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Sunita Singh-Dalal is Partner leading the Private Wealth & Family Offices at Hourani in the UAE. She advises on cross-border estate and succession planning, wealth management, formulating and implementing family codes of governance, family constitutions, and establishing family offices.
India’s democracy has spoken and some believe that this is a pivotal moment where the tide has turned. So, what happens next; will the wealthy stay, or will they go?
Perhaps a more appropriate question is — and in fact has been for a while — is India seeing an exodus of wealth, or merely witnessing the global diversification of wealth as business families, entrepreneurs, and wealthy individuals explore new opportunities elsewhere?
Furthermore, how is the UAE positioning itself in relation to such diversification, and why does it remain an attractive investment migration destination and a significant recipient of such Indian outbound flows of wealth, in comparison to other traditional financial centers such as Singapore?
128,000 millionaires are projected to migrate globally in 2024, and the UAE sits atop the table of Top 10 countries set to see the highest net inflows, with a projected +6,700 net inflow by the end of the year. This is a new record after the net +4,700 who arrived in the Emirates last year.
The UAE is on a clear trajectory and continues to position itself as a successful investment migration destination.
The evolution and development of the country’s wealth management ecosystem is unprecedented. In less than five years, the UAE has introduced a robust regulatory framework that provides the wealthy with a range of innovative solutions to protect, preserve, and enhance their wealth.
Much of the UAE’s economy is dependent on family businesses; circa 90% of privately-owned companies in the Emirates employ more than 70% of the sector’s workforce and account for 40% of the national GDP. The stability of all family businesses is critical to the country’s economic stability. Ensuring the continual growth and sustainability of family businesses is a strategic priority and an integral component of the vision of the UAE’s leadership, who state that ”the family business sector reflects our vision for excellence and our commitment to pursue new opportunities to achieve success. Ensuring a smooth leadership transition, preserving the family legacy, and strengthening governance are key priorities in our plans to preserve the fabric of our family businesses and prepare them for the future.”1
Since 2020 we have witnessed a surge within the wealth management industry, with world-class professional advisors relocating to the UAE from other international financial centers in order to capitalize on the opportunities and capture the wealth that is flowing into the UAE.
Indian private banks and wealth management platforms are consciously and strategically enhancing their presence in the UAE in a bid to provide their clients with seamless investment advisory services. Two such notable recent examples are Nuvama Private and LGT Wealth Management, both exemplary investment advisors who are equally proactive in supporting their Indian clients with their global diversification and expansion requirements. Similarly, Kotak Mahindra Bank and 360 ONE Wealth are joining the dots to provide Indian families with wealth management services on the ground in the UAE, ensuring that they don’t lose out to their competitors.
The UAE’s Family Business Law introduced in 2023 focuses on creating long-term legacy and succession plans for all UAE-based family businesses (regardless of nationality), creating a framework that regulates ownership and governance of family businesses and facilitates the transition of ownership of the business between family members to support the continuation of family businesses across generations.
It is an ‘opt-in’ legislation, meaning that families must themselves choose to be formally registered in order to obtain such official status and the various corresponding benefits.
The Family Business Law also applies to certain structures established by families in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) such as trusts and foundations, which are widely available and proving to be incredibly popular wealth preservation and asset protection solutions.
Similarly, the Emirate-level family business laws, namely, the Dubai Family Business Law (2021) and the Abu Dhabi Family Business Law (2020), provide family businesses with wealth structuring solutions to overcome the current legal limitations of existing corporate entities in order to create effective investment vehicles.
Established in 2004, the DIFC is world class. It has a separate and independent regulatory framework, with civil and commercial laws that are modeled on English common law and enforced by its own DIFC common law courts. It created its own dedicated Family Wealth Centre in 2023, with the aim of strategically positioning the DIFC as an optimal global jurisdiction to preserve the wealth and protect the assets of family businesses using foundations, trusts, and other related corporate structures in the DIFC.
It is a vibrant business hub and is home to much of the UAE’s wealth management industry, providing a range of wealth management and succession planning solutions to wealthy individuals. It is often the ‘go to’ jurisdiction for many wealthy Indian families.
The DIFC went a step further in March 2024 and finally introduced the long-awaited enhanced firewall provisions for all DIFC trusts and foundations in relation to forced heirship claims (for example, claims brought pursuant to Sharia law) and creditor claims, thereby assuring the wealthy of even more legal protection and security.
Predictions suggest that the UAE's family office market alone could oversee assets exceeding USD 1 trillion by 2026. The country offers a range of options for families keen to establish primary and satellite family offices to better manage the diversification and expansion of their wealth. The DIFC introduced the Family Arrangements Regulations in 2023 and revised the eligibility criteria for those seeking to create a single family office. Provided a family has a global net asset base of USD 50 million, it can incorporate a single family office in the DIFC in circa 90 days.
Notwithstanding the introduction of a 9% UAE corporate income tax in 2023, the UAE remains a tax efficient, competitive economy, continuing to support and encourage growth and attract inward investment. The stable political framework, the peaceful environment with advanced infrastructure, the ease of doing business, the diverse investment opportunities, the futuristic regulations and supporting infrastructure, the clear and dedicated commitment to ESG initiatives and the wide range of easily available residence options, are all reasons why the UAE is positioned as a prominent recipient of much foreign investment and why it’s the destination of choice for so many relocating high-net-worth individuals.
Notes
1 HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.
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