Published: Sep 28, 2014
Source: Saudi Gazette

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Gulf’s growing private wealth needs more prudent handling

“With the growing size of private wealth in the Gulf, maximizing the returns on this wealth is today’s most pressing need and challenge. This has triggered fierce competition among wealth management firms to offer best packages to their clients,” Hamed Mokhtar, Managing Director at Fortress Investments, said in the light of the latest report issued by Boston Consulting Group (BCG) titled “Global Wealth 2014: Riding a Wave of Growth”.

Private wealth management services delivered to high-net-worth investors include advice on the use of various estate planning vehicles, business-succession or stock-option planning, and occasional use of hedging derivatives for large blocks of stock.

“With the rise in the number of affluent investors in recent years, there has been an increasing demand for sophisticated financial solutions, including the Gulf,” he added.

Wealth management can be provided by large corporate entities, independent financial advisers or multi-licensed portfolio managers who design services to focus on high-net-worth clients. 

Mokhtar further said: “On a regional level, the report reveals that private financial wealth grew by 11.6 percent to reach $5.2 trillion in 2013. This poses lots of challenges for high-net-worth individuals (HNWIs) in maintaining their wealth or growing it further with the least possible risk.”

The report said private wealth in the region will reach $7.2 trillion by the end of 2018, approximately a 3.6 per cent share of total global wealth.

“The $7.2 trillion projected wealth needs the consultancy of wealth management companies in financial planning, investment portfolio management and other essential financial services,” he said. “It is high time that HNWIs sought advice from specialists on a consistent basis to manage their investments, be it equities, bonds or even cash and deposits.”

Mokhtar said “there is a strong need for wealth managers and financial planners who can develop wealth management strategies. Some clients are under the mistaken belief that their wealth be very high to use the services of wealth management experts. This isn’t the case.”

The UAE ranked 12th globally in the proportion of millionaire households, with 3.3 percent holding private wealth of at least $1 million, the report said.

Hence, UAE needs more prudent wealth management strategies to remain on par with global practices where a more scientific and professional approach is followed in managing wealth, Fortress Investments, a leading investment firm operating in the Middle East, underscored.

Globally, the growth of private wealth was driven primarily by returns on existing assets. The amount of wealth held in equities grew by 28.0 percent, with increases in bonds (4.1 percent) and cash and deposits (8.8 percent) lagging behind considerably. As a result, asset allocation shifted significantly toward a higher share of equities, the report said.

Private financial wealth includes cash and deposits, money market funds, and listed securities held either directly or indirectly through managed investments or life and pension assets, and other onshore and offshore assets. It excludes investors’ own businesses, any real estate, and luxury goods. Global wealth reflects total financial assets across all households. Unless stated otherwise, wealth figures and percentage changes are based on local totals that were converted to US dollars using year-end 2013 exchange rates for all years in order to exclude the effect of fluctuating exchange rates

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