Godfrey Sullivan and Harold Haddad, both Partner & Managing Director at Boston Consulting Group Middle East, believe that the performance of MENA economies weighs on the growth of wealth across the region this year.
Looking back in the last 12 months, what are your views on the private banking and wealth management sector in the Middle East?
Personal wealth has experienced a slower than usual growth in the Middle East in 2018, mainly driven by an overall slow-down of the wealthier economies in the region. The GDP per capita variation by country remains unchanged with two extremes from $130,000 to less than $10,000.
On a more positive note though, HNWI in MENA have tended to keep their assets closer to home in comparison to previous years, increasing their exposure to home markets. Part of this is due to a continued meek perspective on the overall banking sector in Europe.
In line with major trends across the industry, private banks have also begun to offer a more personalised approach to their clients. How do you see this developing over the course of the year, how sustainable is this strategy and would you do things differently? If so, how?
Similar to retail banking offerings, private banking players are seeking to implement personalisation to deliver value to clients across many dimensions. This is also beneficial in terms of clients seeing the value and increasing their willingness to invest.
Personalisation is not only limited to offering—it encompasses tailored communication, marketing and event offering. Whilst the race to personalisation is on, many banks do not communicate with their clients or assume what the latter wants which can have a detrimental effect on client journeys.
Private banks are warming to the idea of hybrid business models, which mix personal advice with digital offerings—and offer investors the best elements of a robo-adviser coupled with a personalised experience only a human can provide.
Leveraging digital and analytics, several banks in MENA have introduced new customer journeys, self-service trading platforms and access to a broader set of investment solutions. That being said, digital offerings for HNWI still trail behind mainstream retail, with significant room to introduce further personalisation. Increased focus of many Middle East economies on privatisation will increase the room for angel, VC and private equity investing in MENA which remain significantly behind other developing economies.
What challenges do you foresee for the coming year?
With a general slow-down in MENA wealth and in particular, with the favourite asset class of many HNWIs around real estate, MENA private and wealth management players will have to identify ancillary opportunities to attract private banking wealth.
Differentiation will become increasingly difficult between players as they offer similar products and target the same client and wealth pool—the most effective path to take is to focus on delivering a better, faster and more convenient client experience.
Data analytics is believed to be an impetus in investment decisions. How much of this would actually assist wealth managers? What are your recommendations in striking a balance between reliance on predictive technology and human intuition?
Data analytics is naturally an essential component for investment decisions of wealth managers. Data could be leveraged to bridge the existing gap between customer expectations and the business anticipations. Segmenting your audience will allow you to create more personalised offers and attract new clients with razor-targeted propositions.
The challenge that continues to be faced in MENA is that banks are sitting on a gold mine of data but they still need to catch on to the idea of mining the data and building on it. Many banks have taken upon themselves to further strengthen their data infrastructure and data quality.
That being said, this remains to be done at individual entity levels and tying the knots with broader ecosystems remains nascent. In addition, we have seen a rising trend for banks to start hiring data analysts with the intent to increase personalisation and increase customer share of wallet.
What kind of opportunities do you see in Middle East markets at the moment?
Further investing in hybrid digital business models and data analytics are certainly key imperatives for the MENA private and wealth markets. However, there is still significant work to be done on the regulatory side, ensuring proper central census entities are established and further transparency is provided.
What are your projections on the growth of wealth in the region and on asset classes in 2019?
Projections for wealth growth in 2019 will be more modest than previous years as a reflection of the performance of MENA economies. We expect to progressively see a shift from preferred asset classes of real estate into private investments—that being said, rebalancing significantly the mix will be a long journey.