Lack of transparency, unjustified fees and a lack of responsibility for the negative consequence of their advice are the main gripes felt by Middle Eastern clients when dealing with wealth managers in the region, according to a new study.
One of the common themes highlighted in the report by Qatar Financial Centre Authority and Campden Wealth was transparency in relation to fees, Andrei Postelnicu, director of research at wealth management consultancy firm Campden Wealth.
“75 percent of research participants said that private bankers failed to provide enough transparency and clarity regarding the structure of their fees. A constant theme throughout the investigations was that fees were not discussed transparently enough at the beginning of a client/adviser relationship and that additional fees mysteriously appeared at various stages down the road,” the study said.
The vast majority (86 percent) of the respondents said that no responsibility was taken by their bankers for the negative consequences of their opinions and decisions, and 80 percent felt that private banks and wealth managers were not offering enough information about their performance.
“The aftermath of the crisis has found private wealth owners to be very sceptical of everything they have been told by financial services providers. They feel that bankers don’t take responsibility for the advice they have given and for the consequences of their advice, they feel that they don’t have enough information of the performance, even if it’s good or bad or indifferent, and they don’t feel the fees they have been charged are justifiable, they don’t even know how they are calculated,” said Postelnicu.
As a possible consequence of the apparent dissatisfaction towards wealth-management, almost three-quarters of the respondents (74 percent) said they wanted to have a bigger role in the decision-making process regarding their investments.
The study surveyed 47 private wealth owners as part of the research, which was conducted via interviews throughout the region focusing on the GCC economies.
“A significant portion of respondents in the Middle East described the same relationship (with their bankers or wealth managers) as either adequate or poor. When invited to elaborate on their answers, participants said that they received off-the-shelf products and ‘nothing creative’,” the study found.
The study found the Gulf is home to over 100,000 millionaires, with over 3,000 holding more than $30m in investable assets.
The UAE topped the list for high net worth individuals (HNWIs) in the GCC with 53,800 dollar millionaires. In terms of the super rich, Saudi Arabia was the best performer and was home to nearly half (1,225) of the HNWIs holding more than $30m in investable assets.
The number of wealthy individuals in the region is estimated to have grown by between five and six percent per year since 2011, according to the research.
Saudi Arabia counts 23,200 HNWIs and 1,225 super rich, the UAE had 53,800 rich and 775 ultra rich individuals, Qatar was home to 4,160 HNWIs and 290 super rich and Kuwait accounted for 13,600 HNWIs and 720 super rich.