ISSUE FORTY ONE - JUNE - JULY 2017
ISSUE FORTY ONE - JUNE - JULY 2017 BUILDING A LEGACY
Building a legacy A CPI Financial Publication
HNWI INTERVIEW WWE ROYALTY STEPHANIE MCMAHON 36
LUXURY TRAVEL VELAA PRIVATE ISLAND 40
MOTORING PORSCHE PANAMERA 44
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CONTENTS
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Editor's
LETTER
Greetings, all
Welcome to the 41st issue of WEALTH Arabia. I hope you all have had a wonderful summer thus far. For our cover story, we have brought you one of the leaders of the non-resident Indian community in the GCC, the CEO of Nakheel, Sanjay Manchanda. He offers an update not just on how Nakheel’s vision for Dubai and its company has evolved over time, but also his offers advice to others in the NRI community who look for him for leadership. Stephanie McMahon will need no introduction to many of you, but for others, she’s the Chief Brand Officer of World Wrestling Entertainment, which has huge popularity all over the world. On her recent trip to Dubai to launch WWE Wal3ooja, the first Arabic-language WWE programme airing exclusively on OSN, we sat down to speak about her life as a female business leader and the philanthropy she holds most dear. She even took a moment, in front of the whole crowd, to thank WEALTH Arabia and I for work done in the past to feature women in the investment field, something very dear to our hearts at CPI Financial. Beyond that, there’s still much to explore. I hope you enjoy it. Till next time,
William Mullally 4
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OPINION
20
06
‘Snap’ to it
NEWS & ANALYSIS
08
The latest analysis from the investment world
COVER INTERVIEW
10
Nakheel: a renewed vision
30
PRIVATE BANKING
16
UAE remains a bright spot for private banking
INVESTMENT
20 24 30
China Malta’s value proposition Citizenship Invest
WEALTH MANAGEMENT
34
Why your financial planner should be a robot
34
Chairman Saleh F. Al Akrabi Chief Executive Officer ROBIN AMLÔT Managing Editor GEORGINA ENZER Sales Director OMER HUSSAIN
44
ADVERTISING sales@cpifinancial.net
Editor, WEALTH Arabia WILLIAM MULLALLY William@cpifinancial.net Tel: +971 4 391 3718
Business Development Manager WEALTH Arabia DANIEL BATEMAN daniel@cpifinancial.net Tel: +971 4 3752526
EDITORS MATT AMLÔT matt@cpifinancial.net Tel: +971 4 391 3716
GOOD TALK
JESSICA COMBES jessica@cpifinancial.net Tel: +971 4 364 2024
36
WWE’s Stephanie McMahon: the ‘queen’ of women’s empowerment
NABILAH ANNUAR nabilah.annuar@ cpifinancial.net +971 4 391 3718
LUXURY TRAVEL
40
Velaa Private Island
36
MOTORING
44
Porsche Panamera 4s
HNWI CHAT
50
EDITORIAL editorial@cpifinancial.net
Sitting down with an Emirati filmmaker/ entrepreneur
40
Contributors Velaa Private Island Bruno Daher
Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net
Business Development Managers NIKHIL MATHUR nikhil@cpifinancial.net Tel: +971 4 391 3717 MOHAMED MAKSOUD mohamed@cpifinancial.net Tel: +971 4 391 5320 SIMON MOTWALI simon.motwali@ cpifinancial.net +971 4 4335321 London Bureau ISLA MACFARLANE isla@cpifinancial.net Tel: +44 7857 429476
Senior Designer FLORANTE MAGSAKAY florante@cpifinancial.net
Finance Manager SHAIS MEMON, ACCA, CMA Shais.memon@ cpifinancial.net Tel: +971 4 391 3727
Creative Designer ANA MAKSIĆ ana@cpifinancial.net
Data Analyst NADINE ABOUZEID nadine@cpifinancial.net
Administration & Online Content Manager Subscriptions SIYA PAINAYIL enquiries@cpifinancial.net siya@cpifinancial.net Tel: +971 4 391 4682 Tel: +971 4 391 3722 Tel: +971 4 391 3709
Head Office P.O. Box 502491, Dubai Media City Dubai, UAE Fax: +971 4 390 9756
ISSUE FORTY ONE - JUNE - JULY 2017
ISSUE FORTY ONE - JUNE - JULY 2017
www.cpifinancial.net BUILDING A LEGACY
WEALTH WARNING! Building a legacy
A CPI Financial Publication
HNWI INTERVIEW WWE ROYALTY STEPHANIE MCMAHON 36
LUXURY TRAVEL VELAA PRIVATE ISLAND 40
MOTORING PORSCHE PANAMERA 44
Remember, if you wish to act on any of the information you read in WEALTH Arabia, consider taking independent advice first. WEALTH Arabia is written for a general audience and the information contained herein may not be appropriate for your personal circumstances.
Registered at the Dubai Media City Printed by United Printing & Publishing – Abu Dhabi, UAE © 2017 CPI Financial FZ LLC All rights reserved. No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from the Managing Editor.
Don’t miss your copy of WEALTH Arabia. Subscribe now, full details at: www.wealtharabia.net and on Twitter @wealtharabia. ISSUE FORTY ONE - JUNE - JULY 2017
5
OPINION
‘SNAP’ TO IT
B
y now, you are all well versed in the UK election fiasco. Prime Minister Theresa May called for an election years earlier than necessary, beaming with confidence due to huge leads in polls, wanting an election to increase her mandate ahead of the looming Brexit negotiations. Things didn’t go according to plan. Her party instead lost ground, resulting in a hung parliament. As Gary Dugan, Chief Investment Officer–Wealth Management, Emirates NBD, puts it: “The UK electorate has delivered a real wake up call to the world. The vote represents the first emphatic effective vote by millennials for a redistribution of wealth and power away from the old order. The UK establishment had written off Jeremy Corbyn the leader of the Labour Party as a dinosaur a character from a past, long–gone era. Instead his brand of socialism has appeal to vast majority of millennials who seek a voice in what they believe to be an unjust world that fails to offer them a future. Educated, but left with debt, given a job but at a low wage and with very modest opportunity to advance in a career and left to rent with little prospect of owning their own home. Meanwhile they see over the horizon to a world where taxes can only rise to pay for an ageing population.”
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Dugan himself seems to sternly lecture the ‘millenials’ on their ignorance: “Millennials don’t remember how socialism took the UK to the brink of bankruptcy in the 1970’s before a Margaret Thatcher-led Conservative party righted the ship.” Nevermind that this may be a gross oversimplification of the UK’s economic situation in the 70s and 80s and that it is very much up for debate whether ‘socialism’ was the cause of the problems, as he implies, the fact remains the same: the UK is in tumult again, a year after a pro-Brexit vote stunned the financial world. But while Dugan and others have noted that this will cause more uncertainty in the country and potentially raise doubts over whether companies will invest in the UK, Knight Frank believes the housing market as a whole will be likely to continue to be supported by ultra-low interest rates, despite the risk of higher inflation due to the weak pound, which should remain a fixture through 2017 even more-so after the election. In their view, the weak pound itself should provide some stimulus for the London market in the form of overseas inward investment. James Lewis, Middle East Regional Head of Knight Frank, noted, “While the outcome of the UK general election has not been decisive, thus causing further political
uncertainty, the appeal of the UK market is unlikely to be significantly diminished from a Middle East business or investors’ point of view. With the full political fall-out from the election yet to be seen, some decisions may be put on hold. However, the depreciation of sterling could counteract that to a certain extent, as investors pull the trigger to take advantage of the weaker pound.” So as uncertain and risky as things may be, that might be exactly the right time to invest, especially in housing, as so many HNWIs in the Gulf have.
William Mullally
NEWS & ANALYSIS
Christoph Riniker, Head Equity Strategy Research, Julius Baer
A
decent rebound in Euro zone equities brought up concerns that the market might already be overvalued by now, but an elevated level of the equity risk premium indicates that equity investors are compensated for taking a higher risk.
Comparing the equity risk premium of the US market with the one of the Euro zone shows that the US is well below its longterm average (at 3.5 per cent vs. the 4.3 per cent average) while we see a Euro zone risk premium of 5.3 per cent that is almost on the average (5.6 per cent). The Euro zone therefore looks more attractive. However, it is even more interesting to find out about the potential future price/earnings (P/E) level of the equity market. For that we have to assume that the equity risk premium will revert to the mean over the next 12 months “Furthermore we use the Julius Baer bond yield forecast of 2.5 per cent for US 10-year government bonds and 0.7 per cent for the Euro zone counterpart. Taking all this into consideration, US equities should trade at 14.7x as opposed to the current level of 17.3x. On the other hand, Euro zone equities could even further revalue as they deserve a P/E of 15.9x rather than the current level of 14.8x. In our index models, we use valuation levels near current levels given the minor importance compared to earnings. The relative attractiveness of Euro zone equities still remains in place.�
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NEWS & ANALYSIS
Richard Boxshall, PwC Middle East’s Economist
W
hile new taxes will provide a challenge to businesses in the region, the move towards VAT and other new initatives will likely increase investor confidence in the region, and there will be a number of investment opportunities, particularly as the major Gulf economies look for alternative sources of financing. This includes the debt markets and privatisation initiatives.
The flurry of activity in debt markets, privatisation and PPPs has only just got started and should generate interesting business opportunities in the next few years. Investors can expect to see GCC economies make increasing use of international debt markets and to work harder to attract foreign direct investment in the next few years.” “Foreign investors will want to see that governments have credible and committed plans to control the public finances. Introduction of VAT and excise tax in the GCC is an early opportunity for GCC governments to signal to international investors their commitment to fiscal reforms.”
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SANJAY MANCHANDA
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COVER INTERVIEW
Building
A LEGACY NAKHEEL CEO SANJAY MANCHANDA
Tell me about Nakheel’s overall vision. Nakheel was created to bring to life the aspirations of Dubai. This was done in terms of creating Dubai in the global real estate sector and doing something iconic, something that the global audience would come to recognise as something that is unique and admirable. The vision was to create a world class destination for living, business and tourism. Nakheel was given the mandate to create more waterfront properties, to bring spectacular, unique, landmark real estate projects. With Palm Jumeirah and The World and now our new islands, Deira Islands, we have brought awe-inspiring projects that are recognised the world over. The award-winning Palm Jumeirah is globally known to people. We are building communities that people are happy to live in. Jumeirah Islands, Palm Jumeirah and one of our newest communities, Jumeirah Park, are all in demand, with investors really appreciating the efforts we have put into building those developments, which we continue to enhance and improve with new services and attractions.
How has the vision changed since Nakheel’s inception? I do not think the vision has changed; it remains the same. If anything, it’s made us more resolute in that we must continue what we have established. Notwithstanding that we did have a short period during the global financial crisis when the business had to be repositioned to enable us to continue with that vision and provide that impetus. If you go back in time, in 2011, we were the first developer to announce a new project—Palma Residences—at a time when everyone was a little unsure of how to move forward. But Dubai continues to surprise people—investors, residents, and the business community, so we took a leap of faith and launched a development that ended up doing very well and selling out in a very short time. We then went on to launch other projects after the success of Palma Residences. That started the resurgence of the real estate business in Dubai. Having gone through the learning phase, the strategy was to continue and to create iconic projects, and that prompted us to do two things—first, to look at our ...cont. overleaf
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COVER INTERVIEW cont. from page 11
real estate strategy in terms of sectors and second, to lay the foundation of a long term sustainable business. At the time, our portfolio largely focused on residential, plus we had two malls: Dragon Mart, the world’s largest Chinese trading hub outside mainland China, and Ibn Battuta Mall, the world’s largest themed shopping mall. We have now fast-forwarded the development of both of these, doubling the capacity at Dragon Mart and increasing Ibn Battuta by a third, with more extensions on the way, because we see there is room for expansion. It goes along with our strategy of building cash and generating assets for the company. Our mission is to continue building those cash-generating assets, because it has a two-fold impact for us. Firstly, it provides a natural hedge that insulates us against extreme volatility in the development business, which is a well-known issue in that space. Secondly, it improves the overall financial health. Tourism is one of the key economic sectors for Dubai, and we thought it would be beneficial for us to step into the hospitality sector. Very mindful of the gaps in that sector in Dubai, we stepped into the space that is commonly referred to as three to four star, or mid-scale, hotels. We have an ambitious plan of ramping that up with 18 properties, with around 5,800 rooms, in our portfolio. . Two hotels are already operating, and there are four more under construction. We believe that our strategy of stepping into hospitality dovetails very nicely with the tourism sector in Dubai. Dubai itself has stepped up its game plan for tourism by introducing family entertainment in a big way in the theme park space. The focus is to provide new experiences, new revenues, new concepts, and new partners in order to create space to welcome the 20 million tourists that Dubai aims for. What are you aiming for in bringing these new partners into the fold? The idea is to bring new, reputable, international players who have newer offerings who have a good market following that that will benefit Dubai and enable them to develop their business and brands. ...cont. overleaf
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SANJAY MANCHANDA
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COVER INTERVIEW cont. from page 13
Our core business development will continue, and we will also put more emphasis on residential leasing in the newer areas as Dubai grows to develop on the southern side (towards Abu Dhabi). We have enough opportunities in those areas to increase our residential leasing portfolio. That comes from the fact that our current portfolio of around 18,000 units is running at more than 95 per cent occupancy. That’s a very encouraging sign for us that we can continue to tap into the leasing market and aim to double the number of leasing units to over 35,000. Our vision is to help realise the Dubai’s vision for 2021 by, adding the two or three verticals in the real estate that I have mentioned. We’re also continuing to enhance our existing projects with new facilities and attractions. Last year we completed a project with great feedback: The Boardwalk at Palm Jumeirah. This stretches the entire 11km length of the crescent and is a magnet for residents and tourist on the island. We’re also making our developments cyclefriendly, with 105km of bike tracks that will eventually link to the larger cycle grid being planned by the Dubai Government. What do Nakheel and Dubai need to do to keep investors interested in the long term? The real estate sector has the onus to continue developing. There is an impetus to continue to generate more revenue by creating new developments that enhance people’s experience of Dubai’s sun, sand and attractions. Dubai always endeavours to improve on every aspect of community and as a country. If you look at any kind of statistics, whether it’s the number of tourists, busiest airport, tallest building, Dubai is always in the top 10, if not the top five. I think there is a conscious effort to make sure we’re not just focused on creating landmarks, but creating experiences. Dubai has created a very congenial, friendly environment whether it’s residential, business or tourism. Across any spectrum, you will find best in class available in Dubai. For investors this is all good, but there is also the economic return—“What’s in it for
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Having gone through the learning phase, the strategy was to continue and to create iconic projects, and that prompted us to do two things—first, to look at our real estate strategy in terms of sectors and second, to lay the foundation of a long term sustainable business.
– Sanjay Manchanda, Nakheel CEO
me?”, as they say. Over the years it’s been proven, through growth in Dubai ports, FDI inflows, businesses starting up, that Dubai is still on the up, and that investors are seeing a return on the investments they are making. One cannot overlook Dubai’s strongest selling points. It is very strategically located. There is world-class infrastructure. Businesses can have global market reach from here. There is resolve by the government to not just rest of their past laurels but to step up and find solutions to any issue that arises. Tell me about PALM 360. Statistics show that over the past 1214 years The Palm Jumeirah has given investors the highest return on the dollar— more than any other area in Dubai. I think the beauty of the Palm Jumeirah cannot be taken away at all. It’s locked-in demand. We came up with PALM 360 to provide another opportunity for those who wish to be a part of this community. It’s a twin tower project, around 220 metres tall. It’s a mixed-use development, with two luxury boutique hotels with around 110 rooms, along with 12 luxury penthouses including six duplex penthouses, each with all the amenities you can think of—their own infinity pool, sauna, gym
and home theatres. Its location is very spectacular, right on the western crescent with a clear view of the Arabian Gulf. Because of its height, it will also have the most spectacular city views and the structure is such that you will have floorto-ceiling glass to take advantage of those views. This is why it’s called PALM 360: it offers unmatched, 360 degree views of the sea and city. Another key feature is an infinity pool connecting the two towers at the 35th floor. At 155 metres long, it’s about the size of a football pitch. We also want to bring some well-known brands into the hospitality side of things at PALM 360, and we are talking to potential partners now. PALM 360 will undoubtedly attract niche investors, and will be highly welcomed on The Palm. Could you tell me about Palm Tower and Nakheel Mall as well? These are currently under construction. Nakheel Mall has a very captive audience of hotel guests—about 50,000 people— and the islands 30,000 residents, as well as the wider Dubai community. Plus, given the fact that it has unique features, it will create the ambiance that is required for the tourists. It is connected to the
SANJAY MANCHANDA
public transportation system through The Palm Monorail. The rooftop features a panoramic view of Palm Jumeirah and the Dubai skyline. The Palm Tower, which is directly connected to the mall, is 52 storeys high, with a rooftop infinity pool and viewing deck above that. The first 18 floors will be a hotel with 289 rooms managed by St. Regis, with about 500 residential apartments above that. Launched successfully in 2014, The Palm Tower offers an unrivalled experience for living and tourism. What do individual investors prioritise most when looking at an investment with you? The first thing that comes to mind is location. Second, they look at the developer and thirdly they probably look at the features—what is on the offer, how popular it is, how much value it has been holding, etc. Palm Jumeirah is still ranked number one in the mind of HNWIs, but there’s a strong interest in Jumeirah Islands as well, as it’s a family-oriented, niche community. In the high to mid-market Jumeirah Park is also in demand. We believe that amongst these three or four projects there is a lot of interest from HNWIs
from a personal use perspective. From a purely investment perspective, then both Discovery Garden and International City have always given the highest returns in the residential community in terms of rental yields, as found by a number of third party research companies and consultants. As these areas connect more to public transportation, there is a lot more value growth to come. As one of the leading NRI businessmen in the region, how do you see your place in the NRI community and what words of wisdom do you have for your fellow countrymen? I’m very fortunate. I would say that it’s more an accolade for the leadership of this place to have them place their trust and confidence in me to give me an opportunity here in my existing position. I think it has been very well received in the NRI community. A lot of people perhaps look up to me for inspiration. I was nobody, and in a short span of time, with all things being done in the manner they have, you see yourself in the public eye and you become a public figure. I think it’s very gratifying to see yourself amongst the community and as a member of this community.
I have maintained that I came up through doing only one thing—hard work. There is no shortcut. If you want to achieve your career objectives, you have to work for it. It’s not going to fall in your lap like fruit from a tree. You have to earn your respect and position in society. Integrating is very important, as is keeping the checks and balances in place to make sure you do what you do with clear intention and focus. What do you consider your greatest professional accomplishment? Undoubtedly, to be hoisted into this position. In my previous professional life, I had reached the top of my career as an advisory partner at PwC, and usually a switch like this doesn’t happen—it’s more often seen in the finance side of things. But for me this was a welcome challenge. I thank my Chairman and the Board of Directors their trust and confidence. I also thank all my of my colleagues who have allowed me to travel this far. It’s never just one person; it’s the team around you and it’s my responsibility as a leader to keep them together and make sure we achieve our objectives. Without teamwork, we would not achieve what we do.
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UAE remains a bright spot for private banking IN THE EMIRATES, THE SECTOR REMAINS STRONG, WRITES BRUNO DAHER, CEO OF CREDIT SUISSE MIDDLE EAST AND NORTH AFRICA 16
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PHOTO:SHUTTERSTOCK/WHITE LACE PHOTO
PRIVATE BANKING
THE UAE CONTINUES TO BE A STRONGHOLD FOR THE GLOBAL PRIVATE BANKING COMMUNITY.
L
ast year was marked with a series of unexpected events— from Britain’s vote for Brexit, to the results of the US elections and the growth of populist movements across Europe. While all of these events projected dissatisfaction with the status
quo, they had a seismic impact on global markets. Further into 2017, the global markets are again embroiled in a state of ambiguity and complexity—with the ongoing Brexit negotiations and several elections in Europe this year. In addition, uncertainty on Donald Trump’s agenda
and his ability to fully enact his policies are leading investors to tune into a ‘wait and see’ mode. It is only fair to say that volatility and uncertainty are the main characteristics that define today’s global economies. Taking a closer look at regional economies, the challenges have been mainly centred on the impact of low oil prices and structural reforms—which is now viewed as the ‘new normal’. On a more positive note, the GCC countries continue to exhibit a robust growth trajectory in non-oil sectors— especially with these countries pursuing strategies to rebalance growth towards more productive public spending and strengthening non-oil fiscal balances to preserve wealth for future generations. Among GCC nations, the UAE has remained relatively resilient in the face of low oil prices as it has navigated this challenge better than its neighbours, aided by economic diversity and high competitiveness. The country’s economy is expected to gather strength this year, with preparations for the Dubai 2020 World Expo giving domestic demand a much needed boost. The recovery in oil prices should also give a corresponding impetus to the UAE economy. According to IMF’s latest forecast, UAE’s economic growth will accelerate to 4.4 per cent in 2018, with the global recovery seen gathering momentum in 2017. WEALTH ACCUMULATION IN THE REGION The Middle East is a growth region for wealth creation with wealth increasing by 162 per cent since 2000, well above the global average of 119 per cent, as per the Credit Suisse Global Wealth report. Wealth per adult has also increased by 67 per cent, in line with the global average. One other example that highlights the region’s wealth potential is the number of millionaires, which is expected to ...cont. overleaf
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PRIVATE BANKING
These examples clearly show that, despite a modest economic growth forecast, there is an impressive and rapid upward trajectory when it comes to wealth creation in the region. Supported by this steady growth in wealth, the private banking business is also witnessing a boom in the region, particularly in the UAE. One of the key reasons for the strong growth in wealth is that the UAE has a highly developed infrastructure, a world-class regulatory framework, as well as a stable pool of banking talent. The fact that the UAE is the commercial and business centre in the Middle East naturally solidifies its position as the regional hub for private banking activities as well. Furthermore, the UAE’s strategic location combined with its political and economic stability makes it a very attractive market for high net worth individuals not only based in the region but also across the globe. Another emerging trend working in UAE’s favour is that post-Brexit UK businesses are eyeing Dubai for overseas expansion—which indicates there would be an increasing influx of entrepreneurs looking to set-up shop here over the next few years—this again bodes well for wealth managers in the UAE.
BRUNO DAHER
reach 460,000 by 2021, with Saudi Arabia and the UAE expected to lead this growth. According to a recent study by Boston Consulting Group, private wealth in the UAE is projected to record an annual growth rate (CAGR) of 14.1 per cent and reach almost $1 trillion in 2020. cont. from page 17
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Private wealth held by ultra-highnet-worth households in the UAE is also expected to see a substantial rise of 20 per cent over the next five years. In addition, the UAE has attracted 2,000 more ultra-rich individuals through millionaire migration, clearly outpacing other GCC countries in this space.
CATERING TO THE CHANGING ATTITUDES OF WEALTHY INDIVIDUALS IN THE UAE The financial crisis of 2008 and the impact of low oil prices highlighted the importance of asset allocation and diversification to regional clients. This is where wealth managers and advisors like Credit Suisse have played a significant role; advising and guiding clients to diversify and effectively manage their risks. However, as the region continues to develop, the needs of regional private banking clients are becoming increasingly varied. Even within the region, clients differ from one country to the next. This poses as a key challenge for wealth advisors.
One of the key reasons for the strong growth in wealth is that the UAE has a highly developed infrastructure, a world-class regulatory framework, as well as a stable pool of banking talent. – Bruno Daher, CEO of Credit Suisse Middle East and North Africa
In recent times, there has been a significant rise in private wealth management advisory or bespoke services in the UAE due to several factors. One reason is the growing private wealth and increasing number of millionaires and entrepreneurs in the UAE. Secondly, given the challenging economic situation, there has been a shift in wealth allocation and the risk appetite of HNWIs who are now adopting a more cautious/low-risk approach. As a result these individuals look to diversify their portfolios and make mature investment choices to optimise risk and return. This shift corresponds to another important factor—the fact that clients in the region display characteristics that are relatively similar to those of emerging markets clients. Regional clients have an entrepreneurial spirit when it comes to doing business, they live in an environment that has strong growth potential and they understand the meaning of risk and return. Therefore, in a period of uncertainty, they seek diversified investment choices and would also like to capitalise on a wide range of opportunities that volatility brings. For instance, we are seeing that the wealth allocation patterns of clients have changed in the last few years. Most clients now have a greater share of their wealth invested into their own business and in cash and deposits rather than a heavy concentration in equities or real estate which was the predominant scenario a few years ago. Also, clients now prefer to keep their assets closer to home, which means that more capital is homebound.
Thirdly, in the current economic environment, HNWIs in the region are more interested in growing their wealth so their needs are not always traditional or capital preservation related. And this is a fundamental trait that differentiates them from clients in more mature markets. With clients in the Middle East being more sophisticated and knowledgeable than before, they are capable of identifying higher growth opportunities in emerging markets. We believe that while the changing needs and attitudes of regional clients create opportunities for wealth managers; it also has its challenges. Financial advisors who have the relevant experience, strong local presence and most importantly, the right specialists to cover both assets and liabilities requirements are in a unique position to meet the sophisticated needs of these clients. AN INTEGRATED APPROACH The Middle East is experiencing an economic trough in the short-term. However, it is clear that strong wealth creation opportunities in the future still exist for the region. The private banking industry in the UAE is also becoming increasingly competitive. The competition exists not only between international private banks but also among local private banks. Both offer different products. However, in today’s dynamic world, wealthy clients have complex financial requirements that are beyond traditional private banking services. They require more support and advice on complex situations and are looking for wealth advisors that can help
them navigate through and take advantage of less favourable economic conditions, whilst offering a strong value proposition that is unique when compared with local players. For instance, a global bank that is able to offer the best of both worlds, including global products as well as customised local solutions. Also, clients in the UAE and the wider region prefer a partner who is able to offer a strong synergy by leveraging collaboration across the different divisions of the bank. Therefore, wealth advisors combining unique strengths and expertise in Private Banking & Wealth Management, including Asset Management services and Investment Banking, are in a strong position to take a long-term holistic view and provide sound advice to clients in relation to the entirety of their wealth, and in the context of their wealth creation and preservation requirements. Looking ahead, the enhanced value proposition of the integrated banking model and the capability of delivering local tailored products will increase competitiveness in capturing the share of wallet of clients’ local wealth. Our aspirations remain to grow our business in the UAE while offering optimal, holistic and multi-faceted solutions that best match the needs of our clients. We are truly focused on building our clients’ wealth and ensuring that the best investment and growth opportunities are available to them even in challenging times. And in this way, we will continue to successfully participate in the dynamic growth opportunities that the UAE and the wider region presents.
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CHINA’S MAINLAND STOCKS ARE GETTING A RETHINK FROM THE MSCI, ACCORDING TO ABERDEEN’S NICK YEO.
A symbolic STEPPING STONE
ABERDEEN ASSET MANAGEMENT HEAD OF CHINESE AND HONG KONG EQUITIES NICK YEO WRITES FOR WEALTH ARABIA ABOUT THE LATEST MSCI DEVELOPMENTS OVER MAINLAND CHINA STOCKS 20
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INVESTMENT
M
ainland China's entry should be a formality since MSCI eased its own admission criteria. But it will be largely symbolic. It will probably lead to around $515 billion of flows into A-shares from passive funds tracking MSCI's Emerging Markets Index. That is nothing when you consider that the market capitalisation of China's onshore exchanges is $7 trillion. The allocation of A-shares in benchmarks will be tiny to begin with and will rise only slowly. Even then, implementation will take a year.
So it will be quite some time before Chinese stocks have a material impact on global equity allocations. By 20 June we will know whether global index operator MSCI has relented finally to allow mainland Chinese stocks entry into its widely tracked regional equity benchmarks. The US firm has resolutely rejected inclusion of A-shares from the world’s second largest economy for the past three years, citing prevailing concerns over the inability to access, trade and cash in stocks freely.
But we detect a marked change in MSCI’s accommodation this year. Far from endorsing Beijing’s efforts to address previous impediments surrounding ownership rights, capital repatriation limits and trading suspensions, the index creator has instead modified its own admission criteria to such a degree that China’s entry now appears a formality. It has swapped the framework by which global investors would access A-shares from schemes restricted by investment quotas to Stock Connect, the bilateral trading loop directly linking the Hong Kong exchange with those of Shanghai and Shenzhen. In one swoop it is side-stepping a number of constraints. Stock Connect has no initial quota requirement; it is open to all investors without need of a licence; and it has no restraints on capital mobility since trading happens in offshore yuan (CNH)—a freely convertible currency not subject to capital controls. In short it ticks the key boxes on access and liquidity. Further, MSCI has included only large-cap companies and excluded duallisted stocks that feature in the MSCI China Index to reduce overlapping exposures. It has also exempted constituents suspended for more than 50 days over the previous 12 months. What it boils down to is just 169 stocks eligible for inclusion, representing five per cent of all listed mainland companies. If approved, A-shares would account for 0.5 per cent of the MSCI Emerging Markets Index—less than half the weighting of last year’s proposal for inclusion. This approach is indicative of MSCI’s enduring caution—similar to their approach when it comes to investing in ...cont. overleaf
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emerging markets. MSCI was unable to incorporate Shenzhen Stock Connect last year as that scheme was still pending, but it is now up and running and has improved A-share investibility. If China meets the index provider’s approval, the $5-$15 billion likely to flow into A-shares from funds passively tracking MSCI’s Emerging Markets Index will be marginal in the context of China’s onshore bourses’ combined market capitalisation of almost $7 trillion. This is why MSCI’s likely action is largely symbolic. Besides, implementation will not happen until June next year. From then on we could expect the weighting of A-shares to go up only slowly, in line with broadscale improvements in accessibility and liquidity. So it might be years before Chinese stocks have a material impact on global equity allocations. Stock Connect is far from perfect. It takes several hours between buying and
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receiving shares. For some investors this poses unpalatable credit and counterparty risk. Stock Connect is also subject to daily trading limits, which run contrary to freedom of access. Worse, China has the highest number of voluntary trading suspensions worldwide, even after a regulatory drive in May last year to curtail the practise. Pre-approval requirements on certain financial products and a lack of hedging tools highlight further areas for improvement. But so limited is the scope of MSCI’s proposed framework that we see little reason for institutional investors not to welcome China in. At the very least index-driven money should offer a foil to the retail speculation behind most A-share trading. The hope is index inclusion begins to foster a longer-term, institutional mind-set. It would raise currently miniscule foreign participation, exposing
local managements to global standards of accountability. Positive shareholder activism can propel improvements in profitability, and profit-sharing, to everyone’s benefit. That said, MSCI’s decision has no practical application for us as a stockpicker. We invest in companies based on strict criteria such as sustainable earnings and progressive capital management. An influx of indextracking capital will not answer to such considerations of quality. In summary, MSCI inclusion provides a stepping stone in Beijing’s drive to deregulate and liberalise its capital account, albeit one whose newsworthiness may be exaggerated. What will not receive much attention are the markets that stand to lose as the weight of money in emerging markets inexorably shifts over time. When it comes to sustained domestic capital market reforms, most are failing.
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INVESTMENT
Malta’s value proposition H
ome to a population of just over 421,000, the Mediterranean island of Malta has stood out in Europe with an economy outperforming many of its Euro zone brethren. The country was rated as the 16th out of 138 countries for the soundness of its banking sector in the World Economic Forum’s The Global Competitiveness Report 2016-2017. Malta has rapidly diversified its traditionally tourism dominated economy with key movements into the services sector. Indeed services now account for some 75 per cent of Malta’s GDP, with industry accounting for 23 per cent and agriculture for two per cent. Furthermore, throughout the financial crisis, Malta emerged as a relative safe haven despite turmoil in financial markets globally. The financial services sector is well regulated under Euro zone rules, with the banking infrastructure supporting all levels of wealth from ultrahigh net worth individuals requiring private banking services, to the mass affluent. Malta hosts banking and finance institutions form countries around the world including Australia, Austria, Bahrain, Belgium, Greece, Portugal, Turkey, Cyprus, Finland, Italy, Kuwait, Switzerland and the UK. Malta has had a traditionally quite conservative approach to banking which has supported the sector’s stability.
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This is reflected in the lack of systemic shocks the sector underwent during the financial crisis. Bank funding in the country relies on retail deposits rather than wholesale borrowing and funding, with banks maintaining substantial liquidity and adequate capital ratios based on prudent lending practices. The island nation has also emerged as a hub for wealth management and family offices from around the world, including a growing Middle Eastern presence. Swiss-style private wealth management are offered by specialist firms such as Mediterranean Bank, whilst foreign banks, such as Akbank T.A.A., Sparkasse and BAWAG provide management solutions. Professional financial advice and products tailored to high net worth clients can a lso be found amongst the retail banks in the country, such as HSBC or Bank of Valletta. Malta has a history of fund management and investment banking, with a growing fund inventory of more than 600 funds licenced by the Malta Financial Services Authority (MFSA). Banks have had an involvement in a variety of different investment vehicles, ranging from mutual funds to real estate funds and pension funds. Investors who are looking at physical assets may also find value in Malta. The island has already found itself as a
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A GROWING SPOT FOR INVESTMENT, MALTA OFFERS INTRIGUING OPPORTUNITIES TO THOSE THAT LOOK
stopping point for superyachts crossing the Mediterranean, and as such, the country has begun offering incentives for high net worth individuals looking at private yacht and aircraft solutions. Extensive VAT incentives are offered for the registration of yachts under the country’s flag, coupled with strong existing marina infrastructure provide motivation to use the island as a base for a yacht. Likewise with aircraft, Malta has developed legislation to make the registration of private jets easier. The island also has a strong reputation in the wealth preservation space through trusts and foundations and those looking
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YACHTS YACHTS LITTER LITTER THE THE BAY BAY NEAR NEARVALLETTA, VALLETTA, THE THE CAPITAL CAPITAL OF OF MALTA MALTA
to achieve yield through investment funds. Malta is one of the few EU countries in which both trusts and foundations can be set up. This allows for the creation of customised solutions that can fit diverse personal and business needs—from succession planning to estate management. Legislation in this field has recently been updated which has brought about the introduction of the Private Trust Company (PTC) which offers opportunities to high net worth individuals looking for a tailormade trust solution. Supporting the growing services sector is the sound legal framework upon which it operates. English is an official language,
alongside Maltese, with corporate law heavily influenced by British models. This can provide further comfort to those looking to invest in the island nation as the local laws are published in both English and Maltese, making negotiating the legal landscape a relatively simple affair. The fiscal framework of the country is both approved by the OECD and the EU, with Malta also sporting some 70 double taxation treaties. Finally, as a destination for investment and business, the lifestyle on the island might be seen as a positive in its own right. Malta is a somewhat more relaxing destination than most other major
European financial centres in its secluded Mediterranean location. The island features abundant beaches with beautiful scenery to match. Take a direct flight via Emirates!
Finance Malta
Finance Malta is a non-profit public-private foundation that was set up to promote Malta’s Business & Financial Centre, both within, as well as outside Malta. The organisation aims to bring together the resources of both the finance industry and the government to help ensure Malta can maintain an efficient and modern legal, regulatory and fiscal framework for the financial services sector to continue to prosper and grow.
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INVESTMENT
REITs provide income and security for UAE investors INVESTORS ARE INCREASING LOOKING FOR WAYS TO GAIN EXPOSURE TO THE REAL ESTATE AND CONSTRUCTION SECTORS WITHOUT LOCKING THEIR PORTFOLIOS INTO PROPERTY. MOHAMMED AL HASHEMI, EXECUTIVE DIRECTOR OF ASSET MANAGEMENT AT INVEST AD, DISCUSSES HOW REAL ESTATE INVESTMENT TRUSTS (REITS) PROVIDE A TRANSPARENT, LIQUID, AND TAX-EFFICIENT SOLUTION FOR REAL ESTATE INVESTORS.
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eal Estate Investment Trusts (REITs) are a sub-set of traditional property funds that are viewed as a less risky, more liquid and diversified way to benefit from real estate growth potential. The principal objective of a REIT is to provide investors with a stable source of income throughout the property cycle. Income is generated primarily from rent received from the REIT property portfolio, in addition to realised gains from the sale of properties. The first REITs were launched in 1960 in the United States as a result of supportive legislation. Since then, REITs have gained recognition globally as an alternative investment class, seen as especially attractive against bonds, which are directly sensitive to
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interest-rate risks. Globally, the market capitalisation for REITs is now over $1 trillion.
WHAT SETS REITS APART
Compared to property funds, REITs typically distribute 80 per cent of annual income to unit holders as dividends, with little or no tax requirements, and generally invest a minimal percentage of total assets in properties under development. Like property funds, REITs can have their units listed and traded on recognised exchanges, creating more liquid exposure to property than traditional direct real estate assets. ...cont. overleaf
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REITS MAY MAY OFFER OFFER THE THE MOST MOST SENSIBLE SENSIBLE REAL REAL REITS ESTATE SOLUTION SOLUTION ON ON THE THE MARKET. MARKET. ESTATE
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THE DUBAI HOUSING MARKET STILL HAS MANY OPPORTUNITIES FOR INVESTMENT.
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INTRODUCING REITS TO UAE
Property development has always been a core driver of the UAE economy. Over the past 15 years, both the primary and secondary property market have grown substantially, with direct property ownership remaining the predominant route for investors. Despite this, REITs did not gain traction in GCC capital markets for many years due to a lack of investor awareness of the asset class. GCC investors were generally less inclined towards the tax advantages of investing in REITs due to the region’s taxfree environment. Meanwhile, the historic lack of local regulations, and limitations on foreign ownership of real estate have inhibited growth opportunities for the trusts. Regulators in the UAE, Kuwait, and Bahrain made advances in introducing the model, but the 2008 financial crisis, which caused property prices to fall by
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more than 50 per cent, caused regulators in other jurisdictions to roll back their plans. More recently, ADGM in Abu Dhabi and the CMA in Saudi Arabia have developed and issued specific legislations governing REITs. While the majority of REITs in the GCC region are private, the public listing of a few vehicles over the past three years has begun to raise awareness among GCC investors.
REIT ADVANTAGES
REIT’s provide investors with less risky, more liquid and diversified exposure to residential and commercial real estate growth potential, in comparison to direct investment in incomegenerating property, which is the historically referred route for UAE investors. Direct property ownership carries with it the burden of substantial oversight; owning and managing a building requires property
maintenance, tenant and lease management, optimisation of the leased space, and building usage enhancement. How do REITs compare to other income-generating assets? Investors looking for income can traditionally choose from three asset classes; fixed income, dividend-paying equities, and real estate. The returns and risks associated with each of these vary widely. A REIT provides a steady and relatively predictable income stream, at a return almost twice that of an investment grade bond. In relative terms, bonds are more liquid assets, but REITs provide optimal exposure for investors and corporates seeking to meet recurring payments or liabilities, such as insurance companies. Ultimately, both asset classes provide a diversified means of producing income and are complementary yet non-correlated asset classes.
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Applicable for residents of UAE | Qatar | Kuwait | Bahrain | Oman | Jordan | Lebanon | Egypt This Card is issued by AMEX (Middle East) B.S.C. (c) pursuant to a license from American Express. American Express is a registered trademark of American Express. AMEX (Middle East) B.S.C. (c) – Emirates is regulated and licensed by the Central Bank of the UAE. AMEX (Middle East) B.S.C. (c) is regulated and licensed by the Central Bank of Bahrain as a Financing Company.
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Preserving wealth through second citizenship
VERONICA COTDEMIEY, CEO OF CITIZENSHIP INVEST, WRITES FOR WEALTH ARABIA ABOUT ONE OF THE KEY ISSUES OF GLOBAL HNWIS TODAY
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btaining a second citizenship has become a sought-after investment by wealthy individuals around the world.
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High net worth families and individuals are resorting to their advisors to determine how to best protect their assets and manage generational wealth, and
citizenship programmes have increasingly become part of their valuable advice. Holding a second nationality allows a better preservation of wealth, presenting
INVESTMENT
from certain countries with high tax rates as to shift their tax liabilities to the country of their second citizenship. Choosing to be liable for Cyprus’ tax policy provides the advantages of a better personal tax plan that does not include tax on income, wealth, gift, inheritance, or capital gains tax if non-resident. For example a Cyprus tax resident pays zero taxes on the profit from the sale of securities and with the implementation of the non-domicile principle in Cyprus, anyone with a non-Cyprus domicile who elects to be tax resident in the country pays zero taxes on dividend income as well.
BETTER BANKING AND FINANCIAL SERVICE
ANOTHER PASSPORT CAN PROVE HUGELY BENEFICIAL TO HNWIS WHO ORIGINATE FROM CERTAIN COUNTRIES.
amongst other advantages a variety of beneficial tax policies to choose from. How exactly can a high net worth individual protect his wealth through a second citizenship? Some of the most popular ‘fast track citizenship programmes’ are from some of the Caribbean which are considered tax havens, with no wealth, gift, foreign income or inheritance tax. Cyprus, which holds the fastest citizenship programme, which allows applicants to obtain an EU passport in six months, is one of the few European countries with lowest taxation. Wealthy individuals from India, Pakistan, Afghanistan, South Korea, Indonesia, Malaysia, as well as several countries in the Middle
East, seek a Cypriot citizenship given the many benefits it offers. One of these benefits is that tax payers can utilise Double Taxation Agreements to place themselves under Cyprus’ generous tax regime. Here we highlight some of the wealth protection strategies that could be achieved through obtaining a second citizenship.
PERSONAL TAX PLANNING
Effective use of Double Taxation Agreements (DTAs) can reduce your personal tax if not eliminate it entirely. A second citizenship from a country with better tax policies may benefit Individuals
The ability to act fast and freely with money is imperative to everyone. Many nationals around the world face problems of Government-imposed capital controls. In case of an emergency, being able to transfer or use your money internationally is key. Savvy businessmen also understand the impact of interest rates. A second citizenship conveniently allows the person choose from international banks that could be more applicable to individual financial requirements. Also, banks in stable economies that have low debt and are more conservative with customer deposits are considered safer rather than banks in politically disturbed regions.
IMPROVED FIDUCIARY AND TRUST PLANNING
Trusts have been used for decades in succession and estate planning. Smooth and effective inter-generation transfer of assets to family members is essential. For example, with Cypriot citizenship, the passport holder is eligible to use sophisticated wealth structures to protect their current and generational wealth or to separate personal and business assets avoiding any contamination effects. Certain ...cont. overleaf
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INHERITED GENERATIONAL CITIZENSHIP
A second citizenship is today’s concept of wealth preservation, legacy continuity, and freedom of decision making. One of the many advantages of second citizenship programmes is the capability of passing your citizenship on to your descendants. The true benefit of having a European citizenship is the ability to use these benefits for decades to come. Your children and grandchildren, who will also be European citizens by naturalisation will be able to follow in your footsteps and carry on with the family’s business and wealth.
BUSINESS TAX PLANNING & INCREASED BUSINESS OPPORTUNITIES
VERONICA COTDEMIEY, CEO OF CITIZENSHIP INVEST
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countries like the US or Canada do not allow their citizens to open trust accounts. On the contrary, an Indian national can open a trust in India but is required, by law, to state the nationality of the beneficiary, which would make the beneficiary liable for tax in the future. In a scenario, where the beneficiary has a second citizenship from a country with a better tax regime, then the beneficiary has the possibility to claim domicile in the country of his second citizenship and have their wealth structured around more beneficial tax regimes.
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ACCESS TO THE WORLD
In this day and age, the ability for a businessman to move freely is critical. Having a second passport gives the opportunity to grow a business internationally. It facilitates a much easier expansion process in terms of opening offshore companies and bank accounts in various key locations. This opens an array of opportunities while simultaneously conserving your tax liabilities in terms of wealth, transfer and inheritance tax.
Corporate and business owners with plans of starting businesses in Europe, could learn about how being national of a certain country could further their desires. For example Cyprus offers one of the lowest corporate tax rates in Europe and a resident with a Cypriot passport is subject to tax under the Cyprus personal tax regime, which is regarded as one of the most generous tax regimes in Europe. There are special incentives in the country for relocating. For instance, 50 per cent of the salary income is exempted from income tax for the first ten years provided that the annual emoluments are over EUR 100,000. Saying this, you do not necessarily have to start a business in Cyprus. You can benefit from being a non-resident in the country while investing in Cyprus’ lucrative property market. This doesn’t make you liable to immovable property tax which has been abolished this year and allows you to profit from Cyprus’ increasing property prices. A second citizenship enables experiencing the world from a different perspective and living with less restrictions, with less uncertainty. Most importantly, citizenship by investment programmes provide the possibility of passing these valuable benefits onto future generations and truly leave a meaningful legacy.
Second Nationality?
CS Global Partners is an industry-leading legal advisory firm specialising in citizenship by investment and investor immigration solutions. The firm is comprised of an expert global team committed to assisting international businesspersons and their families in achieving increased mobility, security, and protection through second citizenship. Dubai Office: 3504, Burlington Tower, Business Bay, Dubai T: +971 4 226 1704 • M: +971 56 892 9303 • @: dubai@csglobalpartners.com Farsi speakers, please contact: +971 54 3455 833 www.csglobalpartners.com LONDON • ZURICH • HONG KONG • BEIJING • DUBAI • NEW DELHI • LAGOS • WINDHOEK • ST KITTS & NEVIS • SINGAPORE
WEALTH MANAGEMENT
Why your financial planner should be RETIREMENT PLANNING REQUIRES MORE DATA AND LESS HUMAN INVOLVEMENT TO NUDGE CUSTOMERS TO A MORE COMFORTABLE FUTURE, WRITE LUCAS WEATHERILL, CEO & CIO AT ONTRACK RETIREMENT, AND BORIS LIEDTKE, DISTINGUISHED EXECUTIVE FELLOW, INSEAD EMERGING MARKETS INSTITUTE
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n 2015 the Singapore-based bank DBS surveyed 600 local mothers in their 30s about retirement. The results were revealing. Three-quarters had not started planning for their retirement. Only 25 per cent thought they would have sufficient funds to retire on.
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The average Singaporean household, headed by a 45-year-old, spends $3,800 per month. However, 69 per cent believe they would be able to retire on less than $2,200 a month, while 38 per cent believe it would be less than $1,500. It is unlikely that the average person is willing to settle for such a sharp drop in their lifestyle. Based on current spending levels, the reality is that Singaporeans' monthly retirement stipend will need to be closer to $3,300 to maintain their current living standards. Most Singaporeans will draw $550 per month from the Singaporean retirement income scheme for the elderly, the Central Provident Fund (CPF) LIFE. Contrary to popular wisdom, household spending does not decline significantly during retirement. This is often referred to as the retirement income puzzle. According to a 2015 Nielsen survey, six out of 10 Singaporeans only start saving for their retirement once they reach 45. They believe they will just need to double their current savings to retire comfortably with peace of mind.
In China, the social pension is the primary source of retirement income. However, 43 per cent of respondents in a survey conducted by the Society of Actuaries in 2016 believe the government or their company will cut their benefits in the future. With an estimated 329 million Chinese turning 65 by 2050, it is projected there will be a $118 trillion pension deficit.
WHY IS RETIREMENT PLANNING SO DIFFICULT?
For behavioural, judgement and decision-making reasons, planning for an uncertain future is extremely difficult– especially when the trade-offs are known. For example, putting more money into an investment or savings plan is considered a loss in the short term, as it decreases spending power and consumption. The exact future gain is uncertain. What makes retirement so difficult is that it is not only numerically complicated but also inexact. Think of your retirement as a liability (much like
The liability has two key components– both of which are difficult to assess: 1. The longevity of the liability (i.e. the life expectancy of the youngest member of your household) 2. The annual negative cash flow stream (i.e. the kind of lifestyle you want in retirement) The composition of the asset has also two parts: 1. Regular cash flow contributions (forced and unforced savings) 2. The asset mix (including housing and all financial assets) The average 55-year-old male has a life expectancy of 82 but he has a 22 per cent chance of living past 85. If we assume a realistic retirement age of 67, that means, on average, the individual will live 15 years in retirement–but there is a one-fifth chance it could be more than 18 years. Based on our calculations at OnTrack Retirement, adding an extra three years of life reduces the probability of funding the entire retirement from 41 per cent to slightly over one per cent.
REALITY OF THE PROBLEM
By all measures, Singapore is a rich country–the net worth of Singaporeans is around $275,000 per adult. Of that, housing is the dominant asset representing 55 per cent of personal net worth. This is followed by cash at 24 per cent and CPF retirement savings at just under 20 per cent. Retirement savings is a large financial asset for the household, but when we break the data up by gender and age, the numbers become more sobering. The average balance in CPF for a 45-year-old male is $95,000. For a woman of the same
age, it is only $87,500. If we assume they are married, then household retirement assets are around $180,000. At 45, with 22 years to go until retirement, surely you can still save enough, right? Unfortunately data does not support this. At 55, the average male has $98,000 and female has $85,000, bringing the total household retirement assets at around $183,000. However the couple now has only 12 years until retirement. Of these balances, for a household, approximately $87,000 is in cash instruments granting a low return. Only about $94,000 is available for higher risk investment options which will mostly be relied on to grow the asset pool. Most people have not been properly educated about the need to plan for retirement. Fewer than a quarter of Singaporeans have prepared a proper retirement plan with a financial professional. In China, 68 per cent of respondents to the aforementioned study had prepared their retirement plan without help from a financial advisor. Their primary sources of information were family, friends and co-workers. As a result, most portfolios gravitate towards low-risk cash instruments. The often praised CPF limits what people can invest in. As a result, many stick with what they know–their own house and cash. Presently CPF only allows four exchange-traded funds (ETFs) to be used. Among academics, ETFs are typically seen as a cost-effective investment advice.
COST OF ADVICE
People tend to be unprepared for retirement due to a lack of financial planning and associated costs. Good financial advice does not take five minutes. Frequently costs are estimated based on the client’s situation but we find that looking at it from the financial planner's perspective is just as revealing. The average retirement plan takes between two and three hours to
prepare—being conservative we estimate that it could cost the financial planner around $300 per client. Assuming he or she wants to make a profit–and most do—they might need to generate $435 in revenue per client plan. The average 55-year-old male with a CPF balance of approximately $98,000, after allowing for the minimum balance, has about $41,000 to invest. If all that money is invested based on the advisor’s recommendations, that $435 plan represents a total upfront cost to the 55-year-old of over one per cent every time a plan is undertaken. That is just the cost for the advice. Then the client needs to pay the asset manager, custodian, trustee, etc.—roughly another one per cent per year. Add inflation and the investment solution needs to make four per cent per year just to keep up with today’s purchasing power. So, while the typical solution—more investment advice—is well meant, the end result at a macro level is unlikely to be economical for the average client.
IS THERE A BETTER SOLUTION?
As an option, the human touch in retirement planning needs to be reduced with the help of fintech to make it affordable for the average person. A hybrid model blending a mix of technology for most people and faceto-face advice at pivotal moments is an obvious solution. It cuts cost for end users, but still gives them the flexibility to receive face-to-face advice when making important decisions that require a human touch to provide reassurance. At the same time, it enables financial advisors to provide more profitable outcomes for their clients. We will expand on how this can work in practise in the next article. This article is republished courtesy of INSEAD Knowledge (http:// knowledge.insead.edu) Copyright
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an insurance company would). That liability needs to be at least matched (on the asset side) for you to be able to retire in comfort. The difficulty lies in how to model the liability and how to think about the structure of the asset.
STEPHANIE MCMAHON
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HNWI CHAT
The queen of women’s empowerment
WWE’S CHIEF BRAND OFFICER STEPHANIE MCMAHON HAS SPENT HER WHOLE CAREER MOVING WOMEN TO THE FOREFRONT WHILE HELPING GROW HER FAMILY’S BUSINESS
THE FAMILY BUSINESS
It’s never easy when you are starting your own business or working for your family’s business—but nothing in life that’s worthwhile is. Hard work is something that’s been a part of my family’s values and something they’ve instilled in me. While my great-grandfather did start this business, he was primarily a boxing promoter, and he was disowned by his parents because he was the first in his family to graduate college and rather than becoming a doctor or a lawyer, he became a boxing promoter. Then my grandfather took it over and made it boxing and wrestling and my father took it over and turned it in what it is today. The biggest benefit of working in a family business is that we all have the same passion. We all have a passion for what we do, and to achieve our mission, which is to put smiles on people’s faces the world over, whether through our programming or by giving back to the community.
ROLE MODELS
My mom was the CEO of WWE, and so I never thought there was a barrier to entry, and my grandmother was also a working woman in the 1940s, who worked as a budget analyst. I had these very strong female role models. In WWE, we’re leveraging
our actual performers for this message. In media, it’s very important as well. Thank you for featuring WOMENA on the cover of WEALTH Arabia. The more that we can get the message out there about women in business, but also women in sport, the better.
ON INVESTING WEALTH
From an investment standpoint, I do what I do in business—I hire experts. I’m not an expert, and so I hired someone who is. He certainly helps us, and of course we discuss and make the decision as to where our money goes, but I lean very heavily on his expertise.
A FOCUS ON PHILANTHROPY
In terms of our charitable donations, a lot of that is driven by me and what we love. There are a number of different things that happen throughout the year that you want to contribute to whether it’s natural disasters etc., but for me personally I was inspired by a little boy who was eight years old named Connor Michalek who lost his battle to cancer. I became so involved in pediatric cancer research and support that ultimately my husband and I started something called Connor’s Cure. That fund sits in two places—with the V Foundation and the Children’s Hospital of Pittsburgh.
With V Foundation, all of the funds go directly to research. There’s an incredible board there of experts that decide the right people for it to go to, and then the Children’s Hospital of Pittsburgh, some of it is research but most of it goes to patient and family care, whether it’s food vouchers, parking vouchers—things that families do not think of when their children get sick but things they’re going to need—things that help so much. Connor’s Cure is something I’m incredibly passionate about. WWE has four key pillars to giving back—hope, diversity and inclusion and education. Literacy is a huge issue for us. If you look at our hope bucket, we’ve had a partnership with Make a Wish Foundation almost since its inception—over 30 years! Special Olympics and Susan G. Komen— all of these groups I’ve become personally attached to, so that also informs my giving strategy. Giving back is core to who I am as a person, what WWE is to an organisation, and a crucial part of how I distribute my wealth.
WORK-LIFE BALANCE
I think there’s work-life balance but it’s not 50/50. That’s something that my mom taught me a long time ago—it could be 80/20, it could be 90/10. I think that it is important ...cont. overleaf
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STEPHANIE MCMAHON, WWE’S CHIEF BRAND OFFICER
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to have support, whatever form that support might be. I’m very lucky to have some help at home, and more and more dads are getting involved in child care. I was in Brazil and my then five-year old got really sick. She had a high fever and was throwing up and as a mom, my heart was breaking and I wanted to jump on the next flight and see my baby girl. And I talked to my husband [Paul Levesque, known more commonly as the wrestler Triple H], this big tough guy, and he said ‘No it’s ok, I’ve got her. I’m cuddling with her right now.’ He took care of her for as long as she was sick and when I came home from Brazil, I was so excited to see my daughter, and I put her to bed, and she woke up a little bit early and she came in because she wanted someone to cuddle her and I said, ‘Ok baby, I’m right here! mama’s home!’ and she said ‘No, Mama, I want Daddy.’ As a mom that crushed me, but I was so happy for my husband and my
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daughter, and that they had built this relationship, and how beautiful that is. It’s about making that the time that you do have with your family is quality time. I put my phone down in my house—which can drive my husband crazy if he’s trying to reach me when he’s not home! But I make a conscious effort to put my phone down because you can be so distracted because you’ll be physically there but not in the moment, and your kids notice.
BEING A ROLE MODEL
I turned 40 last year, and for my birthday, my girls made this picture and they handwrote around the frame that described me in their eyes. I saw words like ‘leader’ and ‘fearless’, and to know that my daughters see me in that life and that I could possibly be setting that example for them, because those are characteristics and values that I want them to have— was really overwhelming to me. Setting that example is so important and more
women need to set that example and feel confident in setting that example.
THE BEST ADVICE I’VE RECEIVED
One is to listen, as you never know where a great idea is going to come from. Two is to respect everyone, no matter who they are. Everyone is a person, you shake everyone’s hand, you look everyone in the eye, and no one person is better than anyone else, and three, take calculated risks.
WHAT WOMEN NEED
I think that confidence is so important. I know that, sometimes my confidence gets shot and I second guess myself, and you just have to believe in yourself. That really goes for men and women, but I do think women more so than men. Men don’t seem to suffer from a confidence problem, or at least most of them, but women do, and I think that’s really important to be successful in anything that you want to achieve.
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LUXURY TRAVEL
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magine the perfect tropical retreat, where the sea gently kisses your toes and the skies are always clear and sunny.
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At Velaa Private Island, it is all a reality. Accessible through a 45-minute plane ride from Male, Velaa’s stunning scenery
combines unlimited luxury with nature’s unparalleled essence. Just 47 villas and residences ensure that each guest will
The Maldives’ STAND OUT
VELAA PRIVATE ISLAND WRITES EXCLUSIVELY FOR WEALTH ARABIA ABOUT WHAT MAKES THE LUXURY RETREAT A CUT ABOVE THE REST
VELAA'S BEACH POOL HOUSE
have a truly private escape all to themselves. Our natural island offers everything the most discerning traveller will ask for.
For those who like being active, three different ball courts are available. A nine-hole golf course developed by
championship golfer Jose Maria Olazabal is present for those who want a round of the gentleman’s game. ...cont. overleaf
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LUXURY TRAVEL cont. from page 41
A fully equipped watersports centre with jet skis, sea bobs and sailing equipment, offering guests the chance to explore their most adventurous side. For those that desire the most cutting edge of water thrills, the Velaa also offers a new hover-board, water jetpack and fly-board. The centrepiece of it all the Submarine, a private underwater vessel that allows guests to explore the wonders and mysteries of the Noonu Atoll underworld. Other core experiences at Velaa Private Island are the relaxation and wellness programmes. With the only My Blend Spa by Clarins in Asia, Velaa brings the standard of wellness in luxury hotels in Maldives to new heights. The Spa creates a highly personalised programme for each guest, which combines different wellness approaches and therapies to ensure a highly holistic experience. After a day’s worth of activities, guests can indulge themselves in any of Velaa’s restaurants, each carrying its own distinct style and cuisine. Choose between the al fresco ambiance of Athiri, or the gourmet dishes of Aragu. For the most unique dinner in Velaa, guests can head over to Tavaru—a stunning tower that is the tallest in Maldives. There, guests can partake in tasting the island’s large wine collection, hosting some of the most sought after vintages, or indulge in and unique East-Asian menu. Velaa Private Island caters to all of its guests’ needs. For those who want a family holiday, kids will love Velaa Kids Club, designed by the owner’s young daughter herself. For couples who want an escape just for themselves, the Romantic Pool Residence is the perfect abode, accessible only by boat, this spectacular residence has its own spa, beach and pool. Known around the world for its perfect white sands beaches and crystal clear sapphire waters, the Maldives has become a top destination for those that seek a tropical escape. Created from the dream of Jiri Smejc to create a luxurious tropical escape unlike any other, Velaa Private Island stands out among the other resorts in the Maldives. Velaa was established for only the most discerning of guests, with each of its luxury dwellings stylishly appointed and nothing short of spectacular.
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SPA BY CLARINS
BEACH BEACH POOL POOLVILLA VILLA
Nested in the collection of islands that form the Noonu Atoll, Velaa Private Island is gracefully situated facing the majestic Indian Ocean. Owing its name from the generations of sea turtles that flock the island to nest and hatch, Velaa is comprised of 47 intricately designed and furnished villas, houses, and exclusive residences. It also boasts of the highly exclusive Romantic Pool Residence, which is only accessible by boat. Each of these is designed for the guest to receive maximum privacy and comfort, while retaining a sense of extravagance and indulging. The villas are all staffed with a personal butler, ready to accommodate any desire the guest might have in mind. The interiors sport contemporary and traditional designs, interwoven to create a highly unique atmosphere, further enhanced with furnishing from around the world such as
Indonesian flowerpots, Italian marble and wood panelling from Borneo. Jiri Smejc’s passion project, Velaa Private Island represents his vision to create an ultra-luxe haven for those who demand only the finest vacation. With a $200 million investment to create what is essentially his dream destination from scratch, Velaa has emerged as a destination in a category of its own. It hosts an exclusive array of amenities unseen in any other resort in the Maldives such as a snow room, the largest and most extensive wine collection in the region. It also hosts the only My Blend by Clarins spa in Asia, and a kids’ club designed by his own nine-year old daughter. At the core of the Velaa Private Experience lies its privacy, its greatest asset. Designed for only a maximum of 142 guests at one time, Velaa ensures its
BEACH POOL VILLA OUTDOOR DINING AREA
SUNSET DELUXE WATER POOL VILLA BATHROOM
ATHIRI RESTAURANT
guests that no request is too much and that they will feel that the island is their own private paradise. Housed within Velaa are three delectable culinary options, each with their own unique identity. The waterside Aragu hosts Velaa’s most intense and interesting culinary creations. Helmed by experienced and renowned chefs, Aragu pushes the boundaries of fusion cuisine, taking flavours and practises from both the East and West to create a wondrous banquet of flavours and aromas. The 23-metres Tavaru tower hosts the largest and most extensive wine
collection in the Maldives. It’s more casual and laid back approach is suitable for friends who desire a chic yet memorable evening. With Velaa one of only four hotels in the world to partner with the distinguished spa brand My Blend by Clarins, the island is a centre of wellness and health in the Maldives. The spa facilities feature six spa suites nestled over the island’s lagoon, with two suites reserved for couples. Additionally, 10 of the villas on the island include their own private spa suites with the full spa menu on offer. The one-of-a-kind Cloud 9 flotation suite is situated looking outwards towards the sea. To complement its facilities, Velaa also houses professional trainers and instructors. Its guests are able to have personal sessions with a yoga master, or consult with professional gym trainers to better their exercise regime. They can also book a training session at Velaa’s own golf course, designed by two-time Masters Champion Jose Maria Olazabal. In addition to everything else, Velaa Private Island is also equipped with a full array of equipment for various water activities. Its dive centre offers excursions, PADI certification courses, and snorkelling through some of the most breathtaking marine vistas. Guests who enjoy windsurfing, kayaking, sailing, wakeboarding, water-skiing and kite skiing can also take their activities out into the waters of the Indian Ocean. For the more adventurous, the island also offers the crazily fast hover board, the sci-fi jetpack, and the adrenaline inducing fly board. To cap it all off, an exclusive semi-submarine is also available
OCEAN POOL HOUSE
for use, which allows guests to dive deep into the Indian Ocean and see for themselves the beautiful Noonu Atoll. To cap off the once in a lifetime experience, guests can arrange dolphin watching or private boat excursions aboard a luxury Prestige yacht or traditional “Bahteli” boat. Our excursions team can also arrange fishing expeditions out in the Indian Ocean. Velaa has also prepared a hatchery for the turtles, to which Velaa owns its name. With lots of space and a conversation plan, our local guests are always welcome here on our island. Situated in the Noonu Atoll, Velaa Private Island is a 45-minute seaplane flight north of the Maldivian capital of Malé.
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MOTORING
A SUPERIOR
SEQUEL
Rebuilt from the ground up, the new Porsche Panamera improves on every aspect of its predecessor, fulfilling the promise of the model to nearly its fullest degree
W
hen a new model of a car comes out, you’re never quite sure what you’re going to get. Sometimes, you get incremental updates,
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bringing largely the same car a few years into the future. Sometimes, you get a complete and fundamental reevaluation of how to make a car that fulfils the
original vision you had for it. Doing that isn’t easy. Luckily, Porsche doesn’t try to make things easy on themselves. Although each iteration of the 911 is more about
PHOTO: FLORANTE MAGSAKAY THE PORSCHE PANAMERA 4S DROVE BEAUTIFULLY ALONG THE DESERT ROADS OF DUBAI'S AL QUDRA.
updating while maintaining the same level of excellence through each technological advancement, the original Panamera came out of the gate a big-seller that had flaws, and needed a rethink. The second generation Porsche Panamera is everything that the original Panamera, launched in 2009, should have been. It’s a four-door sports car—a luxury
sedan with the spirit of a 911—a true hybrid. The design has changed just enough to turn the car into a beauty, differentiated from other models on the road. Everything about the car is designed better, and performs better—moving it from a very good highend car to a superlative one. Much has been updated. The engines and transmission were re-engineered,
the chassis has added rear axle steering, three-chamber air suspension, an electromechanical roll stabilisation system called Porsche Dynamic Chassis Control Support with Porsche Toque Vectoring Plus and 4D Chassis Control. There are now three models with three new twinturbo engines. The Panamera 4S has 2.9-litre V6 petrol engine with 324 kW ...cont. overleaf
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THE DISPLAY AND ON-BOARD COMPUTER HAVE BEEN COMPLETELY REDESIGNED TO BE MORE INTUITIVE.
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MOTORING
THE INTERIOR IS ROOMIER THAN THE PREVIOUS PANAMERA, A WELCOME ADDITION FOR MANY PORSCHE ENTHUSIASTS.
cont. from page 45
(440 hp), The Panamera Turbo, a 4.0-litre V8 petrol engine with 404 kW (550 hp), and the Panamera 4S Diesel, a 4.0-litre V8 diesel engine with 310 kW (422 hp). Each model also gets the Porsche dual-clutch transmission (PDK) with eight speeds and all-wheel drive. The engines are not just more powerful—they’re also more efficient, improving fuel economy and reducing emissions. Once you sit in the driver’s seat, before you even turn on the car, you notice a change. Some drivers complained about the original Panamera’s electronics, display and control. Some said that there were too many buttons, too many features, and it was hard to figure out.
This time around, they streamlined the Porsche Advanced Cockpit and onboard computer. From the moment we got into the car, we never stumbled through any of the car’s features for a moment— everything was completely intuitive. So is it a sports car or a luxury sedan? Is it made for cruising around town, or taking on to the track? While we did not have the chance to push the car to its full potential, here’s one fact for you: it hit a new lap record for a four-door car of seven minutes 38 seconds on the legendary Nürburgring-Nordschleife circuit. When the sports modes are not turned on, it is still far more responsive than most luxury sedans, while
maintaining the immersive, smooth driving experience that the best models in that class can. On your average day, you’ll drive in perfect comfort. But like Clark Kent, you’ll walk around with your glasses on knowing it would just take the flick of a few buttons to become Superman. In terms of safety, the new systems include Night Vision Assist. It utilises a thermal imaging camera to detect people and large animals and displays a colour highlighted warning indicator in the cockpit. If the optional new LED matrix headlights with 84 image points are selected, people beyond the visual range of the dipped beam headlight are also illuminated briefly if they ...cont. overleaf
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MOTORING
48
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PHOTO: FLORANTE MAGSAKAY
cont. from page 47
are in the computed driving corridor, allowing the driver to react even faster. The model has also added Porsche InnoDrive including adaptive cruise control. Based on three-dimensional, high-resolution navigation data, it computes and activates the optimal acceleration and deceleration rates for the next three kilometres—as well as gear selections and coasting phases. In doing so, this electronic co-pilot automatically takes bends, inclines and speed limits into account. Other vehicles and current speed limits are detected by the radar and video sensors and incorporated into the control algorithms. Another complaint that some drivers had about the original is the lack of space inside the car. While the new model has only grown six millimetres in width, much has changed The new Panamera is 5,049 millimetres long (gain of 34 mm), 1,937 millimetres wide (six mm wider) and 1,423 millimetres high (five mm taller). These dimensions house a superior overall package. Four people can travel in a relaxed manner, and the rear seating area offers sufficient space for use as a chauffeured saloon. We took out the Panamera 4S in Jet Black Metallic, but, in a region that loves customisation, there is plenty of room to make this car your own. Porsche offers a very large range of combinations of twelve body colours, ten interior colour and leather schemes, a wide variety of wheels and optional equipment. In parallel to the features programme, which can be called up via the vehicle configurator, the Panamera can be tailored by the personalisation options of ‘Porsche Exclusive’ to satisfy very personal tastes. Starting at AED 483,700, the Panamera may be the best in its price range. If you made up your mind on the model after its first iteration, go take a test drive of the update. Trust us, you’ll feel the difference.
THE EXTERIOR OF THE CAR HAS BEEN COMPLETELY REDESIGNED, GIVING THE CAR A MUCH IMPROVED LOOK FROM THE PREVIOUS ITERATION.
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HNWI CHAT
Sitting down with an Emirati filmmaker/entrepreneur MUSTAFA ABBAS, ACCLAIMED WRITER/DIRECTOR AND OWNER OF CHIVALRY: GENTLEMEN’S SALON,TELLS WEALTH ARABIA A FEW OF HIS FAVOURITE THINGS What's your suit of choice? Hugo Boss. Which car do you drive most? Mercedes-Benz SL Roadster. Which watch most often finds your wrist? Bentley by Breitling. What’s your favorite travel destination? London. Which restaurant do you love most? Wherever my best friends are. What's your personal life philosophy? A man can have bad taste in clothes or music or food. But his choice of woman will say everything about him. What are your hobbies outside of work? It's crucial for me to blur the line between work and play. What's your proudest memory? I would say in 2014 when I was invited by Dubai Customs as the guest of honour and awarded for my work as an Emirati filmmaker. What purchase do you most regret? Anything that won't be used, regardless of the cost. You have to spend $20 million on something frivolous tomorrow. What do you spend it on? I don't do frivolous spending, but since you insist, I would probably invest it anonymously on a really bad movie that would make a lot of money to have a frivolous return. Who's the most famous person in your phone book? I can't say. Who would play you in a movie of your life, and why? I'll get back to you on this when and if I reach 80.
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MUSTAFA ABBAS
Rated ‘A-’ by Fitch
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