corporate
The key traits of High-Net-Worth millennials in the Middle East
Lombard Odier’s fascinating new report reveals the values, aspirations and investment convictions of the next generation of entrepreneurs and investors from across the Middle East.
Wealthy millennials have been the focus of considerable research at a global level, but what about high-net-worth (HNW) investors and entrepreneurs in the Middle East? As a global wealth manager with deep roots in the region, we wanted to find out what the next generation of business leaders, start-up founders and heirs in the region really want to do with their wealth.
To that end, we commissioned a survey of 300 HNW individuals, 200 of which were below the age of 40. It asked a range of questions to discover their values and investment views, and attitudes to succession, estate planning and sustainability. What do they expect from their banking partner and how do these views differ from their older counterparts?
We found that younger wealthy individuals in the region are strongly guided by their values. The overwhelming majority still identifies with their Middle Eastern heritage, although there are signs that some are influenced by values from outside the region. They also have firm investment convictions and are deeply committed to sustainability.
However, respondents also expressed an urgent call for more support from their banking partner. At Lombard Odier, we believe that we have a fiduciary duty to work with our clients to co-create long-term investment and wealth planning solutions that help them truly express their values and meet their objectives.
Below we highlight eight key findings from the survey. Click here to read the report in full.
What’s driving the investment decisions of high-net-worth investors in the Middle East today?
Wealth accumulation is a priority
Our survey found that younger and older HNW investors in the Middle East prioritise very different outcomes for their wealth and investments.
Younger investors have a greater focus on improving their lifestyle and remaining wealthy compared to older investors over the age of 40 (45% vs 16%), while the latter are more interested in their financial and reputational legacy. Younger respondents also diverge from older investors by their appetite for higher returns, even if this incurs risks. Conversely, older investors (65%) would choose to avoid losses even if this reduces returns, compared to just 31% of younger investors.
Clear investment views on key asset classes
Younger investors hold strong, positive long-term investment convictions. 71% believe that equities markets will continue to rise and would like to actively participate in that long-term growth. 60% also expressed a strong preference for private market assets, including private equity, private debt, real estate and infrastructure.
Not only can private assets provide a high level of explicit protection against rising inflation, they can also offer highly targeted exposures to the best technology-related opportunities. 79% of young investors believe that there are significant opportunities in digital and technology sectors.
Sustainability is a performance driver
Younger respondents understand that sustainability factors are an increasingly important investment performance driver.
Almost three quarters (73%) believe that they can generate improved returns through investments that drive the transition to a net-zero economy. 74% believe that new business opportunities will be found in sustainable sectors in the region, such as renewable energy, recycling solutions and sustainable farming. Consequently, the vast majority (81%) already take sustainability into account when making investment decisions, and an even larger majority (88%) say they intend to increase allocations.
“We see tremendous opportunities for us in sustainable or Environmental, Social, and Governance investments. It is still a niche but high potential investment area,” – young investor from Oman.
At Lombard Odier, our views are entirely in line with respondents. For us, sustainability is not just a priority, it is an investment conviction. We believe that we have a duty to help our clients mitigate the risks and capture the investment opportunities associated with this transition.
Signs of convergence with western values
Younger HNW individuals highlighted the close ties between their wealth, their family business and the strong traditional value system by which it is run. However, while their values are strongly aligned with traditional Middle Eastern values, younger investors are also likely to be more flexible than their older counterparts.
Half (53%) of younger respondents say that their families share traditional Middle Eastern values, based on their country’s religious and cultural beliefs. However, a further 31% say they espouse traditional Middle Eastern values but updated for today to account for changing times.
This is in contrast to older investors over the age of 40: 79% say their values are exclusively traditional, while only 11% will take account of changing times.
Views about systems of familial governance are similarly nuanced. Half (50%) of younger respondents say that their family adheres to a formal system of governance based on the views of senior family members, compared to 66% of older respondents. However, a greater number of younger investors are more likely to have a formal but flexible governance system that can evolve over time (45% versus 28%).
An urgent need to start planning for the future
Our survey found that HNW individuals are well aware that effective succession planning is of paramount importance in a region where most businesses are family-owned. Eight-in-ten (84%) respondents believe that their family business is structured to allow for efficient intergenerational wealth transfer, with little disparity between younger and older respondents.
However, only 9% of younger respondents have an estate plan in place for all of their private assets. 36% have an estate plan for some of their assets but 62% of young HNW individuals have no plan in place at all.
Given the outsized economic contribution of family-run businesses in the Middle East, strong family governance is critical for the continued economic success of the region. At Lombard Odier, we will continue to encourage younger wealthy individuals to start preparing for their family’s future as soon as possible by delivering tailored wealth planning solutions structured around their specific objectives.
A strong regional focus
The vast majority of younger wealthy individuals (89%) hold their assets in the Middle East and intend to keep them there over the next five years. The remaining 11% keep their assets in Europe (5%), North America (4%) and Asia Pacific (2%).
For a few HNW individuals (4%), holding assets in more than one country has risen in importance over the last year. Growth opportunities outside of the region are the main reason for this.
“I am looking to strike a balance between established and emerging markets so that we can take advantage of both growth and superior experience. Accordingly, I prioritise particular markets,” said one younger investor from the UAE.
Despite this regional loyalty, our survey also reflects a growing trend among HNW individuals to invest, buy homes and send their children to school outside the region. Almost a quarter of younger respondents (23%) are rethinking the geographical set-up of their family, although this trend is slightly higher for older respondents (27%).
A call for greater support from the wealth industry
Finally, the survey conveyed a clear message to the financial industry. Younger respondents are looking for a highly personalised and differentiated service from their financial institution. They want a well-capitalised banking partner that is aligned to their values, that can help them express their principles and work with them to build a long-term portfolio of innovative investment solutions specifically tailored to their objectives.
For example, nearly all respondents (95%) want to receive investment advice from their banking partner. However, only 20% would opt for a discretionary mandate, one which defers all investment decisions to a professional advisor according to pre-agreed investment objectives. 79% of investors would like their banking partners to show them how they can integrate sustainable or ESG criteria into their portfolios.
At Lombard Odier, our mission is to help our clients achieve the outcomes they want for themselves throughout their lives. By delivering truly bespoke client service and tailored investment solutions, we guide our clients towards their specific goals over the long-term, generation after generation.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
Read more.
share.