(MENAFN-Khaleej Times) The Middle East was once again the standout region for wealth creation, posting its third consecutive year of impressive gains
Fuelled by inflows from Syria and politically unstable countries in North Africa, large Middle Eastern wealth management centres, such as Dubai, are experiencing a particularly robust growth in assets under management, analysts at Booz & Company said.
The Middle East was once again the standout region for wealth creation, posting its third consecutive year of impressive gains - 19 per cent in 2012 after a growth of 15 per cent in both 2010 and 2011, results of an extensive global survey show. The year 2012 also saw assets under management (AuM) growth accelerate in other regions. Asia’s growth rate jumped to 20 per cent, up from two per cent in 2011, thanks to strong economic growth and increasing wealth concentration. This made Asia the “hottest” region for wealth managers, the research report said.
North America and Latin America both posted healthy 12 per cent AuM gains, up from one per cent and five per cent, respectively. While assets under management have seen a significant upswing around the world, these gains have not translated into the top-and-bottom-line growth that wealth managers would expect based on past recoveries, said the report based on interviews with over 150 wealth management executives, senior financial advisors, and regulators from more than 15 international markets.
Key findings highlight that new global regulations, reduced revenue pools, new competition and changing customer behavior represent major challenges for wealth firms. The survey reveals that not all wealth managers are equipped to benefit from the expected upturn.
“In the GCC the overall macroeconomics outlook remains positive, having maintained solid growth over the years,” said Dr. Daniel Diemers, principal with Booz & Company. “The truth is, the region – and the UAE in particular – has benefited considerably from new cash flows as a result of the Arab Spring.”
With assets under management rising in the GCC, High Net Worth (HNW) clients from nations such as Syria, Egypt and Libya are – now more than ever – looking to invest their wealth and diversify their investment portfolios across the US, Europe and Asia. As a result, local GCC players are progressively entering the competitive prime brokerage market, said the report
“In addition, mid-sized offshore private banks are losing traction – forcing some of them to reduce their footprint in the GCC or even close shop. At the same time new US and European players are looking to tap into these new-found opportunities – especially in cities such as Dubai,” said Diemers.
The report pointed out that at the structural level, there are significant changes currently occurring in the GCC. Local regulators are continuing to issue a series of new banking rules and regulations. Naturally, the Foreign Account Tax Compliance Act, Automated Exchange of Information and other regulatory bodies are also urging local private banks to improve their reporting capabilities and management transparency.
“Very recently, digital has emerged as a key topic for wealth management around the globe. And, while banks in the Middle East are yet to spearhead digital innovations, there certainly seems to be a growing appetite for it from the client side,” it said.
The report also highlights that Europe continues to lag behind other regions, and, accordingly, it is the European banks that have had to take the biggest hit in terms of profitability.
“Wealth managers looking to play a leading role will need to fundamentally adapt their value proposition and operating model if they are to capitalize on the continued economic recovery in 2014 and 2015,” said Alan Gemes, co-author and a senior partner with Booz & Company.
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