In the first of a two-part feature, this article talks to banks and investment firms working in Africa.

In a time when the majority of the developed and emerging world is banked, and wealth management services are being challenged by increasing competition and complicated regulation, private banks and wealth managers are looking to new markets for that all-alluring wealth potential. In this article, two firms explain why Africa is quickly becoming the new frontier for wealth managers to watch and more importantly, what it takes to do successful business on the continent. (To see a recent editorial article about Africa and wealth management, click here.) The second part of this feature can now be viewed here.

Africa is quickly becoming a place to watch in the wealth market, as economic growth continues to prosper and financial services firms emerge across the continent. Since 2000 alone, countries like Nigeria, Zambia, Namibia, Angola and Ethiopia have seen an explosive growth in millionaires as wealth per capita has tripled and even quadrupled in some instances. In this year’s annual World Wealth Report survey by RBC Wealth Management and Capgemini, Africa had a total high net worth ($1 million-plus investable assets) of 140,000 with total wealth of $1.3 trillion. Perhaps more significantly, its growth rate in the number of such millionaires – 9.9 per cent – was faster than the global growth pace of 9.2 per cent.

These developments have not gone unnoticed by the wealth management industry. Major players like Standard Bank, Barclays and UBS are moving quickly as they launch new offices in countries such as Angola, Uganda and Nigeria after realising the growth potential. In addition, African private banks such as South Africa-based Investec and Rand Merchant Bank are aggressively pushing into other African markets. And this doesn’t even include the smaller, independent firms which are slowly setting up shop across the continent.

One such IFA is Aston Wealth Management, a Switzerland-registered full-service private client firm that works across frontier markets in Africa and Asia. The majority of its business, a cool 60 per cent, is conducted out of Nigeria, where the firm has established a strong repertoire with local millionaires as well as expatriates. In addition the firm serves clients in Rwanda, Sierra Leone, Liberia, Ghana, Egypt, Azerbaijan, Shanghai and South Korea.

“We try to focus on the emerging markets, rather than where the mainstream companies would go. It is very much where there is a perceived compliance risk on the one hand but the reality being that our clients are a UK passport holder, but happen to be in Nigeria working for BP,” chief operating officer Jay Goss told WealthBriefing when this publication recently met him and founding partner, James Bennett, who also functions as the managing director of Aston.

Discretion above all
In markets such as these, firm’s are challenged by the inability to advertise, because it creates a risk for their staff. As such, Aston takes in clients by referral only, by networking and through the longevity gained by being in the African countries for a longer period of time. The majority of its clients, 80 per cent, are expats while the remaining 20 per cent, are high net worth locals. Bennett and Goss both admit to wanting a larger majority of local clients, but cite trust issues as a key challenge for anyone wanting to do business in Africa.

“It is just the nature of life in Africa, unfortunately. They like to keep information very secure before they give it to you, because naturally, if the nature of this information is known in the local environment it puts them at risk. Privacy is what counts above anything else for African high net worth individuals,” Bennett said.

As such, the firm reiterates that the Swiss regulation was not a random choice, but rather, a necessary one in order to put clients at ease that this particular firm is keeping their money and details, safe.

“Discretion is key. They have to be able to trust you, they want to able to see that you’re a transparent company, transparent fees, transparent operations, they want to be able to see exactly who they’re talking to. Hence the Swiss regulation - because it gives everyone that nice, warm, fuzzy feeling,” added Bennett.

Another firm - in this case, the eighth biggest private bank on the continent with 50.000 Africa-based employees managing about $12 billion in assets - Standard Bank, agreed with this view.

“Our African clients are very discerning and just like any HNW client they expect good service, good products, experienced advisors, fair pricing and advisors and organisations who can provide solutions and not just products. Trust is a major factor and that is linked to the reliability and soundness of the financial institution. Given issues with travel and security, our clients appreciate seeing their advisors face-to-face in their local jurisdiction rather than just dealing with people over the phone,” said Deon de Klerk, head of private clients – international at Standard Bank.

In its interview with WealthBriefing the bank revealed that Africa is not only a major part of its operations, but in fact, the firm’s exclusive focus in its forward-looking strategy. Standard Bank, which boasts a footprint across 19 African locations, has recently opened an office in the Ivory Coast, in addition to its main hubs in Nigeria, Kenya and South Africa, and new presences in emerging countries such as Angola and Mozambique. Although data is scarce, the firm estimates that there are some 45,000 high net worth individuals in South Africa, around 10,000 in East Africa and anything between 15,000 and 90,000 in West Africa.

Local networking is key
This leaves an enormous potential for wealth managers, should they be able to tap in to the new African wealth. But that is easier said than done, said James Bennett of Aston Wealth Management.

“You have to be tenacious, spend a lot of time there. It is very linked in - clients want to see you there, and especially the high net worth families want to know that you’re friends with their families and friends. Despite what we think in the Western world, Africa is divided along tribal lines and that is especially reflected in the microcosms you see in Lagos. So if you are connected to one family, you will not get in with another family. You have to be a bit of a politician to work out how to play the game down there,” Bennett said.

De Klerk said by arguing that “we do not see a materially different product need from clients, but what differs is the culture and time it takes to build relationships and trust - that is why we believe it is important to have a significant permanent footprint on the ground in these countries. HNW individuals demand bespoke/customized solutions that recognize their unique needs, and that means also understanding individual countries and not seeing Africa as one whole”.

Individual services
In this respect, wealthy individuals based in Africa have a broad array of needs that wealth managers must incorporate in to their service. As such, leaving the “one client - one revenue stream” approach behind, is essential, explains Goss.

“With our clients living in these countries they have all kinds of problems. Whether it is owning an offshore bank account, conducting foreign exchange transactions, organising health insurance or creating an investment plan, we try and provide that complete service for them. That is how we’ve really grown the business, because we help them set up a new bank account and six months down the line they want to do investments too,” says Goss.

Another key requirement from clients is wealth preservation and the diversification of risk, whether that be currency or country risk, said de Klerk.

“We have also found that being able to facilitate the use of offshore assets as security for financing local products is a key requirement. But for this market an excellent level of service is also critical, and an understanding of each country’s different cultures rather than assuming Africa is one homogenous whole,” said de Klerk, adding that local clients are especially focused on high-yielding investment products, which have the ability to mirror high local growth rates, with the most desired asset classes being international and especially, domestic, energy, mining and property.

To this end, a clear characteristic of African private clients has begun to emerge. Aside from expatriates, the majority are self-made entrepreneurs who have built successful businesses operating in their home countries and across borders. Obvious money making ventures include oil, gas and resources, but in key locations such as Nigeria, a growing group of tech millionaires is emerging as online companies providing for the service industries and more notably, banking innovations, are gaining serious traction in a market where the majority of the public is un-banked.

Standard Bank typically takes on high net worth clients with a minimum of $1 million in investable assets, which are serviced by so-called relationship managers offering a broad range of wealth management services. The firm said it is crucial to ensure that it retains a diversified book of clients, and as such, it is investing heavily in client offerings across the continent.

“Strategically we need to increase our focus and efforts on the regions and countries outside of our traditional stronghold of South Africa. We have aggressive growth plans to keep up with this emerging wealth in the various African countries,” said de Klerk, adding that certain countries are particularly worth focusing on.