Challenges remain for local private banks, reveals Booz & Company survey
Assets under management have seen a significant upswing around the world in the past six months, but these gains have not translated into top- and bottom-line growths that wealth managers would expect based on past recoveries, reveals the latest global survey by Booz & Company.
The management consultancy’s study states that new global regulations, reduced revenue pools, competition and changing customer behaviours represent major challenges for wealth firms. Not all wealth managers are equipped to benefit from the expected upturn and the prognosis varies by region. “In the GCC region, for example, the overall macroeconomics outlook remains positive, having maintained solid growth over the years,” says Dr Daniel Diemers, principal at Booz & Company. “The truth is that the GCC region and the UAE, in particular, benefited considerably from new cash flows as a result of the Arab Spring.”
With assets under management rising in the region, high-net-worth clients from Syria, Egypt and Libya are – now more than ever – looking to invest their wealth and diversify their investment portfolios across the US, Europe and Asia. As a result, local GCC players are progressively entering the competitive prime brokerage market.
“In addition, mid-sized offshore private banks are losing traction, forcing some of them to reduce their footprints in the GCC region or even close shop. At the same time, new US and European players are looking to tap into these new-found opportunities, especially in cities, such as Dubai,” adds Diemers.
On a structural level, there are significant changes currently occurring in the GCC region. Local regulators are continuing to issue a series of new banking rules and regulations. Naturally, the Foreign Account Tax Compliance Act (FATCA), automated exchange of information and other regulatory bodies are also urging local private banks to improve their reporting capabilities and management transparencies.
Recently, digital emerged as a key topic for wealth management professionals across the world. Although banks in the Middle East region are yet to spearhead digital innovations, according the firm, there certainly seems to be a growing appetite for it from the client side.