Private banking boom for the UAE's über-rich

Forget old money. A new crop of wealthy individuals from the region and the Far East are boosting the growth of boutique finance houses in the UAE and in turn bolstering the global wealth management industry that now manages assets worth trillions of dollars.

According to a recent study conducted by Euromoney magazine, private banking assets under management have gone up by 120 per cent to $7.6 trillion (Dh28trn) from $3.34trn in 2007. This is equivalent to the combined GDPs of France, Germany and the United Kingdom – or 20 million Ferrari 599's.

The net income growth of the private banking industry is averaging about 44 per cent, says Euromoney's benchmark annual survey of the wealth management industry.

The UAE's growing wealthy elite, it seems, also cannot do without their private bankers.

"There are currently 100,000 millionaires in Dubai alone," says Sharad Nair, the managing director of Bank Sarasin-Alpen, a subsidiary of Zurich-based Bank Sarasin.

"The private banking industry in the UAE evolved and grew dramatically due to the rise in oil prices, the construction boom and the influx of wealthy expatriate traders. Such an economic expansion led to an increase in the number of potential clients for sophisticated wealth management products."

And exclusive banking services are something the über-rich can well afford, despite their steep fee structures.

"Our clients should have minimum assets of $1 million so we are able to offer an individual asset-allocation," says Mannan Adenwalla, the managing director of Clariden Leu Asset Management in Dubai, a subsidiary of Zurich-based private banker Clariden Leu, which began operations here last March.

"We are especially looking at wealthy clients with sophisticated wealth management and product needs. Most of our clients come from the Middle East and the Indian Subcontinent. We are also looking at affluents with potential and wholesale clients."

VP Bank, one of the largest banks in the Principality of Liechtenstein, has been running its asset management company from the Dubai International Financial Centre (DIFC) since last year. According to its Middle East head, Guido Lenherr, the rising class of new moneyed individuals are now demanding more from service providers than ever.

"There was and is a tremendous new wealth creation in the region, as well as in India and Pakistan and most of the family investors are highly sophisticated when it comes to private banking. They are very demanding with regards to the high quality of the set of services delivered to them," he says. "The private banking concept is perceived as highly attractive."

Whether it is asset allocation, advice on investment strategies and risk profiles and the structuring of a family office or setting up a succession or generation plan, only the best in the class are selected to cater to the needs of the clientele, he adds.

"We work with various strategic partners in all kinds of areas. We are like the gourmet in a top-class restaurant, catering to all your needs in wealth management, finding only the best ingredients," he says.

Nair adds: "Up until the late 1990s, the region was used by suitcase bankers who would fly into the region three to four times a year to meet their clients and structure their requirements.

"Clients these days are more demanding and want a higher quality of service and seasoned private bankers to manage their wealth. Good personal relationships with the client have become critical rather than purely managing their accounts."

And these increasing requirements are a challenge UAE-based private bankers are more than willing to take on.

"The profile of the high net worth client has changed. They have become savvier in their understanding of investments and focused on preserving their wealth. So it's our challenge to meet the demands of this new clientele," says Adenwalla.

While sworn to secrecy about the identity of their clients, these exclusive bankers say the profiles of their customer have undergone a sea change the last couple of years.

"The rise in global opportunities has led to today's millionaires who are self made, replacing the phenomena of inheriting wealth from their prior generations," says Nair. "The increase in opportunities has led to a rise in global wealth, which has in turn led to an increase in demand for quality products.

"Most millionaires we meet today have earned their first one million dollars in the past 10 to 20 years," he adds.

The World Wealth Report, which is now recognised as an industry benchmark in recording the number of wealthy individuals around the globe, is compiled annually by banking services provider Merrill Lynch and consulting firm Capgemini.

Its 2007 report revealed that assets of high net worth individuals (HNWI) increased by 11.4 per cent to $37.2trn, showing the first double-digit growth in seven years. The global high net worth population stood at 9.5 million, the report said.

An updated report is expected to be out in a few weeks, according to a representative from Merrill Lynch.

"There is strong growth in the Middle East region in general," says Lenherr. "The wealth of HNWI grew 8.9 per cent to $1trn between 2003 and 2004 while the Gulf's private wealth was estimated to grow at an average rate of 12.5 per cent annually over the a period of three years between 2005 and 2007. Asian and Middle East markets have higher growth rates than our traditional markets with seven per cent in Asia and 12 per cent in the Middle East compared to four per cent in Europe annually."

HNWI are typically those who have at least $1m as investable assets while ultra high net worth individuals (UHNWI) are those who have $30m or above as investable assets, Lenherr explains.

"The number of HNWI worldwide is estimated to be 9.5 million while the number of UHNWI is about 95,000," he says.

Traditional banks are also entering the fray. London-headquartered Barclays will soon launch its premier banking services in the UAE. Targeted at what it calls the "mass affluent market" Barclay's Premiere will be introduced in the bank's newly opened flagship branch in Abu Dhabi from June 19.

Barclays Wealth, another component, also offers private banking services, investment management, and wealth advisory to entrepreneurs, family businesses and members of royal families in the region, among others.

HSBC Private Bank also has facilities in Dubai, Abu Dhabi and a number of other Gulf cities and considers the Middle East a high growth region.

"Private banking is about much more than traditional banking services of deposits and loans," says Stuart Crocker, the chief executive officer of HSBC Private Bank in the UAE and Oman.

"It's about finding creative solutions to complicated situations to help affluent individuals and their families manage their wealth today, and develop new sources of wealth for future generations."

So as the UAE's increasing affluent sector continues to make it to world wealth lists, the future looks cushy for those looking to manage their finances for them.

"This is no rocket science. The oil looks brighter and the growth of young aspiring millionaires and creation of broad-based opportunities will sustain it," says Bank Sarasin Alpen's Nair. "As wealth continues to grow, there will be ample demand for responsible private bankers."


The numbers

12.5%: The latest estimated growth per year of the region's private wealth

95,000: The estimated total number of individuals worldwide who have at least $30 million in investable assets

9.5 million: The estimated total number of individuals worldwide who have at least $1 million in investable assets

$1 trillion: Value of Gulf real estate developments, which is fuelling new wealth

Source: VP Wealth Management