UAE wealth management sector set for increasing consolidation

Private wealth in the Middle East and Africa grew by 11.6 per cent to reach US$5.2 trillion in 2013. Above, the Abu Dhabi skyline. Mona Al Marzooqi / The National

The UAE’s wealth management sector is on track for increasing consolidation in the coming years, as a booming economy and increased infrastructure spending attract local and international operators, according to James Fleming, the global chief executive of the British private bank Arbuthnot Latham.

“One of the prevalent features of the global banking sector right now is that bigger institutions are looking at markets which they just cannot compete in because they haven’t got critical mass,” said Mr Fleming in Dubai last week.

“We’ve certainly seen that in Dubai with some of those big names taking a conscious decision to pull out and compete where they’ve got a larger base.”

In the past two years Clariden Leu, Merrill Lynch, Pictet and Vontobel have all ceased offering private banking services in the region, either by offloading them to others or simply shutting up shop.

Portugal’s ES Bankers, meanwhile, is in the process of being liquidated, in the wake of wider problems affecting its parent company Espirito Santo.

Despite such closures and consolidations, the wealth management market in the UAE does not suffer from a lack of players, according to Paul Millar, Arbuthnot Latham’s managing director in Dubai.

“It’s an extremely competitive market we’re operating in, with around 65 private banks operating here in the GCC, as well as numerous larger banks offering private banking and wealth management services, not to mention a huge tier of independent financial advisers,” he said.

Such competition is unsurprising given the uptick in economic performance in the UAE in recent years.

“When you see GDP growth running at over 5 per cent this year, undoubtedly wealth creation continues to grow, and of course with wealth creation comes the need for wealth management,” said Mr Fleming.

Arbuthnot Latham opened its first office in Dubai at the end of last year. The bank’s new clients from the region in the past year have exceeded expectations said Mr Millar, declining to give further details.

Private wealth in the Middle East and Africa grew by 11.6 per cent to reach US$5.2 trillion in 2013, driven by continued strong nominal GDP growth in the UAE, Saudi Arabia and Kuwait, and is expected to grow to around $7.2tn by the end of 2018, according to the Boston Consulting Group.

Equities returned to favour in 2013 among regional investors, according to BCG. The amount of wealth held in equities rose by 30.5 per cent across major MEA markets, compared with 6.4 per cent for bonds and 5.7 per cent for cash and deposits, it found.

Mr Fleming confirmed that the in the past 12 months there had been a stronger bias towards defensive, income-producing stocks, together with a slight shift away from emerging market equities prompted by the tapering of the Federal Reserves asset purchase programme.

“This doesn’t mean that have any less of a strong view towards emerging markets over the longer term, but clearly they’ve had some short term issues that are well known,” he said.

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