By Staff writer
Dubai in particular has emerged as an attractive hub for Africa, as Europe did for the GCC region some years ago, the report said
Larger local banks in the Gulf Cooperation Council (GCC) that are reaching saturation in their home market are starting to venture out into attractive markets such as Africa, according to EY “GCC wealth and asset management report 2016.”
Dubai in particular has emerged as an attractive hub for Africa, as Europe did for the GCC region some years ago, the report said.
“Although market shares between local and international banks may fluctuate, the region is now arguably overbanked. With high levels of protection in the GCC markets, some of the larger local players are starting to focus on markets further afield,” said George Triplow, MENA wealth and asset management leader, EY.
The UAE’s strong ties with African markets has encouraged a number of African businesses to use Dubai and the Dubai International Financial Centre as an infrastructure hub, he added.
Qatar National Bank has already acquired banks in Egypt, Libya and Tunisia, and set up branches in Mauritania, Sudan and South Sudan, while Union National Bank and the Abu Dhabi Islamic Bank are active in North Africa.
According to the report, the wealth management market is extremely active due to the sizable numbers of affluent families in the Gulf region. But investors are now understanding the importance of an onshore presence, as European centres, which historically had strong market share, have become less attractive due to regulatory issues and rising compliance standards.
“While the trend to have family wealth managed externally had retreated in recent years, the oil price decline and challenging geopolitical situation in the region has encouraged a return to sending money out. Local private banks have recognised that they need a value proposition across different segments,” George said.
In a bid to compete with their European counterparts, private banks are recruiting experienced staff, including former relationship bankers from their rivals, and tailoring their offering to local needs - Islamic investment products to tag-on lifestyle services such as advice on philanthropy to access to premium airport lounges.
“They also have an advantage in their ability to book locally, and their knowledge and relationship networks facilitate client onboarding,” he added.
The regional retail wealth management sector faces the ongoing issue of lack of transparency and independence as high fees are often hidden in opaque commissions on funds/other products and advice shaped by narrow sales interests.
“We see many in the industry who would welcome commission disclosure across all financial products. The key would be to provide lower costs, genuinely independent advice and technology-supported portfolio diversification with a focus on passive funds and exchange-traded funds, rather than complex structured products,” George said.