Private banks who flocked to Dubai in recent years are struggling to justify maintaining a significant presence on the ground and are shifting their Middle East business back to developed financial centres like Geneva, London, New York and Monaco.
Vontobel, the Swiss private bank, confirmed this week that it was running its Middle East business from Geneva and closing its onshore hub in Dubai. Nine people are currently employed in Dubai and a spokesperson for Vontobel told us that “some of them will most likely leave the bank”. It only launched its UAE operation in November 2011.
Pictet has also taken the decision to move its Middle East operations to Switzerland and relocated some of its eight-strong private clients team to its Geneva operations. At least two people have lost their jobs, however.
“High-net-worth individuals in the GCC still look to international banks, particularly Swiss institutions, for offshore wealth management, and banks have struggled to convince them to book their wealth onshore,” said Sebastian Dovey, managing partner at wealth management consultancy the Scorpio Partnership. “Instead, they’ve had to focus on more mainstream functions, even medium-net-worth individuals, which requires a much bigger commitment in terms of headcount and investment to build the business.”
Many private banks have underestimated the challenge in finding wealth management talent on the ground in Dubai, which has been a huge stumbling block in generating new business, said Dovey. It therefore makes more sense for institutions to employ the “suitcase banker model”, he said.
“There’s a history of booking Middle East wealth offshore, and the professionals who service these clients would much rather be based in London, Geneva, Monaco and New York and aren’t inclined to ply their trade in the UAE,” he said. “For all its sophistication, life as an onshore private banker in Dubai is tough – there’s a huge amount of wealth concentrated among a small number of individuals, stock markets are volatile and the regulatory environment is not conducive to sophisticated wealth management. Most bankers prefer to fly in for business.”
All of this is a far cry away from 18 months ago when international firms were falling over themselves to hire wealth managers, and investment bankers were making a switch into the sector for enhanced career opportunities.
“It’s slowed down a lot,” confirms Magdy El Zein, managing director of headhunters Boyden Middle East. “International banks want to tap the wealth in Saudi Arabia, which isn’t going to happen with a small operation in Dubai. Many are laying people off, and local banks are taking the opportunity to beef up their teams or upgrade.”
There are still international institutions that are expanding. LGT Group, the Liechtenstein family office, is hiring 40 private bankers in the Middle East over the next two years and Barclays is continuing to recruit wealth managers in 2013.