Although the very rich in the region have a strong appetite to grow their wealth, many of them still lack the awareness of the importance of diversifying their assets, a bank official told Gulf News.
“The understanding of the need for diversification is not here. We have to somehow explain it to our clients,” said Jean-Paul Petoud, chief investment officer for private banking at Emirates Investment Bank (EIB).
There is so much money being created in the region, especially in the Gulf Cooperation Council (GCC) region. Industry estimates have placed the overall wealth in the Middle East at more than $4.5 trillion (Dh12.251 trillion), with about 35 billionaires. Qatar, which has 143 millionaires out of every 1,000 households, reportedly has the world’s highest density of very wealthy residents.
EIB recently surveyed high-net-worth individuals (HNWI) with $2 million or more investable assets in the GCC and it found that the majority are entrepreneurial. Nearly four out of ten (34 per cent) choose to put their money in their own business, while a quarter (25 per cent) invest in real estate and 16 per cent keep their holdings in cash or bank deposits.
“These people want to invest mostly into their business. We’re trying to convince them that sometimes it’s good to have something on the side for less sunny days, but it’s very difficult,” Petoud told Gulf News. “These people understand very well their business, but they don’t understand as well the investment products or investment approach,” he added.
More awareness needed
Petoud agreed that more awareness has to be done to educate the wealthy on how to best manage or diversify their holdings. “If they want to be more aggressive, they have a way to diversify out of their business. They can also be aggressive in something they understand.”
The prevalent entrepreneurial spirit among the very rich can be attributed to the fact that GCC’s wealth creation started only in recent times, unlike in older economies like Europe or US.
“If you look at the largest companies in Dubai that are family-owned, the driving seat is being controlled by the second or third generation. In Europe, or even in Japan, we’re talking sixth or seventh generation,” Petoud said. “You have to build the wealth first to be able to transmit it to the next generation. Maybe in 200 years’ time you’ll see more people here who are more willing to preserve their wealth.”
The bank’s survey found that the region’s wealthy are now “overwhelmingly” more determined to generate money, with nine in 10 saying they are currently focused on growing their holdings. The majority (65 per cent) expect to increase investments in their own enterprise and an equal proportion seeks to increase their investments in real estate in the near future.
