Legacy planning for NRI business owners

For Indian expats, the UAE is their home away from home. Each has an amazing story to tell — business opportunities brought some, while the allure of a quality lifestyle made others settle their roots here since the early 1970s and 1980s.

The strength of approximately 3.3 million NRIs in the UAE, 30 per cent of the population, is the highest concentration in any single foreign country. And through hard work, fortitude and immense support afforded by the hosts, Non-Resident Indians (NRIs) have prospered personally and professionally.

While historic trade ties have long existed between the two economies, the presence of a vibrant Indian community is helping propel cultural, trade and investment relations prominently. India is the UAE’s second largest trade partner and the UAE has become India’s third largest trading partner, with the total non-oil trade between the two at $35.9 billion in 2018.

Estimates from a recent HSBC survey indicate that by 2030, India will overtake China to become the single largest source of imports into the UAE.

The next stage

Many Indian expats have established flourishing family businesses in the real estate, wholesale, technology and retail trade sectors. Now with growing wealth and the opportunity presented by the generous gold card residency and investor visa arrangements, they must think harder about the legacy they build in the UAE, back home and globally.

Apart from supporting families financially and funding a mortgage back home, the most common financial activity among NRIs remains savings and investments followed by remittances. Of the Dh169 billion in outward personal remittances in 2018 from the UAE, India had the lion’s share at about 38 per cent.

In recent years, property in the UAE has also been added to the portfolios of affluent Indians. In 2018, among non-GCC buyers, Indian expats were the top investors in Dubai’s real estate market investing around Dh10.8 billion.

To add to the complexity, we are seeing NRI investors holding more and more assets in different jurisdictions, which makes wealth management and planning more important than ever. Everyone’s circumstances are different and there is no standardised solution that works for all.

Some seek growth and income-generation for the future while for others wealth preservation is paramount. For some, legacy planning is not so much about leaving large amounts of wealth for their children as it is about investing in their education and growth.

Whatever the motivation, the one cultural tenet that every generation shares is the focus on tradition and family, which tends to guide their views on inheritance. The transfer of wealth from one generation to the next is part and parcel of wealth planning.

However, the increasingly blurred lines between business and personal affairs can make this task ever more daunting.

Assessing risk

One rule of thumb is to put your own financial oxygen mask first. A clear-cut plan for retirement should be the first port of call. Avoid relying fully on the family business to fund it as it can put a disproportionate burden on the business, making it difficult to let go.

Diversifying wealth and building assets outside the business early on is important.

We are seeing a combination of new money and new ideas driving a new generation of affluent NRIs, who are expanding the concept, looking for ways to actively improve a much broader impact to the society in the long term, preserve culture, or take an existing family legacy in a new direction.

To ensure the ambitions of these aspirants are not clipped mid-flight, senior generations must give ample consideration to planning their legacy, balancing the demands of wealth generation and life-after-retirement, along with funding the evolution of their business in the hands of an eager new generation.

Marwan Hadi is Head of Retail Banking and Wealth Management, HSBC UAE.