Wealth Management Industry
The wealth management industry in Dubai is witnessing rapid growth. Demand for private banking services is escalating as a result of an explosion private wealth. As per the Merrill Lynch Capgemini survey reports the global wealth assets are growing at 6 percent annually in the coming years with total global wealth assets amounting to nearly $ 44. 4 trillion by the year 2010.
As per the Barclays Wealth Insight Report, 2006 “The impressive growth has pushed up levels of spending by governments on public infrastructure projects, and created a powerful investor culture in countries such as Saudi Arabia and the United Arab Emirates as locals seek new avenues into which to channel their wealth. ” Dubai is the prime location for economic reforms and development and is emerging as the hub of financial and commercial service sector. According to International Monetary Fund (IMF) reports the Middle East countries has one of the largest pools of private wealth, with $ 1.
5 trillion held in real estate, offshore securities and bank deposits. The boom in economy and rise in private wealth assets in these countries are mainly accountable to the oil and flourishing construction business. Dubai and other Gulf countries saw an influx of capital inflows that led to a boom in the stock market and real estate industry. The market capitalization of Dubai Financial Market and the Abu Dhabi Stock Market increased by 700 percent since the year 2001. With 16 percent growth rate in its gross domestic product, Dubai has been attracting overseas investment considerably in the past few years.
The World Wealth Report 2005 released by Merrill Lynch Capgemini reveals that nearly 1. 22 percent of Dubai’s population consists of millionaires and the country accounts for 12. 3 percent annual growth in the number of high net worth individuals. The research paper intends to explore the wealth management landscape in Dubai with focus on market composition, trends, risks and challenges, and the major players in the wealth management market. Statement of Objectives The rising opportunities and emerging economies have given rise to a great number of wealthy individuals across the globe. There are nearly 9.
5 million high net worth individuals across the world with total investable assets of $37. 2 trillion in the year 2006. Rising stock market values along with sustained economic growth has fuelled the rising number of wealthy individuals. The global demand for oil led to an increase of 11. 9 percent in the number of high net worth individuals in the Middle East countries in the year 2006. Dubai has tremendous potential in the wealth management market since the growth percentage of wealthy individuals is quite high. This growth is mainly triggered by the rising real GDP and market capitalization growth.
In view of the above context the research will highlight the market growth potential of wealth management in Dubai in the coming years. The study will focus on the following areas of interest: • What are the market statistics of the wealth management industry in Dubai? • Who are the major players in this field catering to the financial service needs of the wealthy population? • What role does the Government regulations play in monitoring the competitive environment? • How conducive is the political, legal, and economic environment for the growth and development of this industry segment?
It is observed that the overall business environment affects the mode of operation, product offerings, and brand positioning. The same applies to the wealth management industry. Major banks eye the Dubai market with great speculation and interest since they feel that the country has amazing number of wealthy individuals with tremendous earning potential. The market capitalization growth is spectacular with great prospects in near future. The study will analyse all the aspects of wealth management related to Dubai. Research Methodology
The study will comprehensively review the wealth management market in Dubai highlighting the industry statistics, market overview, trends and policies affecting the market operations. The study will analyze and discuss the research topic in the perspective given below: Introduction to wealth management concepts An overview of the global wealth statistics Highlights of the wealth accumulation in Middle Eastern countries with emphasis on Dubai Identification of the trends in wealth service requirements in Dubai Industry analysis with focus on various factors affecting the market dynamics
A study of the major players in the field Analyse future trends and market potential The Middle East Business Intelligence online publication states that “the competition to provide wealth management services is growing as the Gulf’s high net worth investors turn away from traditional offshore banking centres in favour of local bourses. ” There are around 300,000 ultra high net worth individuals in Dubai. Many European and American banks are establishing their offices in the country to capitalise on the growing wealth management market opportunities.
The local and international financial institutions are vying with each other for a market share in this segment. The research study aims to analyse and highlight the market dynamics in Dubai. The study will also cover the government policies and finance regulations that affect the operations of the financial institutions in the country. The Dubai government has provided the banks with the necessary infrastructure to enter the market and this is seen as a significant step in promoting financial services industry in the region. The Dubai International Finance Centre enables multinational private banks to operate in an independent manner.
It is an ideal location to service the rising wealth management needs of the high net worth individuals. The wealth management landscape in Dubai is presented with huge opportunities in light of the rapid financial transformation that has taken place in the country in the last seven years. The political environment has posed immense challenges to the industry especially after the September attack on America. World markets have become less friendly for the Middle Eastern investors as American regulators have increased scrutiny over all transactions taking place in and out of the US markets.
This has spurred the investors to invest in assets in the local market that has created tremendous scope for the wealth managers in the country. Though the Dubai market is not as sophisticated as the rich and developed nations of United States, United Kingdom, France, Italy, Germany, and Japan it is changing rapidly. The country has a high percentage of expatriates comprising nearly 88 percent of the total workforce. Much of this population is under the age of 25 and this presents the wealth managers with a challenge to anticipate and understand the needs of this segment of the high net worth individuals.
Real Estate is a prominent investment options for the wealthy and affluent section in this country. In 2006 more affluent individuals opted for real estate investment and in some cases liquidating other alternative investments for opportunities in the real estate. Real estate investments mounted to US$ 682 billion that was almost an increase of 38 percent. In addition the Islamic wealth products like Sukuks and Murabaha deposits are fast penetrating the market. Banks that has incorporated Arab capital market products in their wealth management services boast of higher assets under management and market share.
Based on these lines the research will analyse the wealth management market in Dubai. The study will also present vital statistics and figures related to assets under management held by major financial institutions and project the future market trends that will emerge. The research will be based on various journals, Internet articles and textbooks related to wealth management industry in Dubai. Explanation of Research Design The research will be based on two principal source types – qualitative and quantitative research. Data collection method: Qualitative research comprising of interviews and data gathered from other sources.
The research employs data gathered from the financial institutions in Dubai who are the major players in wealth management market segment. The study will make use of the extensive information available from online resources and printed materials in the form of journals, newspaper articles and textbooks. Quantitative research that constitutes of statistical data collected from financial institutions. The study will be based on the statistical data of assets under management in the wealth market segment in Dubai collected for the past five years.
This data will assist in analysing the financing trends in the recent years and help in projecting growth trends in the sector. Data processing and analysis: The outcome of the research conducted on the subject matter from various sources mentioned above will be written as a descriptive conclusion of the study conducted. The processed statistical data will be presented as graphs and pie charts for better understanding. Validity, reliability, and limitations: As the information collected from various journals, newspaper reports and articles reflect the current market trend; the analysis based on the findings will be accurate and reliable.
Timetable of research activities: Appendices Statistical wealth management data gathered from the websites and online sources of leading financial institutions and banks, both local and multinational, will form the base of research on the topic. Other sources of information for the current figures of high net worth individuals and their assets in Dubai will be available from Datamonitor reports and wealth reports from leading survey agencies like Merrill Lynch and Capgemini.
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3. Stanley Reed, As Arab Market Crashes, Dubai Cashes In – http://www. businessweek. com/globalbiz/content/mar2007/gb20070320_497360. htm – accessed on 3rd March 2008 4. Middle East sees dispersion of wealth, says Merrill Lynch Capgemini’s World Wealth Report – http://www. ameinfo. com/125036. html – accessed on 3rd March 2008 5. How Dubai property encourages strong fiscal growth – http://www.
eyeofdubai. com/en/articles/article_detail. asp? artid=419 – accessed on 3rd March 2008 6. Christina Corbett, The rise of the Super-rich, Banking and Finance – ArabianBusiness. com – http://www. arabianbusiness. com/498229-banking-for-the-super-rich? start=1 – accessed on 3rd March 2008 7. Wealth Management: Gulf’s Super-rich return home – Middle East Business Intelligence – http://www. meed. com/bankingandfinance/specialreport/2007/12/gulfs_superrich_return_home. html – accessed on 3rd March 2008 8. The Future of Wealth – 2006 to 2016 – Barclays Wealth Insights, Volume 1 in cooperation with Economist Intelligence Unit