Dubai: Over the past decade, the UAE has witnessed sustained improvement in its financial service infrastructure and regulatory framework, and is fast emerging as a globally competitive wealth management centre, the GCC Wealth Insight Report by Emirates Investment Bank has stated.
The report, based on a survey of 108 high net-worth individuals with investable assets of $2 million (Dh7.34 million) or more from across the GCC, showed that the UAE’s financial sector evolved from one that services domestic needs to one that is more and more serving the wealth management needs of international HNWIs.
Underpinning this rapid growth has been the successful economic diversification model that the UAE government has spearheaded and continues to do so with next-generation technology.
“Perceptions of the UAE among regional and international investors [are] of a business safe haven built on its trade, logistics and transportation hub status in the region. Naturally, capital flows towards business-friendly jurisdictions that boast political stability. As such, we have seen the UAE’s ranking on the Global Financial Centre Index (GFCI) gradually rise,” said Khaled Sifri, CEO of Emirates Investment Bank.
In the global ranking, Dubai ranks 25th, worldwide, followed closely by Abu Dhabi, which comes in at 28th, the highest amongst regional peers. The UAE offers several regimes for fund management, including free zones, which appeal to both domestic and global HNWIs.
In this 2018 GCC Wealth Insight Report, HNWIs outline the UAE’s tax benefits and sustainable economic model — one that strives to modernise itself regularly and introduce the latest technologies to build a knowledge economy — as the main reasons they choose the UAE as a wealth management destination.
Of those HNWIs surveyed, 93 per cent of respondents based in the UAE manage their assets at home and nearly 78 per cent of GCC HNWIs rate the UAE as an appealing destination for wealth management in the region. Over the past three years a growing number of HNWIs have opted to keep their assets closer to home, which has also underwritten the evolution of the UAE’s regional wealth management hub status. Compared to many global wealth management centres such as Singapore and Switzerland, the UAE is emerging very competitive,” said Sifri.
Since the UAE was upgraded from “frontier’ to “emerging” market status, fund managers and investors alike have increasingly become more interested in the UAE as a wealth and asset management hub. Currently, the GCC is working towards creating a uniform regulatory regime for the establishment and management of investment vehicles and one that is foreign investor friendly.
The Dubai government has introduced legislation and regulatory frameworks specifically designed to attract inward investment from those who might not have considered the UAE as a fund management destination. The Dubai International Financial Centre’s Wealth and Asset Management report indicates that a growing number of Indian fund managers have chosen the UAE as a prime destination because of the sector’s ecosystem, especially as the country ramps up its continuous efforts to enhance ease of business and an enabling Qualified Investor Funds regime.
Today’s dynamic and connected global business environment dictates certain criteria for the success of a financial centre. The GCC’s wealthy recognise that a compelling financial centre should offer a one-stop shop connecting them to various global markets and maintain a tax efficient environment.
“The UAE’s financial industry is well placed to offer a range of investment solutions, meanwhile keeping abreast with technological advancements. With the advent of new regulations and an improved investment ecosystem, we expect the UAE’s global financial centre ranking to continue to improve and accordingly attract more private wealth from global HNWIs,” said Nadi Bargouti, managing director and head of asset management at EI Bank.
High quality banking
The quality UAE banks espouse is one of the main attractive features for high net-worth individuals (HNWIs) in the region and from across the world as they consider managing their wealth here. Banking capabilities have continued to improve and expand over the past decade. Now, local banks are on a more equal footing with their international peers as they have attracted top talent to support their global investment offerings in terms of advisory services and expansive platform of investment solutions.
The increasing presence of international banks with offshore banking solutions further expands the proposition extended by the UAE, making it more appealing as a wealth management destination amongst regional and international HNWIs.
Technology, in particular, has advanced significantly in recent years with banks investing heavily in developing their IT infrastructure to offer digital solutions to HNWIs, which more than 90 per cent of the region’s wealthy now demands. The Middle East and African investment market is expected to top $1.5 trillion (Dh5.5 trillion) by 2020 from $600 billion in 2012, according to a PwC forecast.
Growth maybe driven by sovereign wealth funds, but affluent and HNWIs represent a sizeable portion of the growth of assets.
As the UAE economy continues to diversify, create value, and serve as a business hub for the Middle East and Africa, wealth among its residents will continue to rise, boosting the wealth management industry further. While HNWIs continue to invest heavily in their private businesses and cash deposits, 2018 is expected to feature a rotation into more alternative asset classes, such as real estate. The surveyed HNWIs say they will allocate 20 per cent of their assets to real estate, up from 15 per cent in 2017.
The alternative investment class has broadened in the region with investors including private equity, precious metals and cryptocurrencies in their investment portfolios.
