Middle Eastern clients don’t want to relinquish control
Anthony Thompson, partner and head of Private Capital, Wragge Lawrence Graham & Co, says that in the Middle East, the days of the simple discretionary trusts, to hold business assets, are long gone.
What interesting high-profile cases of succession planning involving business transfer have you dealt with?
I have a number of cases and although the businesses are very different, the underlying concerns are the same. There is a wish by the client to lay the path for succession but not necessarily to give up any control, so we have to try to accommodate these two conflicting objectives.
What should UHNWIs be aware of when transferring businesses to their children?
An equal share for each child in the business makes sense from the point of view of fairness between the children, but it may lead to deadlock if the children disagree. As a result, the client needs to decide which child, or children, will run the business in the future and ensure that he or she is able to do so. Without that, there is likely to be at least one child who thinks that they are a brilliant business person but in all probability are not, and so this will prevent the more able children running the business effectively.
What trends do you see in the industry you can tell us about?
In the Middle East, where much of my work originates, there is more sophistication in the types of structure and governance that clients are interested in. The days of the simple discretionary trusts, to hold business assets, are long gone. We are also using light touch corporate governance techniques to apply to family wealth structures.
This is an important area for advisors and their clients, particularly in view of the first generation wealth that is continually being created in the emerging economies. The worry of “shirtsleeves to shirtsleeves in three generations” is well appreciated by many first generation wealthy clients.