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Middle Eastern Wealth Management


By: VRL
Published: June 2010

Middle Eastern Wealth ManagementAs the market redefines itself over the next five years, wealth managers must rely on product innovation to meet the demands of the region's growing HNWIs for a greater choice of investment. However, simply providing products is the smaller part of customer acquisition/retention strategy, as only high-touch customer services will provide a distinctive value proposition.

Containing proprietary data and research, and combined with market leading case studies, it is the only source you need to maximise the efficiency, and essentially increase the profit of, your wealth management portfolio for the Middle Eastern market.

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The four key factors that are currently reshaping wealth management in the Middle East:

  • rapid economic growth and commercial diversification
  • a younger demographic profile
  • a new demand for Shariah-compliant products
  • changing culture attitudes

These factors coupled with macro-economic factors such as economic liberalisation, banking reform and the need to achieve economic diversification beyond petroleum-based financial activities is providing wealth managers with a host of new opportunities and a few challenges.

As the market becomes awash with products, two things will act to differentiate the wealth management services between competitors: return on investment and service. Middle Eastern HNWI customers can readily access individual product performance, but value for money is a result of the combination of products and services.

This key findings from the new edition of this report are:

  • Wealth management clients in the Middle East want managers who can seamlessly move across product offerings, between traditional and alternative investments and across geographic boundaries to find new opportunities.
  • There is a shortage of talented bankers and fund managers who can navigate the myriad of regulations, emerging products and an increasingly competitive environment.
  • Clients require a multi-generational relationship and measure performance on total asset appreciation
  • Many nations in the region are tax-free environments, thus clients are more performance conscious.

Case studies include: ABC Islamic Bank, Abu Dhabi Commercial Bank, Ahli United Bank, Al Safa Islamic Banking, ANB Investment Services, Arab National Bank, Arcapita, Asian Finance Bank, Bank of Bahrain & Kuwait,  Banque Saudi Fransi, Doha Bank, Dubai Islamic Bank, European Finance House, Gulf International Bank, Investcorp, National Bank of Abu Dhabi, National Bank of Dubai, National Bank of Kuwait, National Bank of Oman, Emirates Bank International, Gulf Bank, Kuwait Finance House, Mashreq Bank,  Qatar Islamic Bank, Qatar National Bank, QINVEST, Riyad Bank, Samba Financial Group, Saudi Investment Bank, Shamil Bank Bahrain, United Gulf Bank, and Union National Bank.

 

The Middle East has been experiencing enormous growth because of two primary factors: the global dependence on oil (in which the Middle East holds 65 percent of the world’s reserves) and the introduction of new regulations post 9/11 in the US which has brought capital to the Middle East that historically would have been invested in US markets. These factors and others have contributed to a rapid growth in the number of High Net Worth Individuals (HNWI) and the size of their assets in the past five years.

Oil production is still the key driver behind the wealth in the Middle East. Nations in the region are concerned over having their economies dominated by a single commodity, and are now embarking on a process of economic diversification into other industries such as finance and tourism. Economic diversification into the financial markets has resulted in extensive development to establish sophisticated financial hubs in cities such as Dubai, Manama, Doha and the announcement of the King Abdullah Financial District in Saudi Arabia.

The composition of HNWI clients is also changing as wealth managers in the Middle East are looking to extend services to non-resident Indians. Another key development is the rise of Islamic-based or ‘Shariah’ financial services to appeal to Muslims throughout the region.

Financial institutions in the Middle East have become more aware of the opportunities presented since 9/11. World markets have become less friendly for Middle Eastern investors as US regulators increase scrutiny over all transactions in and out of US markets in an effort to locate terrorists and drug dealers. The higher demands of US supervision are considered to intrusive for HNWIs who seek privacy and have decided to invest locally. These changes in regulatory stature in Western markets have altered market dynamics of the region creating new opportunities for wealth mangers.

The actual size of the Middle East wealth management market is not very large; however, the opportunity it provides is indeed significant. The traditional composition of the wealth management market in the Middle East consisted of local family-based investors. However, a growing number of ex-patriots (ex-pats) from the UK, India, and Pakistan have been moving into the region in senior managerial roles.  As a result the composition of the wealth management segments is changing. Growth can be anticipated from both segments as long as fees are kept under control and high returns continue to be yielded. Financial institutions throughout the region, even banks that did not use to offer traditional services specifically designed for HNWI are now offering products tailored for high net-worth individuals, many of them offering added perks such as valet parking and private executive lounges. In short, the wealth of the region is increasing and so is the competition for managing that wealth.

With much of the region’s population under the age of 25, generational wealth management is a concern for older HNWI. Wealth managers are anticipating a demand for an increased exposure to international investments from the younger generation of HNW inheritors. Products are not particularly innovative yet, but banks in the region are doing their best to cater for their customers, and these are, in fact, quite unique. Middle East investors have traditionally favoured real estate investments however, HNWI are interested in expanding the breath of their portfolios.  Transformation in the region is not strictly limited to economics, as changing attitudes toward women are also helping create a new group of wealthy clients.

Introduction to Islamic Finance

Private Banker International Middle East Roundtable

Chapter 1: Wealth Management in the Middle East

Chapter 2: Demographics and Social Changes

Chapter 3: The Main Wealth Management Products and Institutions

Chapter 4: Saudi Arabia

Chapter 5: United Arab Emirates

Chapter 6: Kuwait

Chapter 7: Qatar

Chapter 8: Oman

Chapter 9: Bahrain

View full Summary Report

 

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