Falcon banking on a different approach to private wealth

The wealth management sector in the region is increasingly crowded. The UAE is home to a high number of super-rich individuals and one Abu Dhabi-owned finance house aims to succeed as a niche player.

Falcon Private Bank branding. Jake Badger for The National

Falcon Private Bank is betting that its Swiss management and Abu Dhabi backing will help distinguish it in increasingly overcrowded private banking market in this country.

Even though economic growth may be slowing on the back of falling oil prices, the UAE still boasts one of the highest concentrations of millionaires in the world and increasingly one of the highest concentrations of private banks.

There are more than 60 private banks operating in the Arabian Gulf, with the majority of them based in Dubai.

Swiss private banks are making a sprint for the region because recent fines on a number of banks in the European country, including UBS, the largest by assets under management, have increased the costs they incur to make sure they are compliant with rules and regulations.

That pressure has made the industry ripe for mergers and buyouts and increased the urgency for smaller banks such as Falcon to distinguish themselves by offering investments that others cannot. In its case, Falcon touts itself as an emerging-market specialist and most of the bank’s clients outside Switzerland are to be found in Russia, the UAE and South East Asia.

“The secret of success going forward is that we will see a few global players like UBS, Credit Suisse, then a few niche players and one of them is Falcon Private Bank,” says Erich Pfister, the global head of private banking, at his office in Abu Dhabi.

Mr Pfister says his bank differs in several ways from bigger players.

For eample, it offers clients private equity deals in Africa that other lenders would find hard to match and he touts the bank’s ability to close deals quickly.

Falcon does not target the super-rich, but rather those with assets of between US$5 million and $20m –those regarded as within the high net worth individual range – which makes it quicker for them to enter and exit investments.

“The value proposition is the unique service, a very close service, the speed of execution which nowadays is very critical – with a very flat hierarchy, decisions are made quite fast in our bank,” Mr Pfister says.

“Clients want to have answers whether you can do things or not, sometimes it takes forever in bigger organisations, the decision makers and back down again,” he adds. “So, for us, time for decision making is very short.”

Last year, the bank, which has 16 billion Swiss francs (Dh58.41bn) of assets under management, closed its doors in Hong Kong in order to focus on the Middle East, eastern Europe and South East Asia as well as its home market. On Wednesday it bolstered its board with the appointment of Walter Berchtold.

Mr Berchtold was a board member at Credit Suisse Group from 2003 to 2012.

Falcon began life in Zurich in 1965 as Ueberessbank and was renamed AIG Private Bank in 1998.

After International Petroleum Investment Company (Ipic), an Abu Dhabi sovereign wealth fund, bought the bank in 2009, its name was changed to Falcon.

“That’s one of our key selling points,” says Mr Pfister. “Swiss managed and Abu Dhabi-owned gives a lot of comfort. “Switzerland still stands for a lot of expertise, heritage, depth of knowledge and top quality. Abu Dhabi backing us from a financial point of view gives a lot of comfort for our clients.”

While Falcon has representative offices in Abu Dhabi and Dubai, it is mulling the idea of opening up shop in the Dubai International Financial Center (DIFC), joining several other banks such as the Lebanese lender BankMed that are also pursuing a niche strategy. Other bigger banks, such as Citi, are also deploying more bankers to the DIFC, the region’s de facto financial hub.

“We are not here to compete with the big local or international banks,” says BankMed’s chairman Mohammed Hariri.

“We are a medium sized bank. We believe that we have a certain niche, attracting a lot of the Lebanese diaspora all over the world to expand into the emirates and try and have a special niche for our activities.”

Behind that desire to enter the UAE market is the fact that the economy is a bright spot in a world characterised by sluggish growth.

Last year the economy of the UAE grew by more than 4 per cent and, while this year growth may be slowed by lower oil prices, economists say the part of the country’s GDP that is not heavily dependent on hydrocarbons to make money will still flourish, including transport and tourism. Aviation, for example, is expected to contribute 32 per cent to Dubai’s GDP by 2020, according to government estimates.

Economic growth has helped private wealth in this country to grow at the fastest pace among Gulf states in the past four years, according to a study published this month by the consultants Strategy&.

While wealth in the region grew at an average of 17.5 per cent a year from 2010 to 2014, doubling to $2.2 trillion from $1.1tn, the UAE’s wealth increased at an annual growth rate of 25 per cent.

The country’s share of the region’s wealth increased to 30 per cent from 24 per cent between 2009 and 2013, the report says. As a result, private banks have been boosting their businesses in this part of the world to take advantage of the growing wealth.

In the past two years a number of private banks including Swissquote and La Cloche Wealth Management have also set up in DIFC.

The benefit of the UAE is that not only is its economy growing at a rate that exceeds the global average but the country has become a haven for money escaping turmoil in emerging markets such as Russia.

“It’s not easy for our clients currently to do business in Russia but that doesn’t affect our business that much,” says Mr Pfister.

“Most of the guys have their money with us. If they booked it with us, they don’t have it in roubles any more. They have it in dollars or other foreign currencies but, obviously, doing business in Russia is much more cumbersome these days.”

While Falcon may be worried by the big private banks, it will certainly face more competition from local banks of similar size, such as Dubai-based Emirates Investment Bank (EIBank).

EIBank’s private banking services have been bolstered in recent years as wealthy individuals in the region shifted money from international offshore accounts in a bid to acquire closer and more personalised services from local banks that have matched the level of service of the big Swiss private lenders such as UBS and Credit Suisse.