has been evolving, meaning that the processes that support it must also evolve, triggering the emergence of a new ecosystem today to facilitate the transition of complex assets across generations.
However, with 73 percent of wealth holders unwilling to discuss comprehensive legacy planning scenarios even with their most trusted advisors and long-time wealth managers, this system is being hindered by human challenges. As a result, more than 50 percent of wealth transfers encounter delays, triggered by insufficient preparation, legal complexities and resulting probate processes that can last up to 12 months on average.
Consequently, prolonged probates can mean sizeable volumes of wealth under external scrutiny, sizeable legal and court fees, and temporary inaccessibility. Due to these pressures, the wealth accumulated by earlier generations is under a growing strain.
New technologies to preserve wealth
The report reinforces the importance of close collaboration between Middle East wealth managers, family offices, regulators and service providers in creating a robust platform for wealth transfer and driving adoption.
To minimize potential loss of wealth for future generations, today’s wealth managers have an opportunity to re-evaluate how they enable the transfer of wealth and to build a new approach to legacy management that encourages readiness and reduces friction, to the benefit of generations to come.
“As we work closely with current and future generations, it becomes more important than ever to take into account the evolving landscape with the onset of digital assets. We increasingly see the potential of technology particularly blockchain and tokenization in enabling a secure and transparent process for wealth transfer,” stated Alireza Valizadeh, CEO, Julius Baer Middle East.
New technologies are beginning to play a key role in ensuring that wealth can successfully be preserved, and even grown, as it passes from one generation to the next. For instance, artificial intelligence and distributed ledger technology have begun to provide new opportunities to transform the inheritance cycle by enabling greater visibility, accelerating transfers and removing friction.
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Regulatory action needed to foster trust in digital ecosystems
Regulatory action and support will be critical to foster trust in these new digital ecosystems, helping to encourage a traditionally conservative industry to embrace technological advancements. In addition, collaboration between wealth managers, regulators and service providers is essential in building a robust, scalable platform for wealth transfer.
This unified approach will not only safeguard wealth but also promote its fair distribution, securing a prosperous and stable financial future for generations to come.
