With more women and 'Generation Ys' becoming clients, private banks are having to respond to new demands Published in Bloomberg Businessweek, 4 June 2015
Once a year, Azeemeh Zaheer, a vice president of Kuwaiti-owned Gatehouse Bank, travels from London to Jeddah. It’s not the sort of trip that private bankers usually make to the Gulf. She doesn’t go in search of investment opportunities or to meet clients, but instead to teach students at Dar Al-Hekma University, a women-only institution, about the realities of real estate investment. “We teach them how to look at an investment memorandum, how to look at the fee structure, how a deal is structured for tax purposes, how to do due diligence, whether something is a good or bad investment,” she says. “I leave the class feeling so fulfilled, because they have this hunger, they want to learn how to do this. Some of the women want to be able to talk to their husbands about this in the evenings, some have a dream of starting a company.”
Across the region, the position of women in society is changing. Consultancy firm Strategy& estimates that women now control 20-25 per cent of the region’s high net worth assets. For many in the private banking sector, reaching out to these potential clients is increasingly important, although they don’t always do it well.
“Women are taking a greater and greater role in investment decisions,” says Zaheer. “A lot of investment banks have tried to target women, but a lot of it has been quite patronising, organising things like cooking classes. But women are astute; they have the same ability to grasp these things as men. They can’t be ignored and they definitely shouldn’t be patronised.”
In reality, it shouldn’t be too difficult for banks to meet the needs of female customers—their concerns aren’t that different from men’s. Although the difference can be overstated, women are often characterised as slightly more risk-averse than men. “Female clients are more risk averse and cautious but more loyal and refer more clients than men,” says Rami Sayegh, head of private banking wealth management at Bank of Sharjah. “The majority of women clients look for investment structures that offer steady income and security.”
Other groups of emerging customers can be rather more demanding in their outlook. In particular, the next generation of wealthy locals presents banks with a number of challenges. These people often have a more sophisticated approach to finance than their parents, and are more willing to take risks and to invest outside their home markets. They also tend to look for more active engagement, often via digital channels. “It’s a really interesting group of people that needs to be catered for by the local and international private banks, but probably in a slightly different way to how it’s done in the West,” says Daniel Diemers, a partner at Strategy&. “In the West these people tend to be more passive investors, but in the Middle East they’re more entrepreneurial and fast-paced.”
Meeting the needs of these new customers will require private banks to be more agile, as many in the industry freely acknowledge. “Investors are becoming increasingly knowledgeable and the industry has had to adapt to the changing client demands, as people are becoming more sophisticated,” says Daniel Savary, head of the Eastern Mediterranean, Middle East and Africa at Swiss private bank Julius Baer & Co.
One trick in terms of persuading the next generation to open accounts is to reach them early. Julius Baer runs investment workshops for the children and grandchildren of clients in an effort to do just this. But it is local banks that often have an advantage when it comes to signing up more private banking customers. “One should never forget the amazing position that local banks have in terms of client access,” says Diemers. “You’ll find really rich locals who are still dealing with the retail networks of the banks. The level of sophistication that banks have achieved in their branches is very different to retail banking in Western Europe. If a wealthy patron walks in, the head of the branch will step out along with some of his senior team and they’ll discuss matters over tea. I’ve seen it happen and it’s very powerful.”
Smaller local operators also often garner new account holders through their existing customer base, with parents introducing their children to an institution. “I’d expect that, over the next five years, three to five banks from the region will realise that if they up their game in terms of their offering and their outreach they’ll be just as competitive as the international operators, particularly if they can seize the opportunity to access clients’ wealth earlier in the home market,” says Seb Dovey, managing partner at London-based Scorpio Partnership. “The big challenge for the international private banks is that they often get to the individual later in their wealth cycle.”