great opportunity for private banks – but they must recognise that
brand names are not as important as adapting to local business
culture, according to one industry figure from the
region.
The culture fit “really is key” for private banks seeking business
in the Middle East, according to Leila Alameddine, head of private
banking at Europe Arab Bank, speaking to the annual British
Bankers’ Association (BBA) private banking conference in London on
29 April. Some firms from Europe and the US may take time to adapt
to the slower pace of business in the region, she declared.
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“It doesn’t matter if you’re a UK bank, a German bank – I believe
that most private banks offer the same thing. It’s about finding
your niche and developing relationships,” Alameddine said.
“You can have the best product in the world but it doesn’t matter
if you don’t have the right relationship”.
However, Alameddine did imply that the region is prepared to meet
bankers halfway, noting that the tendency for new wealth to
increasingly materialise in the hands of business entrepreneurs is
as evident in the Middle East nowadays as it is across Europe and
the US.
“These are people who have been educated in the US and have worked
in Western society so they understand how business works,” the
private banker commented.
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By GlobalDataAlameddine added that wealth in the Middle East is no longer
exclusively the preserve of those involved in the oil and gas
businesses, highlighting other sectors such as IT, with Middle
Eastern technology companies gaining prominence at home and further
afield in Africa.
The real estate boom seen in Dubai and other emerging Middle
Eastern wealth centres means it is this kind of asset which clients
in the region are most familiar with and hence most likely to
invest in, with private equity also finding favour because of its
role in supporting infrastructure and real estate products.
Though no single private bank has built up a large market share in
the region, areas being targeted include Bahrain, Qatar and Kuwait
as well as Dubai and Abu Dhabi. Alameddine envisages that Saudi
Arabia, a client-rich market, will also eventually become the focal
point of private banking activity, though institutions’ modus
operandi here may centre on joint ventures due to the complexity of
the market.
The repatriation of wealth to the Middle East is a trend that is
unlikely to subside any time soon, said Alameddine. The shift of
wealth onshore has also been acknowledged by institutions within
the region, and they have begun to change their business models
accordingly. Banks which previously focused on retail and
commercial banking are now turning to the wealth sector.
The speaker declared that improvements to infrastructure and
service levels would soon mean that private bankers “should move
away from looking at the region as an asset gathering place to
looking at it as a booking centre”.
Building a presence
Barclays Wealth, which recently inaugurated its first branch in Abu
Dhabi, is one such wealth manager looking to build on its
already-established presence within the United Arab Emirates.
Speaking at the conference, Barclays Wealth chief operating officer
Farzan Riza cautioned that private banks must not over-react to the
current financial crisis and highlighted the ways in which
institutions can take advantage.
“We see huge opportunities in the [global] marketplace,” said Riza,
who sees a systematic approach bearing fruit in the long-term. The
bullish COO emphasised the scope for investment opportunities and
the importance of having a true ability to source deals,
highlighting the role of key introducers as well as the centrality
of banker-client relationships.
Faith in the ability of banks to provide suitable investment
opportunities is likely to have been shaken by recent events,
however. Riza outlined how Barclays Wealth plans to establish more
meaningful relationships with its clients, emphasising that private
banks should take the chance to engage and build trust with their
clients on a more fundamental level.
“[Private investment banks] tend to push a lot of industry jargon
and a lot of statistical aspects out to clients. Our approach to
that has been that we need to talk to clients one at a time and
look at the behavioural aspect of how clients think about investing
in financial markets.
“We’ve put together a team of behavioural psychologists who focus
on how clients think. Performance for each individual client
becomes more important – how do people perceive and react to
financial information. What we want to do is build up the
confidence and the clarity when they make an investment
decision.”
Transparency was also on the agenda on a wider scale, with the
predominately UK-focused conference seeing speakers addressing both
the finer details of the UK government’s controversial non-domicile
regulations as well as private banks’ implementation of MiFID
(Markets in Financial Instruments Directive).
Speaking on the latter topic, Liz Purdy, head of compliance at
Investec Private Bank, acknowledged that the UK’s Financial
Services Authority (FSA) “is not as focused on MiFID as it used to
be”, with the credit crunch and the fall of Northern Rock having
overshadowed the rush to implementation.
This represents a chance for UK private banks to ensure that they
are fully compliant, said Purdy, suggesting that regulatory reviews
planned for Q1 and Q2 2008 were now likely to take place in the
second half of the year.
The FSA may well use its Treating Customers Fairly (TCF) principle
to drive its assessment of MiFID implementation, the speaker added,
meaning that “firms will need to be able to demonstrate that their
execution-only clients have sufficient experience and knowledge to
understand the risks involved in the products they want to buy or
transactions they want to do.
Purdy also issued a further warning to UK institutions. “While the
FSA has said that it would be quite flexible in its requirements in
the first half of the year, I doubt they will be as flexible with
any issues they find in the second half of the year. Private banks
need to take advantage of this breathing space to resolve any
issues.”
