Private Banking Special 2014: The Contenders

In the Middle East, wealth formation is still growing, offering attractive opportunities for wealth management firms to develop their business. It seems, though, the competition in the region is becoming more challenging, requiring a strong focus and clear strategy.

Local onshore banks offer all services related to real estate, private equity, company growth and other daily financial needs – they can be seen as the UHNWI’s house banks. Offshore banks don’t quite have the same supremacy due to legal and regulatory requirements, and often they focus on core private banking business and services.

This may mean that they compete for a smaller portion of the wealth than onshore banks. While some offshore banks have maintained a longstanding relationship for over thirty years with their clientele and benefit from their loyalty, others have only recently entered the market and struggle to position themselves with a distinct client value proposition.

While wealth formation is still growing and the potential for new business remains very attractive, both the onshore and offshore banks want to profit from a crucial challenge that all offshore banks face is cultural diversity.

International banks must understand the particular needs of its local clientele, as well as the social and religious context they live in.

For international private bankers, it requires patience, intercultural skills and a certain degree of sensitivity to comprehend and adapt to the local environment. Not all foreign bankers take the necessary time and effort to manage this sensitive subject, although this constitutes a key prerequisite for a prospering client relationship.

In this competitive market a distinct financial offering with a sharp client proposition is important to successfully position an institution and secure economic survival, as a further consolidation of the financial industry will very probably continue.

Since 2009, Falcon Private Bank has been owned 100 per cent by Aabar Investments, a majority owned subsidiary of IPIC, the sovereign wealth fund of the government of Abu Dhabi.

This acquisition led us to a refocus of the banks’ strategy towards emerging markets. We believe that emerging markets will retain the biggest growth opportunities. Besides the growth potential in wealth management, there are many promising sectors, which are flourishing, such as health care, education and infrastructure.

Additionally, a remarkable transformation of the UAE as a country, from an energy exporter, to now a more diversified economy with global significance, will attract more entrepreneurs and business builders who in turn will expand their banking and wealth management requirements. In this dynamic environment, one can only survive with a strong strategic ambition and a unique proposition.

We have the strategic ambition to become a leading emerging markets private bank in the Middle East, Eastern Europe and Asia.

Although we face fierce competition in the Middle East, we are very confident that our Swiss private banking boutique will continue to grow and our strong emerging markets expertise will help us to successfully develop our market position in the region.

---

WHAT TO EXPECT OVER THE NEXT 12 MONTHS

We are still bullish on risk oriented asset classes, due to supportive economic data and accommodative monetary policy. In our view, equity valuations are not stretched and we still believe shareholders will be rewarded with superior returns longer term.

The recent pull-back in equities in our view was simply a reflection of normal market volatility and represented a re-entry point. On the fixed income side, we prefer emerging market and high yield bonds.

However, we believe this market is on the rich side and we suggest remaining cautious as it relates to new money allocations.

Our investment activities for clients continue to reflect our Private Banking boutique strategy. On the one hand safety and value preservation products, and on the other hand niche products and tailor-made solutions that address sophisticated needs of our emerging market focused client base.

David Pinkerton, chief investment officer, Falcon Private Bank