Africa is home to some of the fastest growing economies in the world and the stats show how moneyed its populations are; high-net-worth individuals, according to the World Wealth Report, grew by 8.1% in Africa last year, with overall affluence increasing by 10.7% – faster than anywhere else in the world.
“We definitely see this trend continuing far beyond 2018. There is an entrepreneurial spirit sweeping the region. As we see technology permeate all areas of the economy, individuals are using this access to start new businesses and expand beyond city centers and geographies. It’s these entrepreneurs who are creating wealth for themselves and their families,” says Duggal.
The wealth needs of Africa’s diverse, growing middle class population, estimated at 300 million people, are intricate, with most countries being emerging economies and wealth being a relatively new notion for many. The African Lions report defines the continent’s middle class as “not in poverty” and having “disposable income and discretion”. The African middle class, says the report, also has a tertiary education that has been completed or is underway; they have money to fall back on in times of emergencies and access to a computer with email and internet.
“This particular growing middle class is looking for means to save for their first home, pay for their children’s education and set money aside for retirement. In many cases, they are the first ones in their families to attain surplus wealth, so often, there is a need to care for their aging parents or other relatives,” notes Duggal.
Saving early and doing so prudentially is key, however there is a need to dispel the sentiment that a considerable amount of cash is required to start investing. Many banks cater for basic savings plans that allow for a fixed amount to be put away each month. Standard Chartered, for example, offers a vehicle where money can be invested in a diversified portfolio of globally-recognised mutual funds. In South Africa, tax-free savings plans that are comprised of unit trusts and other investment vehicles intended to bolster savings are also gaining popularity, with the likes of Allan Gray and Old Mutual offering similarly structured products.
THERE ARE CHALLENGES WHICH NEED TO BE ADDRESSED BUT I WOULD SAY THERE ARE FAR MORE OPPORTUNITIES THAN CHALLENGES.
The best place for one to start creating wealth, Duggal tells us, is to become financially literate and to understand the options available as an investor. “Of course, every investor is unique and their investing is solely dependent on their individual client risk profile and personal preferences.”
On the trends in Africa, Standard Chartered sees real estate as a favored asset class for many with developers turning to mixed-use projects as a means to boost their bottom lines. There is also a marked increase in technology start-ups with the rise of mobile devises – an IDC report shows that the African smartphone market reached an estimated 95.37 million units in 2016; although feature phones still rank number one, homegrown manufacturers such as Mint Mobile in South Africa are coming to the fore with a ‘Made in Africa’ solution to meet local smartphone and tablet demand. And while asset classes invested in Africa’s natural resources and commodities are popular, a portion of their money can also be found in offshore investments.
From the bank’s perspective, diversification across both asset classes and geographies is vital to reducing overall risk, which is unique to the individual with investment power dependent on their existing risk profile as well as personal preference. But generating wealth substantial enough to be able to invest it is not without its challenges, which includes high inflation, illiquid markets, a lack of information and credible research data however, Duggal is confident the pros outweigh the cons.
“We are optimistic that many African economies will continue to grow in the long run amidst certain shocks here and there. There are challenges which need to be addressed but I would say there are far more opportunities than challenges,” he says.
There is a growing consensus that the millennial generation currently has the greatest buying power – projections put this number at between 80-90 million in America alone and thus, millennials are at the core of the majority of industries today. Wealth management is no exception.
The millennial generation, in particular, has been exposed to significant global, social and economic change in relation to previous generations. Millennials are distinguished by their impatient nature and have different attitudes towards how to manage their assets. It is for this reason that Duggal believes that it is crucial to have a conversation with the bank’s younger private banking and investment clients to explain their investment profiling and look at how they can invest their money, saying that “a millennial investor has no issue with understanding the math behind a solution, yet, we lose them over a traditional paper and pencil explanation. Millennials want to understand how the advisor thinks and analyses through a screen and a dynamic tech solution. It is important to get them to see how the right kind of advisory platform can help them make an informed decision in terms of their investment.”
A key driving factor amongst millennials in their decision making is their need to change the world. According to EY, a millennial is twice as likely to invest their money in a company that is focused on social or environmental issues. This bodes well for sustainable investments, which currently represent 18% of assets under management in wealth and asset management classes.
“They need to know where their money is put, and they want to make sure that this it serves their purposes. This would require vast research and a restructuring of product offerings,” explains Duggal.
HOW DO THEY DO IT?
So what qualifies Standard Chartered to advise its clients on where to put their money?
“We have strong advisory capabilities and a specialist model, which makes us unique in the market. We also leverage on our local market knowledge. We have had a presence for over 100 years in many of the countries we operate in… We are deeply rooted in Africa and can confidently say that we are ‘Here For Good, Here For Africa’. The bank also has a global footprint. It is because of this that we are able to combine global, regional and local knowledge to best serve our customers,” says Duggal.
From within, Duggal believes in the importance of nurturing the bank’s young talent. Standard Chartered has programmes to invest in its talent across all levels of seniority – a leadership programme aimed at its senior managers and heads of business helps them grow within the business. Similar programmes are in place for junior employees with the objective of upskilling them, where they can travel on short-term assignments for up to a year to more established markets to help them to gain a better understanding of how these markets work.
As business as a whole moves into a more global space, it is more important than ever to develop programmes that aim to bring about a diverse range of skills and experience and nurture talent by encouraging mentorship at all levels – the Boyden Talent Management Trends in the Banking Industry 2017-2018 report notes that “The best talent wants to work for innovative companies that offer learning opportunities and financial institutions must win the talent war in order to succeed in their efforts to recruit and retain individuals most suited for their organisation. This flexible and focused workforce will help build an organisation that is digitally savvy and flexible enough to adapt to current and future changes. To this end, having leaders and recruiters with experience in transformational change is essential.”
With the prospects in Africa riper than ever before, we can certainly look forward to seeing Standard Chartered putting their money on the continent, along with their clients.
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