What are foundations, and what use do they serve?
Foundations have become popular for regional wealth structuring and succession planning in the UAE. A foundation holds assets in its own name and as an independent entity. The assets held by the foundation are managed according to the foundation’s charter and by-laws.

Benefits include:

Asset protection
As an independent legal entity, the assets held within the foundation are out of reach of the founder’s creditors, governments, or other family members.

Privacy
Wealth can be managed discreetly as the foundation’s beneficiaries do not need to be made public. This reduces the risk of claims or legal actions from third parties and provides better bargaining power when negotiating business deals and acquiring assets. The risk of being targeted or blackmailed on the back of the assets held in the foundation is also reduced.

Effective succession planning
Foundations guarantee that the assets (or their benefits) will be distributed as directed by the founder. A foundation enables families to exercise their intergenerational legacy planning and wealth protection objectives because legal and beneficial ownership differs.

Better family governance
Foundations provide a practical corporate governance framework (similar to a company or single-family office), allowing wealth to be managed professionally to benefit the founder and their family.

Enables philanthropic giving
A foundation can evolve alongside the founder’s vision and ethical wishes and can be used to support issues close to the founder’s heart.

The UAE foundation structure has been an unprecedented success since first introduced in 2017 in the Abu Dhabi Global Market (ADGM), and later in the Dubai International Financial Centre (DIFC) and Ras Al Khaimah International Corporate Centre (RAKICC). The introduction of foundations has allowed private clients to structure their wealth as they see fit. It removed the need to use costly corporate vehicles and introduced something much easier to understand, accessible and flexible.

Indeed, a UAE foundation provides expatriates and nationals with a local solution to manage their wealth, protect their assets and make succession planning arrangements.

A big advantage to a foundation is that it does not necessarily need to be Sharia compliant and can hold all types of assets to be managed according to the founder’s wishes and to benefit only those stipulated by the founder.

The establishment of foundations has dovetailed nicely with the growth in real estate investment at scale and the need to structure those assets appropriately.

However, their use as cost-effective investment holding vehicles for all asset types is valid. They also serve other ends. However, the accessibility and cost efficiency of foundations has meant they have become very popular. There has certainly been a democratisation effect, but in turn, that has led to a degree of commoditisation. From a bespoke structure catering to the wishes of the founder and needs of the family to an ‘off-theshelf’ product, with little to no consideration of the client’s specific needs or wishes.

Moving forward, service providers will need to deliver on service, providing something specific to the needs of the founder and the broader family. As well as the structuring itself, service providers will need to exceed in terms of communication, process efficiency, and supporting the client before and during the foundation being set up, as well as on an ongoing basis.

This is where technology comes in
Communication is a prominent area crucial to the success of a foundation. They can quickly become complex and span multiple generations and family branches. Good communication also applies to those that have made their money relatively recently and quickly, and are very much involved in how it is grown and looked after on an ongoing basis.

In both instances, we see that everyone involved in the foundation wants much more than a six-monthly review meeting. Covid-19 and, latterly, Artificial Intelligence (AI) development and implementation have catalysed better communication. Virtual meetings are now the norm and allow for a light touch, high-frequency approach. Instant communication removes the pain from servicing the client - all the more so when the client is internationally mobile.

AI helps identify what to send out, to whom, and when in terms of research, other information, and data – thus maintaining relevance and accessibility for the adviser.

Digital tools and a client portal also allow for client interactivity. Most clients, but particularly younger ones, now want to be able to see things in real-time and to be able to slice and dice a foundation’s assets from a number of perspectives and angles.

As well as communication, a good client portal can also be used to facilitate doing business quickly. That could be speedy and instant reporting, sending out research data and other insights, but also, on a practical level, it means leveraging tools like DocuSign to move things along and get them filed with the appropriate authority without wasting days or weeks waiting on paper-based administrative processes.

The same is valid with the onboarding process – online identification is a real boom and easy for both parties. In addition, some apps allow for tracing the journey and provenance of wealth, which is a real comfort factor at this level.

The combination of digital tools, AI, and better data, make for a much better service proposition – once, this would have been considered a bonus. Now it is seen as a must-have and, if done well, a differentiator.

Blockchain
The other big move is within Blockchain. Although this is something that is talked about a lot, there are not many established, everyday use cases. However, in the UAE, the Dubai Land Department has started to use Blockchain and implemented it within its land registration process. The deed is now held on the Blockchain, and in a region where real estate is a popular investment, this obviously has implications for how other facets of real estate are ordered and held. We expect to see moves toward Blockchain implementation from elsewhere too.

In addition, we think that younger clients being more open to digital assets and having seen a few instances where people have made a fortune from holding things like NFTs, service providers will need to incorporate these capabilities into their offering, and that they will soon become an expected norm.

Ultimately, we think technology has made it possible to maximise the opportunity afforded by the foundation’s structure and its popularity with the private client sector. It allows for a much easier relationship with clients. It has revolutionised how business is done - from onboarding to KYC, identity verification, filing, registration, and all manner of things. Everything can now be done online.

This is all the more important as the DIFC is also all online, so doing things digitally makes sense from a regulatory and client perspective. Indeed, in general, the UAE is very advanced. The Emirates ID has everything on it: insurance, passport, and a number of other important data points. It is a very technology-enabled society, and people expect that of their service providers too.

The role of technology in supporting the adviser and boosting the means to do business has been revolutionary. Technology makes a service provider stand out. It is a real paradigm shift, fast becoming embedded and embraced as the norm. In short, the technology makes it easier to do business and easier for clients to do business with you – this leads to better business, growth, and success.

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