IN A CITY of self-made millionaires and billionaires, Leena Parwani has seen one problem crop up repeatedly: third-generation syndrome. In Dubai, it’s often the first generation that starts a business, said Parwani, a six-year MDRT member from the United Arab Emirates. The second generation often doubles the size of the business, but the third generation comes along and wants nothing to do with it.
In fact, 70% of family-owned businesses in Dubai fail to pass the wealth to the third generation, she said. “The third generation is more pampered, and money is easy for them,” Parwani said. “There’s also a different vision between the first, second and third generations. The third generation often wants quick money, and their scenarios can invite risk to wealth accumulated so far.”
As an advisor to these business owners, who are primarily in trading and manufacturing, Parwani has made succession planning part of her estate planning process. Insurance is a key part of the plan, especially for clients around 50. “I often see millennials have the least interest in insurance, because there’s enough wealth accumulation in the family and they can’t see further ahead to the uncertainty.”
In one case, Parwani was working with a manufacturing business owner who had three children. The son wanted to come into the business, but he wanted to make major changes. Both daughters wanted nothing to do with it.
“After an open discussion with the family about succession planning, we did a policy where the two daughters get a lump sum when the owner passes away, and the son will get the ongoing business shares,” she said.
“This case took almost a year, because the owner thought he could convince his daughters to come in. He was already the second generation, and the first generation didn’t want to sell the business.” With several properties also in place, equalization of assets was made easy with a large life insurance policy.
Parwani started in financial services in 2012. She had recently lost her job as head of human resources after a company reorganization. As she outlined next steps, she didn’t want the type of job where she could ever be fired again.
She had worked closely with insurance agents as part of her previous job and was intrigued by the idea of a career path where she had control.
“I committed myself for six months,” she said. Within the first year, two big clients helped her qualify for Top of the Table. Both were business owners, a niche she began to focus most of her efforts on.
“I took a very targeted approach my second year,” Parwani said. She narrowed her market down to succession planning for high-net-income clients and employee benefits.
She used a top business magazine to identify high-net-worth business owners, while also networking with business-owner associations in Dubai. “The kind of crowd you want to serve, you want to be seen with that crowd.”
Through an association, she met one of the wealthiest billionaires in the area, who invited her to attend his speaking engagements. That relationship allowed her access and the ability to network with ultra-wealthy business owners.
She also had coffee meetings with friends who owned large businesses, asking them about their challenges and dreams, while also doing extensive research on estate planning for businesses.
“I started looking at myself as a business owner as well,” Parwani said. “You have to present yourself as a business owner and be able to put yourself in their shoes.”
Most of Parwani’s clients are referred by other clients, or through lawyers and accountants who are working on will and estate planning with the business owner.
“Insurance is a big part of estate planning. It’s a complete wrapper for people who are 50-plus,” she said. “I help them secure and protect their assets.”
When the referrals come from lawyers, the process is very quick, Parwani said. When it’s organic or through referrals, it often takes six to eight months to complete the estate plan.
As business grew, Parwani focused on developing a luxury advisory brand. “I worked on packaging and branding. We create an experience,” she said. “People who have money want to save their time. In our industry, our time is money as well. They’ll pay a fee to be treated like VIP clients if I’m saving them money and solving their problems.”
You have to present yourself as a business owner and be able to put yourself in their shoes.
While commissions are the typical form of remuneration in Dubai, Parwani has chosen to charge a fee, which she describes as a “commitment fee.”
“That’s where I filter my clients. If they’re OK with that, they come back,” she explained. “The fees are not high; it’s a psychological effect for those who are just shopping around.”
The smaller cases are handled by her team of five junior advisors and six administrative staff. “For those clients, we are an affordable luxury,” she said. “We charge them a fee and we also don’t give them a million options just to close the deal. I’d like to close in the second meeting.”
For other advisors considering the high-net-worth business owner market, Parwani recommends working on succession planning knowledge, in areas such as wills and trusts. She also advises working on soft skills, such as communication, body language and how you carry yourself. “Your confidence matters,” she said. “If you want to be successful, act successful.”