Swiss private banks are targeting the UAE’s affluent expat population as their business in the western world becomes crimped by authorities chasing tax dodgers and faltering growth.
It marks a turnaround for these private banks who were quick to exit in the aftermath of the financial crisis following years of building a presence here.
Now that Dubai’s economy is bouncing back, many Swiss private banks are keen to return and tout the virtues of their banking industry.
That’s even more urgent for these banks now as the UAE has also become a safe haven for wealthy investors in other emerging markets, such as Russia and China, roiled by political instability or experiencing economic turbulence. Private wealth in the Middle East grew 9.1 per cent to US$4.8 trillion in 2012 after growing 3.7 per cent in 2011, according to Boston Consulting Group.
“Switzerland is still considered to be the number one in investor protection and that’s one level of protection that gives us a competitive advantage,” said Mario Camara, chief executive of the private bank Swissquote. “Swiss banking secrecy is not what it used to be but it’s still the best. Switzerland now has to abide by a lot more rules than before but it’s still the most protected financial centre world wide.” Banks including Swissquote and La Cloche Wealth Management have opened doors at the DIFC in the past year, while banks such Falcon Private Bank, the Swiss money manager owned by Abu Dhabi, are beefing up their capabilities here while shuttering offices in Hong Kong to focus on the super-rich in the Middle East, Africa and Eastern Europe.
Arbuthnot Latham has also opened for business in Dubai and agreed on a client custody arrangement last week with Pictet, one of the largest private banks in Geneva, that allows Arbuthnot’s clients to use its services in Switzerland, Singapore and Hong Kong.
Most of these banks are targeting high net worth individuals but some, like Swissquote, are focusing on the retail segment – an area up until now that has been dominated by the wealth management arms of local banks such as Emirates NBD. High net worth individuals, or HNWI as they are known in the jargon of the business, in the Middle East and Africa have traditionally preferred to keep a big portion of their wealth offshore.
Cap Gemini and RBC Wealth Management estimate that the rich in the Middle East and Africa prefer to keep 35 per cent of their wealth offshore compared with 20 to 26 per cent in other parts of the world.
Middle East and African HNWIs kept $1.6tn offshore in 2012, they say. In recent years, however, there has been a shift among the region’s wealthy of where they want to acquire their asset management needs. Whereas in the past they did most of it abroad in places like Switzerland and Isle of Man, these people now prefer to manage their assets at home.
“Most of the people here go directly to Switzerland to get those services, but we are here closer to them,” said Manal Al Omari, the head of La Cloche’s Dubai office. “The clients in the UAE who go to Switzerland want the asset managers closer to them. When we manage the assets, we are giving them the whole service. It’s one place to get all the other bank services from one account. You don’t have to move from one bank to another to get those services.”
There is also a desire among professionals in the UAE who are not super-rich to keep that money offshore, according to Mr Camara. Clearer banking regulations in Switzerland have made many UAE residents keen to keep as little of their savings here as possible, he said. And while many of his competitors are going after the big fish, he is happy getting anything he can.
“Big Swiss banks trying to get rid of their small accounts because they are not profitable,” he said. “They talk about accounts of $1.5m and $2m. When I talk about large accounts I, I talk about accounts of $25,000. They kind of laugh at me but we are the number one retail bank in Switzerland for Swiss nationals.”
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