Home Wealth Management UAE consolidates its position as a global private wealth hub

UAE consolidates its position as a global private wealth hub

Yann Mrazek, Managing Partner, M/HQ

The UAE has achieved a magical milestone by registering 1,000 Foundations – an integral part of the country’s success when it comes to wealth preservation and management solutions – thus cementing the nation’s position as a hub for local and international wealth. 2024 promises to be a year of continued growth and unprecedented opportunities, with a projected 50% growth in Foundations – making the jurisdiction THE Tier 1 regional financial/structuring centre to watch.

First introduced just over six years ago to address the needs of local affluent families, UAE Foundations are now a well-proven wealth management and succession planning tool that has gained substantial momentum among both regional families and new entrants, thanks to the benefits it provides when compared with more conservative consolidation tools such as companies, or arrangements such as trusts.

As the Gulf region prepares for an estimated transfer of USD 1 trillion from gen-2 business families to millennials within the next decade, the significance of inter-generational planning and use of the Foundation tool has surged. In addition, the UAE continues to see a steady inflow of ultra-high-net-worth individuals, with Dubai’s centi-millionaire population projected to grow by a staggering 78 per cent over the next decade (one of the fastest rates worldwide) – most of whom could benefit from Foundations for legacy planning.

The Abu Dhabi Global Market (the “ADGM”) pioneered the introduction of the Foundation regime in 2017, followed by the Dubai International Financial Centre (the “DIFC”) in 2018, and the Ras Al Khaimah International Corporate Centre (the “RAK ICC”) in 2019. These are the three jurisdictions within the UAE to provide Foundations set-up services – critically, all governed by the principles of Common Law. Today, Dubai leads the way, with 50% of all UAE Foundations registered in the DIFC; the ADGM and RAK ICC have reached maturity too, with each more than 250 active Foundations.

Yann Mrazek, Managing Partner of M/HQ, the leading UAE wealth optimization platform, commented: “The UAE is on track for its 6th consecutive record year in terms of Foundations registered – every working day of 2023 saw the registration of at least one new Foundation. With a market-leading portfolio comprising of just under 250 active UAE Foundations under our administration – 36% of ADGM/DIFC’s market share – M/HQ is proud to support the UAE’s drive to cement its position as a leading global wealth hub.”

2024 Outlook for Foundations

The unique features of Foundations as a flexible legacy planning mechanism, compatible with regional assets and available to local families of Muslim faith and foreign investors alike, make it a go-to solution for holding a wide range of asset classes, with business continuity and asset protection in mind, whether being a standalone structure or complementing plain vanilla or robust holding verticals.

Foundations will continue as an indispensable wealth management tool in the UAE, where the residential property sector is skyrocketing – the real estate market in Dubai experienced record-breaking years in 2022 and 2023. Besides holding shares, bank accounts, luxury items, and investment portfolios, DIFC and ADGM Foundations, thanks to the Memoranda of Understanding concluded between the Land Departments and the Registries, are permitted to directly hold real estate located in the UAE.

Moreover, UAE Foundations can also be used to consolidate real estate proceeds in a tax-efficient manner – a new reality with the introduction of the UAE Corporate Tax Law. Many families are opting for equity release of assets consolidated under a Foundation – a cost-effective way of raising cash needed for any reason.