As global wealth grows, so does the complexity of managing it. HNWIs and ultra-high-net-worth families increasingly seek bespoke solutions to preserve and grow their wealth while ensuring smooth intergenerational transfer. Enter the family office – a vehicle synonymous with tailored wealth management and holistic legacy planning.
In the Middle East, the UAE has emerged as a key player in this arena, with Dubai and DIFC in particular becoming a focal point for family offices looking to establish a robust and flexible presence.
This article looks at the rise of family offices in the UAE, explores the unique offerings of DIFC, and provides actionable insights for those considering their options. Whether you’re an established family office looking to expand or a first-time founder exploring where to set up, this guide will help you make an informed decision.
The global growth of family offices
In recent years, the rise of family offices has been nothing short of remarkable. Globally, there are now an estimated 10,000 family offices managing over USD 6 trillion in assets – a number that continues to grow. Ultra-high-net-worth families are increasingly gravitating toward these private advisory firms, drawn by their bespoke wealth management services, governance structures, and long-term focus on legacy planning.
But where these family offices choose to set up is just as critical as how they operate. Historically, locations like Switzerland, London, and Singapore have been favoured for their financial ecosystems and regulatory frameworks. Today, however, the UAE – and Dubai in particular – has positioned itself as a leading destination for family offices, offering unique advantages that are hard to ignore.
Why Dubai?
Dubai’s appeal lies in its strategic location and economic strength. Positioned at the crossroads of Europe, Asia, and Africa, it offers seamless access to both emerging and established markets, while its time zone aligns conveniently with major financial hubs.
The UAE’s economic foundation adds further weight to this with family businesses accounting for 90% of private enterprises, employing 80% of the workforce, and contributing significantly to the nation’s economy. With a total private wealth of USD 17 billion, the region continues to attract high-net-worth individuals and families.
At the centre of this ecosystem is DIFC, which offers a robust legal framework based on English common law, exceptional regulatory transparency, and access to a diverse pool of financial experts.
Post-pandemic influx of HNWIs
The COVID-19 pandemic was a turning point for Dubai’s standing as a wealth hub. As the world reeled from uncertainty, Dubai’s swift response and business-friendly policies attracted a significant influx of HNWIs. According to the World’s Wealthiest Cities Report 2023, Dubai ranked among the top 22 global cities for wealthy populations, with over 68,500 millionaires, 206 centi-millionaires, and 15 billionaires calling the city home.
The appeal extended beyond local families. Wealthy families from Asia, Europe, and Africa, once loyal to traditional hubs like Singapore or Hong Kong, began exploring Dubai as a viable alternative. For Asian families, Dubai’s geographic proximity and growing reputation as a safe and stable jurisdiction offered compelling reasons to relocate. European families, meanwhile, found Dubai’s tax-efficient environment and lifestyle offerings increasingly attractive, particularly as tax regimes tightened in their home countries.
A shift from tradition
For many families, the decision to choose Dubai over other established financial centres represents a shift in priorities. While locations like Singapore and London still offer undeniable benefits, Dubai’s unique blend of accessibility, infrastructure, and flexibility is carving out its own space in the global wealth management landscape.
Understanding family offices and their functions
The term “family office” may conjure images of exclusive wealth management firms, but at its core, it’s a simple concept: a private advisory firm established to oversee the financial and personal needs of a single wealthy family or multiple affluent families. Yet the roles they play and the structures they adopt are anything but one-size-fits-all.
Single-Family Offices (SFOs) vs. Multi-Family Offices (MFOs)
The distinction between these two types of family offices is pivotal. A Single-Family Office (SFO) is dedicated to the needs of just one family, managing their investments, legacy planning, and even day-to-day personal affairs. It offers considerable customisation but often comes with high operational costs, making it a viable choice primarily for ultra-high-net-worth families.
In contrast, a Multi-Family Office (MFO) pools resources to serve multiple families, offering a broader suite of services at a fraction of the cost. MFOs provide access to experienced professionals and diverse investment opportunities while still maintaining a tailored approach. For families seeking professionalised wealth management without the scale of a private SFO, MFOs strike an ideal balance.
Key functions of family offices
At their essence, family offices are designed to simplify and centralise the complexities of managing substantial wealth. Here’s how they do it:
Investment management
Family offices excel in managing and growing wealth through diversified portfolios, often venturing into alternative assets like private equity, venture capital, and real estate. Unlike conventional investment firms, family offices have the flexibility to pursue opportunities aligned with long-term family goals rather than short-term market trends. For example, a family office might spearhead a renewable energy project to align investments with the family’s philanthropic vision.
Governance and succession planning
Wealth preservation across generations requires more than savvy investments – it demands sound governance. Family offices play a crucial role in structuring clear policies and processes for decision-making, conflict resolution, and succession planning. They often establish family charters and trusts to ensure wealth transitions smoothly to the next generation, mitigating the risk of disputes.
Lifestyle management
Lifestyle management is a lesser-known yet increasingly valued service. This can include everything from managing luxury properties and coordinating travel arrangements to offering concierge services for private events. For instance, an SFO might handle the logistics of relocating family members to another country, seamlessly managing visas, schooling, and housing.
Tax and compliance centralisation
Tax planning and compliance can be daunting for global families with assets spread across jurisdictions. Family offices consolidate these efforts, ensuring tax efficiency and adherence to local and international regulations.
Tailoring services to HNWIs
What sets family offices apart is their ability to adapt to the nuanced needs of HNWIs. For instance, a family office catering to a tech entrepreneur might focus on structuring exits from startups and reinvesting proceeds into high-growth ventures. Meanwhile, a family rooted in traditional industries might prioritise legacy assets like agricultural estates or art collections, ensuring their cultural and financial value is preserved.
In this way, family offices go beyond managing wealth by delivering tailored solutions that address broader family priorities. Robust confidentiality protocols, including private registers, protect sensitive information, while customised governance structures support seamless succession planning. For families seeking alignment with Islamic principles, Sharia-compliant structures provide an integrated platform that respects cultural and religious values.
DIFC’s Family office framework: unique advantages
A regulatory framework built for family offices
At the heart of DIFC’s appeal lies its bespoke regulatory environment, designed to address the specific needs of family offices. The Family Arrangements Regulations 2023 mark a significant milestone, enhancing the legal framework to offer greater flexibility for Single-Family Offices (SFOs). A key feature of these updates is the emphasis on confidentiality, with private registers ensuring that sensitive family information remains secure. Families can also operate without the burden of income, inheritance, or capital gains tax, allowing them to maximise wealth preservation and growth.
Streamlined licensing and setup processes
Efficiency is another big plus. While families must meet a minimum threshold of $50 million in net assets and provide other application essentials, once established, they can leverage tailored structures, such as the Family Wealth Centre and prescribed companies, which are designed to simplify governance and streamline operations.
The licensing process has also been carefully structured to accommodate the unique requirements of family offices, offering exemptions for SFOs from registering as a Designated Non-Financial Business or Profession (DNFBP), thereby reducing regulatory overhead while maintaining AML compliance. Additionally, families can fulfil office space requirements within DIFC or opt to use their corporate service provider’s address as a registered office.
The role of corporate service providers in DIFC family offices
Corporate service providers play a pivotal role in establishing and managing family offices in the DIFC, offering streamlined solutions to navigate the jurisdiction’s regulatory and operational complexities. From the initial setup process, including licensing and compliance with net asset thresholds, to selecting the most suitable structure—such as prescribed companies or Family Wealth Centres. Their value extends beyond setup to simplifying ongoing compliance, mitigating risk and optimising tax strategies.
Closing thoughts: Securing your legacy with DIFC
With cutting-edge legal frameworks, global connectivity, and a tax-neutral environment, DIFC provides an unmatched platform for managing and preserving wealth. The numbers speak for themselves: nearly 6,000 registered firms and over 42,000 professionals already benefit from the expertise and opportunities offered.
If you’re looking to establish a robust and future-ready foundation for your family office, or enhance your wealth management strategy, take the first step in securing your family’s financial success and legacy by consulting with DIFC experts today.
