In wealth management there is no such thing as an “invisible hand”, which economist Adam Smith described as the growth-driving result of a free market economy in his “Inquiry into the Nature and Causes of the Wealth of Nations”, published in 1776. In fact, private bankers must work hard to lure High net worth individuals (HNWI) and Ultra-HNWI (clients with over $1m and over $30m at their disposal).
Take Swiss private banks Sarasin and Clariden Leu. Although both financial institutions have been in the DIFC since 2005 and 2007 respectively, they opened representative offices in Abu Dhabi in late 2010. Their moves were obviously not a luxury, but a necessity. According to one private banker: “Emirati investors in Abu Dhabi do not spend much time talking to you if you do not run an office in the UAE capital.”
Different stages of development
Islamic banking is likewise a necessity for any bank which aims to position itself strategically not only in Dubai, Doha and Riyadh but also in North Africa. Banks in post-revolutionary Egypt and Tunisia have taken steps to rival their peers in the Gulf region. But while the former states are more keen on developing Islamic retail banking in order to help SMEs to get on their feet, the GCC’s Islamic finance industry is miles ahead. Wealth management in line with Shari’ah is considered the “missing link” between Islamic Corporate Banking and Islamic Retail Banking.
Islamic Wealth management is mushrooming in the UAE. Barclays Bank Middle East has recently obtained a licence to operate an Islamic window within their branch in the DIFC. RBS Coutts, the private banking arm of the Royal Bank of Scotland announced last week that it has applied for a banking license to operate the DIFC and is aiming to hire 40 relationship managers by 2015.
“Basle” does not stand solely for regulation
According to Syrian-born Fares Mourad, Managing Director and Head of Islamic Finance at Swiss private bank Sarasin, which operates in the Gulf region in a joint venture with Alpen Capital: “Sarasin is currently the only private bank in Europe that offers customized solutions for cases which had been almost set under a taboo in the Islamic world, such as complex heritage cases or international real estate management and its related tax management.”
Gary Dugan, the Chief Investment Officer Private Banking at Emirates NBD, says that for Arab HNWI “there is no reason any more to fly out money to Switzerland, since Dubai has proven during the Arab Spring that it is a safe harbour within the Middle East”. Dugan adds: “Our booking centres in Dubai, London and Singapore prove that we are well established in the world centres of Islamic Finance.”
But for conventional banks the scope has shrunk and expanded at the same time. While Qatar does not allow conventional banks to offer Islamic banking any more, Oman’s Sultan Qaboos has allowed Islamic Finance in a decree earlier this year. Sarasin-Alpen acted fast to obtain a licence to offer Shari’ah-finance. But there is competition: HSBC Amanah, the UAE’s local Falcon Private Bank in Abu Dhabi and Geneva-based Pictet also offer customised Shari’ah-compliant solutions. The pieces in the Islamic Wealth Management jigsaw are yet to be set.