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Given the current market conditions, what will 2016 look like for the UAE and the Arabian Gulf wealth management sector?
The wealth management industry is entering an exciting stage in the UAE and the Gulf region. This, to a large degree, is driven by the global events, such as the slowing down of China’s economy, pressure on the US Fed to increase interest rates, and of course the low crude oil prices.
In the GCC region, the shift in the wealth management business is also driven by the fact that over the past decade this region has earned its status as a global financial hub. The growth opportunities for wealth management in the GCC are immense. Over the last 10 years, the huge boom in crude oil prices has generated wealth creation both at an individual as well as government level (in the form of sovereign wealth funds or SWFs). Interestingly, we are seeing a new development in the regional wealth management sector. Until a few years ago, a major chunk of clients’ money tended to be invested abroad in global markets for higher yield. Of late, there’s been a shift in this trend because of the fact that the competition for wealth management business is intensifying in the region with many local as well as global banks vying for a share of the pie and to expand their local presence.
That’s why we see the life of the ‘suitcase banker’ being a thing of the past now. Earlier, wealth managers and private bankers used to travel out of the Gulf region for business purpose as the target of investment was outside the region. There was less focus on recruiting wealth advisors, and training and reskilling them as investment opportunities lay in offshore destinations where there was no need for local relationship managers (RMs) and advisors. All that the wealth manager had was a product suite, which he would sell to his clients. That trend is becoming extinct as wealth managers are now refocusing internally on local markets.
Going forward, I believe, the wealth management business in the GCC is well-placed despite what’s going on in the global and regional markets. But 2016 will be a tough year for all businesses including the wealth management industry.
How are you addressing the current market needs?
Clients are now looking for simplicity, clarity, alignment of interest and someone they can work with and trust. We believe it’s important to do need-based selling rather than product push which happens quite often in this region. We believe in establishing a long-term relationship with clients, understand their needs and goals and match those goals and needs with the products that we have on offer, rather than the other way round where RMs keep pushing products irrespective of whether it meets clients’ needs or not. That leads to mis-selling. Based on whether our clients are cautious, balanced or adventurous, we create a portfolio around that to make sure it fits into their needs. Subsequently, we review the portfolios on a regular basis to ensure they are on track to meet the clients’ financial objectives.
One of the issues in this part of the world is that the customer experience is not that great. That’s where the role of RMs assumes prime importance in order to build the relationship with our clients. During the last 8 months, since I joined the bank, we’ve doubled the size of our salesforce. We had around 30 RMs when I arrived and now we’ve over 60 in the UAE alone. As a consequence of this, we’ve been able to reduce the ratio of clients to RMs, thus giving them more time to broaden and deepen the relationship with their clients.
How would you describe Mashreq Gold’s growth so far in terms of AUM, client segments? What sectors have you favored historically?
The AUMs have grown in line with our expectations and whilst I cannot share the exact numbers, we have grown by mid-single digit during the last 12 months. Regarding asset choice, we believe there’s no one-size-fits-all concept since asset class selection depends on each individual’s needs and goals.
From a product perspective, how does Mashreq Gold compete with large global wealth management and private banks?
Multinational wealth management firms have had significant presence in the region, especially in recent times. Local banks, on the contrary, are expanding their presence. It’s not only their size that is increasing but also the level of sophistication. Therefore, the competition is more among the local banks and not so much with multi-nationals. Mashreq has 4 decades of experience and existence in the UAE and overseas and we are well placed to service our clients efficiently with well-rounded financial solutions.
What’s your investment discipline? Do you believe active value investing pays off in current market conditions?
Our investing discipline depends on clients’ needs, their risk profile, their time horizon and objectives. Based on that we make recommendations and so we believe there’s no one overarching investment recommendation. Also when times are volatile, as they are at the moment, we encourage our clients to drip-feed their investments through dollar-cost averaging.
It’s said, the client is always right. What has your experience been like so far?
Client is always right in the sense that it’s their money and we owe it to them to make sure that we do the right thing for them and build a strong relationship with them. If you manage to establish a strong relationship with them, the clients are not going to come back and tell you, “You sold me something that I wasn’t aware of!” That’s the reason why we encourage our RMs to make sure no sale is executed in a hurry, but only after fully understanding the client’s needs and financial objectives. We treat our clients’ money as our own money. It is also impressed upon our RMs to ensure that they always put their clients first, because if you look after your clients, they will in turn look after you. One piece of bad advice or mis-selling issue can damage your brand, reputation and relationship. One of the issues in this part of the world is that there’re no robust, independent regulation related to mis-selling of financial products, unlike many mature economies where there are well-established rules governing the sale of financial products.
Prior to his position at Mashreq, Kiyani was the Regional Head of Wealth Sales at HSBC Bank Middle East for the MENA region, where he was responsible for the implementation of the wealth infrastructure, managed costs and executed discretionary incentive schemes, and supervised wealth transformation strategy across the network. Kiyani has also undertaken a number of senior managerial positions at HSBC bank of Middle East including his role as Head of Premium Banking, Wealth Management and Mortgages (UAE), and Regional Head of Insurance and Wealth Management MENA.