Published On:17 February 2012
Posted by Indian Muslim Observer

ISLAMIC WEALTH MANAGEMENT: Health, Wealth & Happiness

By Paul McNamara

The area of Islamic wealth management has always been a neglected one in large part because it is believed that there is no real practical demand for it. Ultra-wealthy Muslims seem to park their excess funds in a string of investment vehicles that provide the best returns rather than those that are Shari’ah compliant.

Perhaps more pertinently it’s very hard for any Islamic wealth manager to match the kinds of levels of service and excellence that a bank like Citi can offer – since it has access to just about every financial product on the planet, from basic real estate plays through hedge funds to absolute returns products. Very few Islamic wealth managers can hope to compete with this level of offering and so few try.

But lately there has been a rising tide of Gulf-based banks upping their Shari’ah compliant wealth management offering in the hope of securing at least a portion of the ultra-wealthy Muslim investable funds market. They are not naïve enough to think that they will capture all of it, but with hundreds of billions of dollars in play even a 10% or 20% slice can be very attractive indeed.
The latest green shoots of Islamic wealth management are largely restricted to the Gulf markets because the ultra-wealthy in the other significant Islamic finance market, Malaysia, are generally Chinese rather than Muslim. It is a subject that the authorities in Malaysia are not keen to talk about for fear of stoking ethnic unrest but the rich in Malaysia are undoubtedly Chinese – and the mega-wealthy Chinese are very happy to have Singapore on their doorstep as, arguably, the fastest rising wealth management center in the world.

Singapore, simply put, is a financial center par excellence that has cleverly positioned itself as the wealth management center of choice – bearing in mind the phenomenal rise of China as the next major superpower. That it also has a modest Islamic wealth management offering is no surprise – but Singapore’s eyes are on wealthy Gulf Arabs rather than neighboring bumiputra Malays.

The traditional wealth management center of the globe, Switzerland, is almost bereft of Islamic wealth managers, preferring instead to focus on the traditional wealth management markets while fighting off intrusive American-led probes into its banking secrecy regime.

UBS makes an interesting case study of how a market can be eroded by the constant drip, drip of American pressure. While Swiss wealth managers have traditionally taken a low-key approach to branding and awareness, perhaps the only Islamic private bank in Switzerland, Faisal Private Bank, takes the low-key approach to such extremes that it is all but invisible to the outside world. Indeed the bank appears to have gone into hibernation and has neglected to produce an annual report since 2009.

All of this leaves the field pretty clear for players like ADIB, which is developing a fuller palette of Islamic wealth management instruments in hometown Abu Dhabi. Neighboring Dubai Islamic Bank launched its Wajaha wealth management product as long ago as 2009. Noor Islamic Bank, meanwhile, has launched Infinity that it says is for its ‘high net worth clients catering for all money matters throughout all phases of life, from wealth management, creation, preservation, financing and lifestyle.’

Over in KSA NCB Capital is the first subsidiary of a Saudi bank to be licensed by the Capital Market Authority to handle investment banking and asset management in the kingdom to provide clients with solutions of integrated investment services. Also in Saudi Al Rajhi Capital is one of the largest fund managers in the Kingdom and provides its clients with a range of quality investment products and services, but it is in areas like discretionary portfolio management where the Saudi banks really come into their own.

Indeed a look around all of the GCC markets, barring Oman, will show that there has been a significant increase in Islamic wealth management offerings over the past 12 months. In an ideal world it would be useful to be able to distinguish which bank had the best Islamic wealth management offering, but sadly the waters are muddied rather with the proliferation of spurious awards for ‘best Islamic wealth manager’ given on a favors-basis rather than a merit-basis.
What remains true is that the quality of offering by Islamic wealth managers and private banks is increasing and while Islamic banks will never steal more than a fraction of the business away from the private banking behemoths like Citi, the fraction that they do steal is likely to be very lucrative, high-margin stuff.

(Courtesy: The Islamic Globe)

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Posted by Indian Muslim Observer on February 17, 2012. Filed under , , , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

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