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The profile of the high-net worth
individuals (HNWIs) in the UAE is changing from "traditional"
family wealth connected to oil and gas production to that generated from
business activities from banking, real estate construction and support
services, says a veteran financial advisor based in Dubai.
Joe Capaldi, one of the most experienced financial advisers in the UAE
having started his career in 1973, says that because most of the
region's population is under the age of 25, generational wealth
management is a concern for older HNWI.
Wealth managers are anticipating a demand for an increased exposure to
international investments from the younger generation of HNWI
inheritors.
He says products are not particularly innovative yet, although banks in
the region are doing their best to cater for their customers, with for
example institutional investment in hedge funds.
"Middle Eastern investors have traditionally favoured real estate
investments. However, HNWI are interested in expanding the breath of
their portfolios. Transformation in the region is not limited to
economics since changing attitudes towards women are also helping create
a new group of wealthy clients," he says.
Commenting on the major challenges for wealth managers, Capaldi says the
UAE presents a unique set of challenges for wealth managers and
financial advisors.
In addition to the tax-free environment, the financial markets are not
yet as sophisticated as those of New York, London, Hong Kong or other
financial hubs, although they are catching up.
He says the opportunities for wealth managers in the Middle East are
only limited by the imagination of the managers themselves. During the
last seven years, the region has undergone a financial transformation,
with the creation of financial hubs such as the Dubai International
Finance Centre.
Capaldi says many clients have a focus on real-estate as a key part of
their portfolio.
Currently the thinking on the levels of life, critical illness and
retirement planning are far too low.
Apart form the natural growth of the UAE as a country, the steady influx
of high-quality financial advisors moving from the over-regulated sector
in the United Kingdom and Europe can only benefit the region.
The region needs more advisors who "think big" and get their
clients to do likewise. Capaldi says trends are changing in the
insurance-shy Islamic market of the UAE over the last few years.
"Many Muslims believe traditional insurance is 'haram' and this is
now being addressed by some of the major product providers. For example,
Zurich International has just announced a joint venture with the Abu
Dhabi National Takaful company to take effect in 2009," he says.
"To date there has been low life insurance penetration into
potential Islamic insurance [takaful] markets. For example, this has
been less than one per cent in the GCC. The takaful market is dominated
largely by non-life products and the family market has great potential
for expansion," he added.
Major international players such as Zurich International and HSBC are
lining up for market entry into the family takaful sector. The growth
should be immense.
Takaful industry's growth will be driven by various factors including
the young global Muslim population; the under-developed insurance
industry in the Muslim world [particularly life insurance]; the
marketing and PR of large insurance companies increasing awareness of
what is now available; and finally, the growth of the Islamic financial
sector with huge increases in global Shariah assets.
Capaldi says there is a lack of public awareness on medical insurance
and health issues. Recent reports by McKinsey and Company and Abraaj
Capital have pointed to the region's demand for healthcare going up
significantly in the coming years, with a projection of a 160 per cent
increase in beds by 2025 in the UAE itself, driven by high growth in
population, changing social demographics, high prevalence of health-risk
factors [diabetes, obesity, cancer and cardiac aliments being on the
rise] and the emergence of insurance-based services. He said the average
age expectancy of a man in the year 1900 was only 43. This had increased
to 76.5 by the year 2000. "Many people reading this article will
live well into their 90s. Some of them may even reach 100. That's the
good news. The bad news is most people will outlive their money and be
poorer in the later years of retirement," he added. 2008
December 6 BUSINESS
24-7
Real-Estate Slump Undercuts Dubai's Ad
Market
The global economic decline has put a damper on this Middle East
boomtown's real-estate market. Now, Dubai's nascent advertising boom,
heavily dependent on the property business, is feeling the effects.
Dubai's property market has been an engine of growth for years,
attracting investors from around the world. Amid the prosperity, the emirate
has also promoted itself as a media hub. Some 1,000 companies have flocked
to Dubai Media City, a tax-free zone for media, publishing and advertising
companies.
With the world's tallest under construction tower, Burj Dubai, background
left, vehicles pass by the under construction towers at the Business Bay in Dubai, United Arab Emirates, on Oct. 27.
Real-estate advertising has been an important element of that market.
Property companies have long filled fat, special-advertising sections of the
city-state's many newspapers with listings of newly finished, or even
unfinished, apartments. Emaar Properties PJSC, the Gulf's largest
real-estate developer and the biggest newspaper advertiser in the region,
spent more than $15 million on ads in regional papers this year, according
to the Pan Arab Research Center, which provides research and consultancy
services to marketing managers in the Middle East.
But the emirates of the U.A.E., long spared the worst effects of the
financial crisis, are now planning for diminished revenues next year amid
sharply lower oil prices, and many companies are rethinking expansion plans
and major projects. Property prices are starting to soften in turn, on
tighter credit and souring sentiment from overseas buyers, many of whom are
taking a financial hit closer to home.
Earlier this month, analysts at HSBC said property asking prices in Dubai
fell 4% in October from September, the first price decline since the
city-state gave foreigners the right to buy property six years ago. Emaar
has already said it may cut its work force as part of a plan to reduce
costs.
The next link in the chain is advertising. "Clients in the region
will look at their budgets," says Steve Anastasiadis, managing director
for Publicis
Groupe's Saatchi & Saatchi, which handles advertising accounts for
Dubai real-estate giant Nakheel and the Mall of the Emirates, one of the
region's largest shopping arcades.
"Clients already stalled their campaigns for the last quarter of
this year, so I think we'll see less spending next year," says Elie
Jichi, the production manager of the Pan Arab Gulf Research Center, noting
that property and financial firms were cutting their advertising
expenditure. Many of Mr. Jichi's clients are monitoring the economic
slowdown in the Gulf, waiting until the end of 2008 to deploy their
advertising budget for next year.
Emirates Business 24/7, a Dubai paper, has seen "a substantial drop
from the property segment, and that has really affected ad sales," says
senior ad sales manager Lincoln Rajendram. Mr. Rajendram says the paper gets
40% of its ad revenue from the property sector.
Financial firms are beginning to cut back on advertising as well, Mr.
Rajendram says. John Todary, advertising sales manager of the National, an
Abu Dhabi paper launched in April, confirms that.
Radio stations haven't felt the slowdown as much as newspapers but are
bracing for next year, says Kate Bettel, sales manager for Gulf News Media,
which owns Radio One and Radio Two.
The hitch comes just as the industry appeared to be enjoying a boom in
the region. Companies in the Gulf are estimated to have spent more than $6
billion on advertising this year through September, up 25% from $4.8 billion
last year, according to the Pan Arab Research Center. Meanwhile,
international titles, such as the Financial Times, owned by Pearson PLC of
London, have boosted their presence in the Gulf. The FT launched a Middle
East edition this year in an effort to win more of the region's ad dollars.
"The first thing for any company to cut is advertising
spending," says Shawki Abd El Malik, group advertising manager for
Dubai's Motivate Publishing, local publisher of glossy magazine Hello. He
hasn't seen the cuts at DMP yet.
- 2008 November 28 WALL
ST. JOURNAL
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