Over the centuries, the complexity of inheritance has spiralled. What was once a castle, land and gold is now a collection of banks accounts, real estate, alternative investments, securities, art, collectibles and, more recently, crypto investments. While the composition of wealth has changed drastically, one thing remains the same: wealth transfers are pivotal moments where familial conflict and harmony hang in the balance.
A new innovation whitepaper, ‘Navigating the Future of Inheritance’, finds that digital technologies can streamline this transition by reducing friction, improving transparency, and ensuring secure, efficient asset transfers. Its publication follows on from Julius Baer’s recent expansion of its crypto services to Dubai, where it became the first wealth manager in the Dubai International Financial Centre (DIFC) licensed to offer custody services for digital assets, with a view to serving the needs of both traditional and crypto-native clients.
The findings of the paper bear out our belief that the strategic significance of digital assets in wealth management is likely to increase in the medium to long term – both for the Middle East and globally – giving rise to an entire ecosystem with significant investment potential. Below, we zoom in on some of the main findings:
1. Humans are the challenge, not technology.
Over the last decade, financial service providers have successfully tokenised almost every asset in the traditional wealth portfolio – covering everything from stocks and bonds to art, real estate and more complex emerging assets such as green bonds and carbon credits.
Nevertheless, the emergence of a new ecosystem to facilitate the transition of complex assets across generations is being hindered by human challenges. Some 73 per cent of wealth holders are unwilling to discuss comprehensive legacy planning scenarios even with their most trusted advisors and long-time wealth managers.
2. The wealth accumulated by earlier generations is under a growing strain.
The report finds that, as a result of this unwillingness to plan ahead, more than 50 per cent of wealth transfers encounter delays, triggered by insufficient preparation, legal complexities and resulting probate processes that last up to 12 months on average. These prolonged probates can mean sizeable volumes of wealth under external scrutiny, sizeable legal and court fees, and temporary inaccessibility.
Put together, the above challenges mean, for example, that approximately USD 49 billion will go unclaimed in the Middle East before 2030, with a further USD 123 billion held up for over six months in costly probate processes.
3. Innovative technologies offer opportunities to streamline the transition of wealth.
The process of wealth transfer is both inevitably and uniquely intertwined with the emergence of new technologies. The report states that it is therefore incumbent on each new generation to take stock of emerging innovations and their ability to optimise the process, be it the printing press, telegraph, electronic funds transfer, or more recently blockchain technologies.
A critical part of this re-imagined approach to legacy planning is the host of new technologies that can provide automation, visibility and control in an industry beset by mobility challenges and human process limitations. Among others, artificial intelligence, smart contracts, distributed ledger technology and tokenisation have begun to provide new opportunities to transform inheritance by enabling greater visibility, accelerating transfers and removing friction.
4. The need for a new approach is particularly pressing in the Middle East.
The Middle East is poised to experience an unprecedented generational wealth transfer that will be unique in its scale and rapidity, exceeding USD 1 trillion by 2030. Financial wealth is accumulating at a faster rate amongst individuals there than in almost any other global financial centre. Since 2022, high-net-worth individuals in the United Arab Emirates alone have seen their assets grow by 20 per cent to reach USD 700 billion in value.
This rapid accumulation of wealth raises a pressing concern and an opportunity. Rather than being spread evenly across a balanced demographic of elders, workers and youth, the rapid wealth growth means that the Middle East’s wealth is almost entirely concentrated amongst a single generation. For this wealth to spread, over one trillion dollars will need to be distributed to families and children within the next decade – putting significant pressure on the already strained processes and procedures that support wealth transfer today.
5. Regulatory action and collaboration will be essential.
A trusted, regulated, financial market infrastructure will be critical in fostering trust in the new digital ecosystems and ensuring the safe tokenisation of inheritance. With frameworks in place to address key concerns around regulatory compliance, resilience, cybersecurity, and in safeguarding and mobilising assets, wealth managers and service providers will be better empowered and equipped to integrate digital assets into inheritance processes, ensuring that asset transfers can be managed securely with reduced friction.
Collaboration between wealth managers, regulators and service providers is also essential in building a robust, scalable platform for wealth transfer. A unified approach will not only safeguard wealth but also promote its fair distribution. By collaborating as an industry, HNWIs, wealth managers, service providers and regulators have a unique chance to harness the power of new digital technologies to build a new ecosystem that can simplify and accelerate the inheritance process for generations to come.
Time to seize the moment
The innovation whitepaper, which also examines the stresses on the current inheritance model across the accumulation, inventory and transfer stages of the wealth cycle, concludes by finding that this is an exciting moment for the wealth transfer ecosystem.
The authors encourage family offices, wealth managers, legal advisors, financial market infrastructure providers and regulators – particularly in the Middle East, as it stands on the brink of an unprecedented generational wealth transfer – to embrace the opportunities presented by innovative, tech-enabled solutions and position the region as a beacon of best practices in inheritance.
In this way, they can contribute to ensuring a thriving ecosystem that benefits all and paves the way for a brighter, more prosperous future for generations to come.