GCC individual wealth set to grow to $3.8 trillion by 2012


Wealth held by high net worth individuals (HNWI) in the Gulf region – those with investable wealth of more than $1 million – is expected to grow from $2.1 trillion (Dh7.71 trillion) in 2007 to $3.8 trillion (Dh13.95 trillion) by 2012, according to management consultancy firm Oliver Wyman.


In a report published on Thursday, The Future of Private Banking - A Wealth of Opportunity?, Oliver Wyman found that the bull run in stock markets and unprecedented wealth creation has driven a rapid 11 per cent year-on-year growth in HNWI assets globally. However, due to a tougher market environment, annual growth is expected to slow to 9 per cent over the next five years.


“We expect growth rates to vary significantly by region, with the Middle East and Asia Pacific - except Japan - leading the pack. The strength of these emerging markets combined with the changing global environment will provide new opportunities for well-differentiated and increasingly global players to build a distinctive brand,” said Stefan Jaecklin, Partner and Head of the Wealth and Asset Management Practice at Oliver Wyman.


Oliver Wyman’s analysis shows that an estimated 16 per cent of HNWI wealth globally was held offshore in 2007 (for the Middle East, it was estimated that 52 per cent of HNWI money will be held offshore).

However, this is countered by a strong trend amongst the GCC’s richest to repatriate wealth and invest in regional assets. For a market that was historically served offshore, players now hire teams to service clients onshore, with many foreign wealth management firms also increasing their coverage of the Middle East.


The report also highlighted that international regulatory pressure on tax avoidance will continue to increase, with the share of tax-driven offshore banking set to decline in coming years. A sustained trend towards “onshoring” of financial assets and tax-transparent offshore banking is likely to lead to a change in strategy both for private banks and for offshore centres themselves.


The scarcity of talent - skilled and experienced client relationship managers - is also a challenge in the Middle East, with dedicated on-the-ground coverage teams needed for billionaire families and top UHNWIs.


“In this region, the critical factor is no longer finding clients – millionaires are increasing quickly – but rather finding the skilled and experienced relationship managers to work in the market. A good client relationship manager is absolutely key for winning and retaining clients, especially in the Middle East which is highly relationship driven,” said Jaecklin.

As the global market environment gets tougher, Oliver Wyman expects that some of the strategic decisions taken by private banks will come under increasing scrutiny. Decisions relating to geographic footprint, the choice of distribution model and the choice of corporate structure will become much more important.