Saif Al Alkeem, Head of Priority Banking, Wealth Management and Liabilities at Abu Dhabi Islamic Bank discusses his perspective on how wealth will be managed in the GCC now and moving towards the future.
The growth of personal wealth in the UAE in recent years has outstripped the global average and provided a wide range of opportunities for the financial services industry. This pace is only expected to quicken over coming years in parallel with the proliferation of options for regional investors to manage their savings, particularly with the launch of new online platforms.
However, it is banks that still retain the highest levels of trust, and which also have the size and scale to offer access to the breadth of markets and sectors, as well as the tools, that more sophisticated investors value.
The state of banking in the UAE
The UAE remains a major business hub with unprecedented political and economic stability in the region. Personal financial wealth in the UAE grew by 5 percent a year over the past five years to $400bn, compared to growth of just 1.6% globally in 2018.
The country continues to attract international, as well as home-grown, wealth and approximately 2,000 high-net-worth individuals (HNWIs), each with at least $1 million worth of net assets, including property, cash, equities and business interests, moved to the UAE in 2018. Such trends are anticipated to uplift the country’s personal financial wealth by 8 percent each year until 2023.
"The growth of Islamic finance has increased supply and demand and the sukuk market is expected to witness its fourth consecutive annual increase this year, with total issuance reaching about $130bn."
The banking sector in the UAE enjoys much higher levels of trust than in other countries, especially those in Europe and North America, and a recent survey conducted by ADIB found that banks are the preferred source of financial advice with 25% of people saying they were “very likely” to use them, followed by family and friends, with 22%, while independent financial advisers were very lowly valued.
How to manage money in an unpredictable world, especially in the Gulf States
Given slowing global economic activity, geopolitical threats, and lower base rates, it’s critical that money managers are proficient and have the tools to reposition investors’ portfolios. While some investors are diligent about monitoring their portfolios and shifting assets to ensure diversification, many others may have relaxed their oversight in this area, especially if their portfolios appear stable and growing. This is where financial advisers can step in and provide the guidance that can protect this wealth, shifting assets to risk-off classes such as sukuk, the Islamic finance version of a bond.
"Wealth managers and financial advisers today need to strike a balance between offering access to a wide range of industries in different geographies, with the expertise and insights that can help investors make informed decisions."
Sukuk have become popular in recent years and have previously demonstrated the type of resilience and stability that mitigates an uncertain global economy. The growth of Islamic finance has increased supply and demand and the sukuk market is expected to witness its fourth consecutive annual increase this year, with total issuance reaching about $130bn.
Today, more investors are looking at Islamic finance because they recognise that Sharia’a-compliance provides additional risk screening. Based on a wider understanding as to the principles and values of Islamic finance investment products, there is now greater demand for Sharia’a-compliant wealth management advice from across the investment industry.
Customisation, personalisation and understanding your clients
At ADIB, we work on personalising the experience of our clients, offering customised opportunities across sukuk, mutual funds and private equity. This means that we take the time to thoroughly understand the financial aims and objectives of clients and provide them with bespoke banking solutions to help them achieve these goals.
We demand that all of our wealth managers hold a Chartered Institute for Securities & Investment (CISI) qualification, adhere to very clear processes, especially around investor profiling, and only offer investment options that are suitable for the client.
At the same time, we acknowledge that the wealth management industry will need to adapt to the profile of new clients; those who are younger, tech-savvy and interested in deploying their capital in new growth industries, such as biotech and green technologies. We therefore design and offer products, such as our Equities Basket Note, that provide exposure to these burgeoning sectors while protecting our investors capital.
Wealth managers and financial advisers today need to strike a balance between offering access to a wide range of industries in different geographies, with the expertise and insights that can help investors make informed decisions. This necessitates that they have scale yet also provide exceptional customer experience and customised advice that stands the test of time. This is our proposition at ADIB.
While we will continue to enhance and enlarge our range of products and services, we know that it is our integrity and ability to support investors through every stage of their lives that clients ultimately value most highly.
Saif Al Alkeem is speaking at FundForum Middle East and Emerging Markets on November 4 2019. He will be speaking on Distribution 2020: Market outlook, risks and Opportunities in the GCC.