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The GCC Wealth Insight Report 2014 by Emirates Investment Bank released



The recently published GCC Wealth Insight Report 2014, initiated and sponsored by the Emirates Investment Bank – an independent private and investment banking firm based in the UAE – reveals the views of high-net-worth individuals (HNWIs) across the GCC region on the economy, financial challenges and opportunities and decision making with regards to investments.


Based on a survey of 80 HNWIs – individuals with $2 million or more in investable assets – the report gives both background information and knowledge for the future with regards to those living in the region. Ipsos, a leading market research company, and Brunswick, a global financial PR agency, conducted the survey between November 2013 and January 2014.


The survey comprised six per cent of female and 94 per cent of male participants, of which ten per cent was aged between 25 to 35 years, 51 per cent was aged between 35 and 44 years, 29 per cent was aged between 45 and 54 years, and ten per cent was aged 50 years and above. The demographics also reveal that nine per cent inherited their wealth, 41 per cent worked for their wealth, while 50 per cent claimed it is a mix of both.


Table 1: GDP growth rates of Gulf countries


Source: IMF – The GCC Wealth Insight Report 2014

The GCC Wealth Insight Report states that the GCC region’s GDP is expected to grow from 3.7 per cent in 2013 to 4.1 per cent in 2014, as displayed in Table 1.


Economic sentiment

Table 2: Views of HNWIs on the current economic situation


Source: The GCC Wealth Insight Report 2014


Among surveyed participants, 30 per cent believes that the global economic situation is improving, when compared with 16 per cent that states it’s worsening, for which inflation and high product prices have been labelled as causes by 30 per cent (see Table 2). On the other hand, 56 per cent says that the Gulf region’s economic situation is progressing, when compared with just five per cent that believes it’s deteriorating. Overall, 46 per cent believes that the global economy will be better in one year.


Looking ahead, 75 per cent states that they are optimistic about the future prospects of the global economy for the next five years; for which the reasons include: positive economic signs in developed economies (26 per cent), greater political stability and resolution of wars/conflicts (17 per cent) and financial markets being perceived as cyclical (12 per cent). Yet, in comparison, 12 per cent states that there are no clear changes and that recovery would take more time, while ten per cent has concerns about the sustainability of major economies.


While looking at the future of the region, 56 per cent is optimistic about the Gulf economy and 31 per cent is somewhat optimistic. In comparison, however, 50 per cent is pessimistic due to the negative impacts of the on-going conflicts in the Arab world.


Wealth decisions

Approximately 66 per cent agrees that the global downturn has affected banking and investment decisions, when compared with 34 per cent that disagrees. Among them, 38 per cent claims that they are now more cautious about the risks related to investments, 13 per cent has focused on investments in the Gulf region and 21 per cent says the impact of the downturn was short-lived and their behaviours have now returned to ‘normal’. Forty three per cent, meanwhile, believes that local economic conditions have affected banking and investment decisions.


Financial allocation decisions

Table 3: Investments by HNWIs: Global vs local


Source: The GCC Wealth Insight Report 2014


When asked about investing internationally or locally, 64 per cent of HNWIs states that they prefer to invest in assets closer to home, rather than globally (see Table 3). With safety as a main priority, 27 per cent states that their main reason for doing so was that they have confidence in the local economy and investments are seen as secure.


While 24 per cent, who are global investors, says developed markets have greater stability than their home markets, another 24 per cent says global investments allow them to diversify or manage their risks. Approximately 30 per cent claims that they feel safer when investing in different parts of the world.


According to the survey, the UAE (28 per cent), China (21 per cent), Europe (21 per cent), the US (17 per cent) and India (17 per cent) was the most preferred locations for global investors.


Allocation of wealth

Table 4: Current allocation of wealth by HNWIs


Source: The GCC Wealth Insight Report 2014


As investment in the real estate sector continues to thrive, participants state that 34 per cent of their personal wealth is invested in their own businesses, while 25 per cent is invested in real estate (see Table 4).


Table 5: Likely allocation of excess wealth by HNWIs


Source: The GCC Wealth Insight Report 2014


When asked what they would do if they were given an extra $1m, 37 per cent says they would invest in real estate (see Table 5).


Nine out of ten of those surveyed are currently more focused on growing their wealth, while only ten per cent is more interested in preserving their wealth. Moreover, two thirds of participants state that they expect to increase investments in their own businesses and real estate in the near future (see Table 6).


Table 6: Future allocation of wealth by HNWIs


Source: The GCC Wealth Insight Report 2014


Selecting a banking partner

With an estimated 150 financial institutions operating in the GCC region, HNWIs take many factors into consideration before storing their assets in certain banks.


Table 7: Factors when selecting a banking partner for wealth management


Source: The GCC Wealth Insight Report 2014


High level of service (98 per cent) and good reputation and brand name (94 per cent) are two of the main factors that HNWIs consider when selecting a local banking partner.


Fifty nine per cent states that they prefer to work with a local bank to manage their wealth, while 71 per cent says that they currently manage their accounts through a local bank. However, 14 per cent believes that international banks offer better services, while another 14 per cent says they have better knowledge and expertise.


When it comes to personal wealth and business banking, 61 per cent states that they prefer to use two separate banks to manage both, with 33 per cent claiming that they do this to spread risks.

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