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SPECIAL FEATURE – WEALTH MANAGEMENT
38
O
ver the last decade, the Middle East region has
seen an explosion of wealth. Most reports suggest
that the growth in the number of millionaires
in this part of the world has outpaced all other regions.
The wealth management industry in these places has
also grown rapidly, fuelled by these swelling ranks of
millionaires.
Much has been said in various quarters about how
Switzerland, the original “safe haven”, may be losing its
position as the traditionally dominant wealth management
hub of the world. In contrast, industry opinion suggests
that private wealth management is experiencing a shift
eastwards towards Asia, particularly in financial centres
like Singapore, Hong Kong and more recently, Dubai.
The UAE in general and Dubai in particular has posi-
tioned itself as a prominent offshore centre in the Arab
world, with Saudi Arabia, Turkey, Iran, Kuwait and Russia
emerging as the most important origins of offshore wealth.
The recent geo-political unrest in the region has substan-
tially increased the flow of investments into the UAE.
Wealth management in the UAE
For wealth management organisations, especially banks in
the UAE, this is a time of great opportunity. The industry
enjoyed a resurgence last year, with growth in both the
absolute number of local and expatriate high net worth
investors, and the assets of this target client pool.
However, this increase in flow of wealth is no rising tide
that will carry every bank and wealth manager with it. In
the post-financial crisis world, supervisory authorities and
investors are becoming more demanding about how assets
are managed, and Dubai is no exception. Wealth managers
now have to wrestle with a combination of evolving regula-
tion, less stickiness of client assets, tougher fee negotiations,
and an investor shift towards lower-margin products.
To benefit from the potential opportunities, therefore,
banks will have to demonstrate to existing and prospective
clients that they can provide a compelling value proposition
built around exceptional service and robust investment
performance. Only by meeting and preferably exceeding
clients’ expectations will they be able to grow their assets
under management and wealth management revenues over
the long term.
Furthermore, banks will have to run their businesses
ever more efficiently if they are to reduce costs and im-
prove profitability. Banks will have to expand their open
architecture platforms, offer a wider range of products and
marry their own interests with those of their clients. Only
a few multinational banks will be in a position to leverage
the proper skills, products and support infrastructure to
develop a winning formula.
Challenges for the wealth business
Transparency and communication
The client relationship will be expected to remain the cor-
nerstone of wealth management. Investors have become
increasingly sophisticated and more demanding in terms of
the range of products and quality of services they expect to
receive. To meet and preferably exceed these expectations,
wealth managers need to concentrate on transparency and
communication.
The industry’s lack of transparency was one of the most
high-profile problems highlighted by the financial crisis,
and is one of the most prominent areas where investors
are now demanding change. To meet these demands, and
regain investors’ confidence, wealth managers need tools
that allow them to analyse how clients’ portfolios have
performed. In addition, they must be able to communicate
clearly and frequently with clients to explain their actions
and results. Crucially though, transparency is not merely
about deluging investors with information. Rather, it means
providing clients with clear and honest explanations about
performance, risk and fees.
Wealth management after the financial crisis
The increasing level of wealth in the Middle East is no rising tide that will carry every
bank and wealth manager with it. In the post-financial crisis world, wealth managers must
grapple with demands from supervisory authorities and investors about how assets are
managed. Mr Sanjoy Sen of Citibank looks at some of these challenges and the role
that bancassurance can play in the wealth management equation.
www.meinsurancereview.com August 2011
SPECIAL FEATURE – WEALTH MANAGEMENT
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SPECIAL FEATURE – WEALTH MANAGEMENT
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SPECIAL FEATURE – WEALTH MANAGEMENT
39www.meinsurancereview.com August 2011
SPECIAL FEATURE – WEALTH MANAGEMENT
39www.meinsurancereview.com August 2011
SPECIAL FEATURE – WEALTH MANAGEMENT
Performance
Performance has always been important factor in the wealth
management business. However, as long as it was positive,
investors did not ask too many questions in the past. The
financial crisis, during which many wealthy investors saw
assets plummet, changed that. Post-crisis, investors are focus-
ing more on risk-adjusted portfolio returns, and are keen
to see how those returns are achieved and to what extent
the performance can be attributed to the wealth manag-
ers. High net worth investors in the future are expected to
judge their providers by the returns generated, and switch
to another where performance is deemed disappointing.
The future wealth management business is expected to be
marked by two clear requirements – returns and protection.
Protection
Protection has not been an integral part of wealth advisory
businesses in the past, especially in this region. This can be
attributed to many factors like lack of Shariah-compliant
products, low awareness of insurance products and large
family support systems in the past. However, with the total
insurance penetration below 10% of insurable population in
the Middle East, it is expected that the region will witness
rapid growth in near future. It is also expected that in a
fragmented wealth advisory model like the UAE, banks and
hence bancassurance will play an important role.
The importance of bancassurance
The sales synergies in bancassurance help drive down the
cost of distribution and after-sales service. Life insurance
distribution is where this synergy is seen at its very best
and is expected to be the pivot of bancassurance business
in the UAE.
The success of bancassurance in the life insurance in-
dustry will depend on a number of factors. Bancassurance
is a partnership where both the bank and the insurer need
to contribute. Every bank will need to start by selecting
the right partner – an underwriter whose products, service
quality and brand image is acceptable to the bank’s core
customer segment. Banks will need to have a robust branch
network which can be used to sell insurance products.
Banks generally tend to have more frequent contact with
their clients. And banks, more often not, have a better
reputation than independent advisors.
Bankers are seen as more trusted. This advantage will
have to be reiterated by offering the right products through
proper suitability checks. Most importantly, the success of
bancassurance will depend on the ability of banks to give
a fresh look to the insurance business and develop a strong
customer focus, resulting in simpler and more transparent
products, mostly designed for high net worth customers
in the region.
Citibank and bancassurance in the UAE
Citibank pioneered the concept of bancassurance in the
UAE market. Many years ago, when most other banks were
busy collecting deposits and giving out loans, Citibank took
the initiative to launch insurance products in the UAE. What
started as a set of simple products distributed through the
telemarketing channels has now developed into a set of
offerings for every client segment within the bank.
Citibank had its fair share of learnings in the bancassur-
ance business over the years and has managed to fine-tune
the model to the extent that it is by far the largest insurance
distributor in the Middle East. This success can be attributed
to Citibank’s approach in bancassurance:
• Building client loyalty
Client loyalty is built through a complex combination
of products, services and customer experience. The shift
from a product-based approach to a “one-stop” approach
simplifies life for the customer. The customer’s trust
increases from his knowledge that this “one-stop” bank
has something that suits his need.
Overall, the best way of building customer loyalty is
by being able to offer a continuum of financial products
covering all phases of the client’s life.
• The right products
Insurance is generally perceived as a boring industry.
Products do not differ much from one underwriter to
another. The traditional distributional model is even
more staid. There is hardly any differentiating factor
from one adviser to another.
This is where Citibank made a big difference through
its bancassurance offerings. Products were differenti-
ated from the rest of the market’s, made transparent
and offered at lower charges. This was made possible
because of the bank’s understanding of its customers
and the analysis that it possessed. Armed with this data,
underwriters were happy to create a new set of products
targeted at specific customer segments within the bank.
• Integrated sales process
This was the toughest of all goals to achieve. An inte-
grated sales process is easy to develop as a concept but
practically impossible to execute. It has several variables
to consider and senior management is pivotal in the
organisational acceptance. The process is successful
only when it is supported by an open architecture
product platform, proper suitability checks and the right
compensation structure. Implementing it will increase
top-line revenues, and as the sales pipeline becomes
more manageable, the benefits for the customers and
bank will increase.
Over the years, Citibank has developed its bancassurance
offerings across various segments. The bank’s customers
know that whenever they step into a branch or speak to
an adviser over the phone, there will be solutions they can
look forward to. It does not matter what stage of life they
are in or what their immediate or long-term financial goals
are. They know that they can trust Citibank to provide them
with a transparent, suitable product that performs to fulfill
their financial needs.
Mr Sanjoy Sen is Head of
Citibank’s Consumer
Banking in the Middle
East, Pakistan and
North Africa region.