Dubai: The average length of expatriates stay in GCC countries, counting in all major expatriate groups such as Western, Arab and Indians, exceeds 10 years and this group forms a major target market for asset managers, according to Invesco’s sixth annual Middle East Asset Management Study.
The GCC states have some of the largest expatriate populations of any region in the world and all six of the GCC states have higher weightings to expatriates than any of the largest six economies in the world and, among them, the UAE has the largest expatriate percentage in the region.
The Invesco survey of asset managers showed that contrary to popular belief, the average stay of various expatriate groups in GCC countries are longer, with non-resident Indians (NRIs) exceeding 15 years.
“Historically lower length of stay has been viewed as a potential challenge by wealth managers because highly mobile expatriates are less likely to commit to long-term savings and investments. However, with target clients planning to stay in the region for the longer term, wealth managers see increased demand for wealth management services,” said Nick Tolchard, Head of Invesco Middle East.
The study showed overall NRIs stay in the region the longest. Many of the younger generation of NRIs have been born in the region and consider the GCC their home market. The use of ‘sponsorship’ and non-executive roles is common for NRI business owners to ensure the older generation can retire in the region. In fact respondents expect a small percentage of expatriates to retire within the GCC.
In summary, there was a strong consensus that the number of GCC-based retirees would increase from all expatriate segments if GCC governments changed the immigration rules and encouraged retirees.
The most frequently cited reason for Western expatriate and NRI clients staying in the GCC was the attractive tax rates. For Western expatriates, zero per cent personal tax rates were cited as the key driver and many advisers explained that the rate was not only attractive relative to home markets (such as the UK) but also attractive relative to other expatriate centres such as Singapore.
For NRIs, low corporate and value added tax rates were key drivers for business owners. For Arab expatriates, security was seen as a key driver given the ongoing political instability across Mena.
Analysis of expatriates leaving the region adds another positive perspective on length of stay in the GCC. Job losses are the most frequently cited factor for leaving the region and retirement is the third most common factor. This means that two of the top three responses are ‘push’ factors outside an expatriate’s control.
“Respondents expected length of stay to increase across all client types. For example, 67 per cent of respondents expected Arab expatriate timelines to increase. This is not only positive for the wealth management industry, which offers long-term propositions, but also clients should be prepared to take more risk and therefore better cope with market volatility,” said Tolchard.
Some wealth managers said that increasing length of stay also increased interest in local property investments. In the future, advisers may be competing more with long-term investment into property and less with short-term money in bank accounts.
