Katherine Ellis, Boston Multi Family Office, offers insight into the reasons for the sharp rise in the establishment of single family offices (SFOs) - private organisations that manage wealth portfolios, investments and trusts for one family – in the Gulf Cooperation Council (GCC) region. “What we are talking to local families about is putting some structure and organisation around their very large, diverse wealth portfolios,” she says. Due to the large amount of wealth, their list of luxury assets is expansive, and will often include a number of superyachts.
Historically, there has not been widespread taxation on UHNWIs, such as Value Added Tax (VAT) or income tax in GCC countries; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. However, this is changing, as the Unified Agreement for VAT was signed by all GCC states earlier on this year, introduces a VAT rate of five per cent from 2018. This means that a high number of wealthy families now have to navigate fiscal issues that previously would not have been part of their wealth planning. “Families have never had to consider VAT or what it means about assets [such as superyachts] that attract VAT,” explains Ellis.
Sensing that the tides are turning on wealth management in the area, the Dubai International Financial Centre (DIFC) has recently unveiled new regulations that allows SFOs to set up in this area, to work with local families and offer a range of financial services. As Ellis reports, “Certainly over the last five years, we have seen a rise in Middle Eastern families bringing in US or European advisors, usually out of big banks, law firms, to work alongside family members to put some structure around their family wealth. This is the start of the single-family office.”
A multi-family office (MFO) is usually an independent organisation that supports multiple families to manage their entire wealth. These are often more established and have a range of experience, especially with specialist asset management such as superyachts. For Boston Multi Family Office, the changes in the area is an excellent time to collaborate with superyacht owners in the area. As Ellis explains, “We think this is an opportunity for firms, providers and multifamily offices that have experience in these sorts of assets to help with this transition and this education of families in the region who are moving towards a more structured way of managing assets such as superyachts.”
The collaboration between the Middle Eastern SFOs and international MFOs, such as Boston Multi Family Office is steadily growing. “Where we are working alongside a lot of those people that are going in, what might start with an asset audit and understanding what the family have and how they would like it to be held and the succession plans,” says Ellis.
Ultimately, the organisation of the large amounts of wealth in the area will mean that UHNWIs from GCC countries have an easier superyacht acquisition and management process. “Clients are looking to outsource help with their international assets,” Ellis continues, “These could be property and in lots of places, luxury assets (such as private jets, superyachts), many of which are operated overseas rather than just in the GCC.”
With the help of existing family offices, be it single or multi, the trend of more structured wealth management in the Middle East is a positive sign for our industry, as these services circumvent the fiscal complexities of superyacht ownership.
Katherine Ellis features as a guest columnist in the next issue of The Superyacht Report. As Boston Multi Family Office's director Ellis advises owners on a family office trend towards greater commerciality, which is helping to eliminate a lot of waste in the industry.
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