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04 December 2023

Banks advise clients to diversify

By Matt Smith



Private bankers in the Gulf are battling to convince their clients to diversify their investments away from the region’s booming real estate sector, a top industry player has claimed.


Stuart Crocker, chief executive of HSBC private bank, says with property returns sometimes topping 100 per cent, the merits of more limited gains though private banking may be unclear.

“But it’s a question of showing our clients that it might be wiser to make 15 per cent year-on-year through diversified holdings than it is to double your money one year and make little the next,” said Crocker. “A long term perspective is essential. We must discover our clients’ needs and convince them that global wealth solutions are required, not just local ones.”


Private banking is the preserve of the wealthy, with HSBC defining high net worth (HNW) individuals as people with liquid assets of more than $1m (Dh3.67m), while ultra-HNW are those with more than $30m.


The booming Gulf has seen a clutch of international institutions setting up shop in the region to fulfil the needs of its expanding wealthy classes.


These newcomers are pursuing an aggressive strategy to acquire and retain clients, which is in marked contrast to the softer approach of HSBC. Crocker says this difference can be traced to the history of the respective organisations.


HSBC first entered the Middle East in 1898 with the formation of the Bank of Persia and has been operating in the UAE for more than 60 years.


Crocker said: “Working with local families for this amount of time means we have built up an understanding of our clients that cannot be bettered, so have an advantage over new entrants to the market, although we cannot be complacent.


“We must listen to or clients to find the right products for them, because if we don’t the competition will.” A key plank of HSBC’s strategy for wealthy clients is to bring together its private, corporate and investment banking arms to create tailor-made solutions.


Crocker said: “If we always do what we have always done, then we will get the same results. This used to be true, but in private banking if you always do the same thing you are now likely to end up with less and less.


“The world is more unpredictable and with dollar weakness and the sub-prime problems, quantum shifts are taking place in the financial landscape. This means we must find new solutions for our clients.  We need to talk to them continuously.”



Banking tips


While private banking may be beyond the means of most readers, Crocker says its investment principles can be followed by anyone.


Younger people should adopt a riskier strategy because if things go wrong they still have time to recover their losses, while the rewards could be substantial. Conversely, by the time a person is in their 60s the percentages are reversed, with the emphasis now firmly on playing it safe because there is less time to recoup any losses and people of this age are likely to be retiring.