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Great opportunities ahead for private banks in 2015

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A recent Strategy& report reveals that private wealth doubled in the GCC growing 17.5 per cent year on year between 2010 and 2014 offering immense opportunities to private banks.

“High-net-worth individuals (HNWIs) continue to account for the largest chunk of the region’s wealth at 41 per cent, followed by ultra-high-net-worth individuals (UHNWIs) at 34 per cent,” says Daniel Diemers, partner at Strategy& in Dubai.

UHNWIs have always been private banks clients but as the affluent segment rises private banks should start considering this segment as potential clients if they are thinking of expansion or growth.

“However, the affluent segment has been growing the fastest over the last five years at 21 per cent CAGR, more than doubling in absolute dollar terms from $261 billion in 2009 to $560bn in 2013,” Diemers continues.

One of the flaws the report mentions is the uniform packages private banks usually offer. The UHNWIs’ wealth is increasing and diversifying as well, it changes from individual to individual. As the region’s wealth increases, the note explains, the number of UHNWIs follows the same trend: private banks should make the most of the opportunity and acquire more clients, as well as adapt and improve their services to this fast growth.

“Whether a private bank decides to target the affluent or a wealthy HNW sub-segment by geography or type of client, it needs to develop the right capabilities,” Diemers goes on to explain. “The ‘one-size-fits-all’ approach will not work anymore and therefore, it is important for a private bank to clearly understand who it is targeting before developing the required strategic capabilities.”

With the uncertain economic situation across the world in 2014, private bank clients are concerned and tend to ask more from their banks. They want a customised service with real-time response; they want to be more than an account number. Transparency is also important to them in the light of the latest HSBC Swiss leaks.

“Clients want better reporting, improved accessibility and increased transparency,” adds Jihad K. Khalil, senior associate at Strategy& in Dubai. “To deliver on these demands and create a truly customer-focused experience, private banks will need to continue to invest significantly in technology while in parallel aligning their objectives and operating models to be more client-focused and digital.”

Below are the highlights of the report:

– Private wealth doubled in the GCC growing by 17.5 per cent year on year between 2010 and 2014.

– Saudi Arabia and the UAE control 74 per cent of the region’s private wealth.

– The affluent segment is the fastest-growing wealth segment in the GCC, presenting long-term opportunities for private banks and wealth managers.

– To further grow in attractive wealth segments, private banks need to digitise their offerings and services, develop core capabilities and enhance operating models to be more client-focused.

With clients tightening their purse strings, there is, on the one hand, a risk for private banks to lose clients in 2015; on the other hand, however, there is a tremendous opportunity with new segments in need of private banking.

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