Expats Working in Gulf: In a report based on the Middle East Management Study by Invesco, one of the world’s largest independent investment managers, Western expatriates employed by Gulf Cooperation Council (GCC) nations have an average length of stay of 12.9 years.
This increase Westerner’s length of stay, three quarters of which are UK citizens, is the Gulf’s very low rates for personal taxes. On the other hand, the length of stay in the region’s Non-Resident Indians (NRIs) is 18.1 years which is attributed to the low value added tax and corporate taxes. Meanwhile, Arab expats including Lebanese and Egyptian have a length of stay of 16.9 years owing to the stability and security provide by the Gulf.
Invesco Middle East Managing Director Nick Tolchard stated that the region was not initially appealing to all groups but after settling in, they stay due to the Gulf’s work life balance.
Of the 6 GCC States, UAE had the highest expat proportion but all nations in the Gulf held records for expat populations.
Meanwhile, Invesco pointed out the reasons for leaving the Gulf which was primarily the loss of their job. Other principal reasons include retirement, necessity to go back to their home country to care for aging members of the family and to give their children the needed education. However, with the wide availability of schooling in the UAE, families departing due to this reason are decreasing.
This study made by Invesco together with independent financial advisers (IFA) showed that the mobility of Western expats did not have a significant effect on the industry.
Tolchard went to explain that wealth managers viewed the mobility of expats as highly challenging as this means that these people are not likely to commit to long term savings and investments. But, with the increase in the length of stay of their customer base, wealth managers see a spike in the demand for their services.
For products related to savings, Western expats are heavy on ‘life wrappers’ and mutual funds, for NRI’s it is ‘quite strong’ but Arab expats are not too keen on these products.
Tolchard added that, “Funds and life wrappers are the contestable market for wealth managers”. He also added that 36% of the retirement savings of West expats were in these products, 26% in wrappers and 10% in funds. The corresponding rate for NRIs is 14% in wrappers and 13% in funds. The bulk of the savings for these groups were either in property or in bank accounts.
Another change that has been observed in the industry was the preference for contracts with shorter regular and premium savings duration. The decrease in 25 year savings plans was offset by a corresponding increase in 10 year plans and the same trends was observed for single premium products. This duration is observed to be more in line with the length of stay of the expats. Based on the reply of the respondents, they expected a longer length of stay for all groups which is positive for long term propositions of the wealth management industry. He also added that clients should be geared for taking more risk to cope with the market’s volatility.
The same study showed that with the length of stay getting longer, expats become more interested in local property investments and advisers may have to compete more with the property industry than with short term savings.