At a time of low interest rates and tepid economic growth, the banking sector is having to adjust to tough times. But there is at least one part of the market where things look rather bright.
Banks in the UAE are rushing to take advantage of a booming market in private wealth as more and more more people join the ranks of the world’s hyper-rich.
Private wealth in the UAE grew by 8.3 per cent in 2016 alone, according to a report by The Boston Consulting Group (BCG), “Global Wealth 2017: Transforming the Client Experience”. While the pace is expected to slow, growth in wealth is still expected to rise steadily, at 7.4 per cent, over the next five years.
“As we see the region grow, there is no doubt that wealth in the region continues to grow,” says George Triplow, Associate Partner, Mena Wealth and Asset Management Leader at consultancy EY.
Wealth hub
Today, the UAE is increasingly attractive as an onshore hub for private banking as it competes with other more developed countries such as Switzerland and Singapore.
“The UAE has transformed itself into a place where not just the rich and wealthy have the ability to come in and establish a base, but it also provides them with trade and business opportunities,” says Vipul Kapur, Head of Private Banking with Mashreq. “And with a number of initiatives in the pipeline going forward, including Expo 2020, we see a growing number of new individuals coming into this market.”
“Dubai and Abu Dhabi have been magnets for not just attracting people from the Subcontinent, but now from the greater GCC, from the Levant and even as far as Europe and the Americas,” says Kapur.
Over the past decade, the boom in oil prices meant wealth generation not only for individuals, but also for governments in terms of sovereign funds. Local banks like Mashreq are expanding their wealth management divisions by adding more talent, and bringing in new products that appeal to the rich.
“Private clients are the ones we are able to provide our entire range of services to,” says Kapur. “So in the bank, we provide not just the traditional banking services, which are both through the branches, but through our digital network as well.”
Sophisticated investors
The wealthy tend to be more “sophisticated” in the way they structure their finances, says Kapur. “One of the key things people look for is diversification.”
Mashreq – the oldest private bank in the UAE – caters to clients with investable assets of $1 million (Dh3.67 million) and above. “At Mashreq, we believe in personalisation, tailoring our service to meet the needs of today’s wealthy clients,” adds Kapur. “Every client is an individual and we cater to his needs based on his specific requirements.”
Providing a range of wealth-management services is also critical. “Not only do we have a relationship manager with significant experience in the market, we also support the relationship manager with an investment adviser, an FX specialist and with a mortgage specialist,” says Kapur. “So we are able to provide the client with a range of services that will cover all his financial needs both local and global.”
Mashreq believes in bringing products that will satisfy needs of clients, rather than offering hundreds of products, which do not really mean much, says Kapur.
“I think what is more important than simply the products and services is the way you manage those products, the risk profiling of the client, his needs, the suitability of the products to the individual and providing a solution that is unique,” says Kapur.
As they grow their wealth, and offer banks bigger profits, the wealthy are coming to expect more in return, say experts.
Today, more and more ultra-high-net worth clients or families are looking for more bespoke products, says Triplow. And with that they expect better client servicing.
“Better understanding and transparency about what that product is, what it does, what yield it will attract on an ongoing basis. And with that the price. And there is a very competitive market to be able to provide that on an ongoing basis,” he says.
Digital push
Mashreq, which is celebrated its 50th anniversary last year, is one of the most active lenders in the UAE. Its private banking arm sees technology as hugely important and is making significant investments to cater to a younger generation of high-net-worth clients.
“Every bank is going through a transformation as it continues to reinvent itself with technology. We have not only digitised a number of our services, but we continue to do so on an ongoing basis,” says Kapur.
At Mashreq, while digital services are viewed as important, they will not replace the personal connection. “I believe they will complement each other and work hand in hand to provide a much better experience than what the banking industry could provide a decade ago,” adds Kapur.
Onshore investments
Today, the wealth management sector is also seeing a shift as clients prefer to invest part of their money onshore rather than moving it overseas.
“People in the Middle East who earlier used to place funds in other jurisdictions are happy to keep some of those funds in this market itself. More importantly, people from overseas, who never used to look at the Middle East, or the UAE, as a home destination, are making this their home,” says Kapur. “And when you make a place your home, part of your wealth follows you.”
The UAE was among the top 10 destinations globally for high-net-worth individuals, with several millionaires having migrated to the Emirates last year.
An estimated 5,000 individuals holding assets worth at least $1 million moved to the UAE in 2017, according to the Global Wealth Migration Report by New World Wealth in January.
Going forward, there are a number of catalysts for growth in the region that include Saudi Arabia's economic transformation plan and infrastructure projects that will be undertaken for Dubai's Expo 2020.
“I have no doubt that this is one region that is going to continue to grow significantly. In terms of volume of assets under management you will see that our growth will be in significant double-digits as we go into the next three to five years.”
