ON THE WEALTH MANAGEMENT TRAIL WITH SEB DOVEY

Scorpio’s Seb Dovey enjoys getting out and about on the wealth management circuit taking the industry’s pulse and sharing his own views and opinions about what wealth needs next.

In between the launch of our 2014 Wealth Management Deal Tracker and talking to Spear’s about Scorpio joining forces with McLagan “to develop a ground-breaking range of insight-based solutions that will provide wealth managers with the information that can help them, not just understand better the business they have today, but the business they want to have in the future”, he’s been talking to Dominic Dudley at MEED about how international wealth management firms can tap into the growing market for wealth services in the Middle East.

Banks target the region’s rich

As the wealth of the rich in the Middle East expands, competition to tap into that market is growing for regional and international wealth management firms

11 December 2013 | By Dominic Dudley

The rich are getting richer and more numerous in the Middle East. Over the past year, the number of ultra-high net worth individuals (those with at least $30m in investible assets) has increased by more than 15 per cent in the region to reach 5,300 people. Their total wealth rose even faster, growing by 24 per cent to $880bn, according to a joint report by Swiss bank UBS and Wealth-X, a UK-based research firm.

Other parts of the world may have more multimillionaires, but a combination of high oil revenues and strongly performing stock markets, among other things, means that few places are growing as fast as the Middle East.

“The Middle East is just behind Asia and probably ahead of Latin America in terms of growth prospects,” says one international banker specialising in wealth management. “There is close to double-digit growth, driven by high and relatively stable oil prices and places like the UAE and Qatar diversifying their economies, welcoming foreign investment and becoming hubs between Asia and Europe.”

Gulf focus

As his comments suggest, these days the focus of the private banking industry in the region is on the Gulf economies. Although there are clients in Lebanon, Jordan, Egypt and elsewhere, the political volatility in some of those markets, combined with the weak growth in their economies, mean they are not seen as a compelling prospect for most private bankers.

Within the Gulf, the greatest number of super-rich are in Saudi Arabia and the UAE. Almost half of all ultra-high net worth people in the region live in those two countries, with 1,360 in Saudi Arabia and 1,050 in the UAE, according to Wealth-X. The Saudi Arabian’s among them have an average net worth of $210m, which puts them slightly ahead of their Emirati peers, who each have $181m on average.

Saudi Arabia and the UAE also rank highly when it comes to even wealthier people, with two-thirds of the region’s billionaires calling those countries home. Saudi Arabia has 64 of them, with an average wealth of $3.2bn each, placing it in ninth position in the world. The UAE can claim 37 billionaires with an average net worth of $1.2bn. Riyadh has 25

billionaires, more than any other city in the region, although Dubai is only just behind with 24. Both cities rank in the top 10 in the world in terms of the number of billionaires.

When the region’s wealth is measured in other ways, different countries stand out. For example, Qatar now has the highest density of millionaires in the world, according to a report by the US’ Boston Consulting Group published earlier this year. It says 14.3 per cent of households in the country have private wealth of at least $1m. The next richest by this measure are Switzerland, with 11.6 per cent of households, and Kuwait, with 11.5 per cent.

Qatar also comes top within the region when counting the proportion of households with at least $100m in private wealth, with 8 per cent of homes in this category. It is followed among Gulf countries by Kuwait, with 7 per cent, and the UAE, with 3 per cent.

All this offers rich pickings for institutions providing wealth management services. Traditionally, this has been a part of the banking industry dominated by European and US banks. A ranking of the top 20 wealth management firms around the world by London-based research firm Scorpio Partnership is led by UBS, with $1.7 trillion of assets under management, followed by Bank of America, Wells Fargo, Morgan Stanley, all of the US and Switzerland’s Credit Suisse.

Such European and North American institutions often fair well in the Middle East. They have prestigious brand names and their international reach means they can offer a range of services in markets others find hard to match.

Similar interests

“We are noticing more and more that emerging markets clients are very similar everywhere around the world,” says Bruno Daher, chief executive officer for Credit Suisse in the Middle East and North Africa region.

“Clients from Brazil have a lot in common with those in Qatar or Indonesia. They tend to be a bit more entrepreneurial than clients in Europe. They will look for opportunities in other emerging market countries in Africa and Asia. It’s not only passive investments in other countries. A lot of the ultra-high net worth clients are entrepreneurs with their own businesses and they will look at opportunities in the same sectors in other emerging market countries.”

There are some noticeable differences in the international banks’ strategies, however. There is a divide between those that have a large presence on the ground in the region

and those that have opted for a more limited network of offices, flying in advisers as needed.

“In the past two or three years, there’s been a reassessment by international banks of how to build market share in Middle East wealth management, and whether to be on the ground or to have a more transient private bank model,” says Sebastian Dovey, managing partner at Scorpio Partnership. “A number of European operators, such as HSBC and some Swiss private banks have decided they can cover the Middle East by having a strong booking capability in Switzerland, London or the Channel Islands and having private wealth managers and advisers visiting the region.”

He adds, however, that not all banks have taken this attitude. “Others have committed to an onshore presence, including some US financial institutions. So there’s a mixed school of thought among the international operators as to how to crack the wealth management market.”

To read the rest of the article covering the competition coming from local banks and the different client targeting approaches of different banks read the full article on Meed.com.

Dominic Dudley is a former deputy editor of MEED and freelance journalist. You can find him on LinkedIn , visit his website www.domdudley.com or contact him by email: dominic@domdudley.com

About MEED

MEED is a remarkable senior management media brand that encompasses a subscription website and magazine, more than 30 C-level executive conferences and summits hosted by MEED Events, the MEED Quality Awards for Projects and two high-value content businesses, MEED Projects and MEED Insight. MEED Projects is the Middle East’s premium project tracking database and MEED Insight offers tailored research and in-depth analysis. Established in 1957, MEED, has been integral to delivering business information and news, intelligence and analysis on the Middle East economies and activities ever since.