Gulf HNWIs 'show complex behaviour in investing'
Dubai, June 7, 2011
In the Middle East, high net worth individuals (HNWIs) show complex behaviour towards investing and financial decision making, says the latest report in the Barclays Wealth Insights series.
In Saudi Arabia, HNWIs revealed a tendency to purchase illiquid assets to avoid the urge to sell investments when markets fall – 90 per cent of respondents report this. Saudi HNWIs also prefer to use rules and guidelines to help them make better financial decisions, with 96 per cent of respondents saying that they use rules in financial decision making.
On a regional level, Saudi HNWIs are inclined to set financial deadlines (96 per cent) and have a high tendency to delegate financial decisions to others (90 per cent).
In the UAE, there is also a willingness to delegate financial decisions (82 per cent). Respondents in the UAE also favour setting financial deadlines for themselves (96 per cent) and over three quarters (76 per cent) think that buying and selling often will enable them to do well in the financial markets.
In Qatar, the report shows that respondents are by far the most likely to delegate financial decisions (98 per cent). They also favour active portfolio management to achieve good results in the financial markets, and prefer to strategically time markets as opposed to adopting ‘buy and hold’ strategies. 42 per cent of Qatari HNWIs also say that they prefer to deal swiftly with bad investments and protect themselves from the downside.
The report, Risk and Rules: The Role of Control in Financial Decision Making, is based on a global survey of more than 2,000 HNWIs, and provides an in-depth examination of wealthy investors from a behavioural finance perspective.
Despite their wealth, 41 per cent of HNWIs wish they had more self-control over their financial behaviour, the report said.
Interestingly, the report indicates that a need for increased financial discipline is likely to be felt most by those at the wealthiest end of the scale (£10 million+), where 45 per cent of respondents wish they had more self-control. This is despite the report showing that those who want self-control are less likely to be satisfied with their financial situation.
“Many people will be surprised to see that wealthy individuals have a desire for greater financial discipline, however with increased wealth comes an increased complexity of investment decisions. The key thing that investors need to consider is how these decisions might fit in with their overall investment strategy, and importantly, how they fit in with their individual requirements, both financial and emotional,” said Greg Davies, head of Behavioural Finance at Barclays Wealth.
“These results present an interesting challenge for the wealth management industry in the Middle East. Clearly, more needs to be done to help clients understand their financial personality and the benefits of using financial self-control strategies,” added Soha Nashaat, CEO of Barclays Wealth, Mena.-TradeArabia News Service