Portfolio management service to assist high net-worth customers
KUWAIT: Gulf Bank has launched a new, first-of-its-kind investment service in Kuwait. WISE is an advisory portfolio management service for affluent, high net worth and ultra-high net worth Gulf Bank customers, helping them to diversify their investments and invest in international markets in an easy, transparent and cost-efficient way.
WISE is available at all Gulf Bank branches. "The idea of this service came from some of our clients who want to invest abroad due to diversify their risk. The WISE service is regulated by the Central Bank of Kuwait and the Kuwait Capital Markets Authority. Every WISE portfolio is designed to be consistent with the client's investment objective and risk tolerance," said Meshari Shehab, Assistant General Manager for Consumer Banking during a press conference yesterday at the Gulf Bank headquarters.
The bank has developed a WISE application to allow relationship managers to explain the service. "We use a questionnaire to assess customer suitability, goals, time horizon and risk tolerance. We simulate, together with the clients, different investment scenarios to decide the optimal risk-return composition that matches their goals, time horizon and risk tolerance, using insights from more than 25 years of historical returns," he explained.
The WISE portfolio is available for any individual aged 21 years or older who is a legal Kuwaiti resident or a Kuwaiti citizen (with a permanent Kuwaiti address), an existing Gulf Bank account holder and who passes suitability questions. Kuwaiti citizens resident abroad who are existing Gulf Bank account holders can also open a WISE portfolio with Gulf Bank, in addition to US nationals who are existing Gulf Bank account holders," explained Shehab.
The minimum investment amount required to create a WISE portfolio is $10,000 per account. "The bank asks the minimum number of questions to accurately determine an individual's risk tolerance and investment goals over a set time period in order to formulate the most suitable portfolio for the client. The portfolio consists of ETF securities in equities and bonds and a small portion of cash balance," noted Tareq Al-Saleh, AGM - Investments, Consumer Banking.
The WISE portfolio exchange-traded funds (ETF) include: US Equities: S&P 500 UCITS ETF (VUSD) from Vanguard; All-World equities: FTSE All-World UCITS ETF (VWRD) from Vanguard; emerging market equities: FTSE Emerging Markets UCITS (VDEM) from Vanguard; and US bonds: iShares US Aggregate Bond UCITS (IUAG) from iShares by BlackRock.
High Quality ETFs
"Our investment methodology is based on the modern portfolio theory. It states that returns are best maximized for any level of risk through the optimal mix of asset classes, not through security selection. Diversification is designed to increase a portfolio's risk-adjusted returns by reducing portfolio risk or volatility for every level of return or maximizing return for every level of risk. Proper diversification is implemented by investing in a sufficiently large number of securities that represent a set of relatively uncorrelated asset classes and geographies," Saleh said.
WISE portfolio is in USD, but the client can fund his WISE portfolio through his KWD account. "The money will be invested within five working days after receiving a verification call, SMS or email. The securities will be held by Citibank in London, one of the largest US banks. The limited cash in the account will be held at Gulf Bank's broker Saxo Bank," Shehab said.
The client is free to close his WISE portfolio at any time. "We recommend a period of three years of investments to get the results, but the client can close the portfolio earlier or later. After closing the portfolio, all funds in the WISE portfolio will be directed to the client's linked account with Gulf Bank. The client can withdraw a minimum of $1,000 as long as he maintains a minimum balance of $10,000 in his account," he added.
Service Fees
"We charge a quarterly management fee based on an annual fee rate of 0.85 percent calculated on the daily values of your portfolio. The only other fee the client incurs is the low ongoing charges embedded in the cost of the ETFs. The client gets many services for this fee including advice to create the optimal portfolio compositions, create the portfolio, receive and reinvest dividends, secure transactions and monitor and rebalance the portfolio," stressed Shehab.
"The Gulf Bank fee of 0.85 percent is very competitive and already well below the average fee charged by financial advisors. The client will pay no commission on trades made on his behalf by Gulf Bank. Also there are no custodial, entry or exit, or withdrawal fees," he said.
The WISE application gives the distribution of results over the relevant time period if the client invested according to the recommended strategy. "The best way to see this is to take the questionnaire. It will show the historical performance of different portfolios. Like all market investments, the securities you own in your WISE portfolio are subject to market risk. Fluctuations are hard to predict over the short term, but historical data shows that over the long term, your investment is likely to increase," Saleh said.
Dividends
"The selected ETFs pay dividends. The client has the option to instruct us to either reinvest the dividends or route it to his linked account with Gulf Bank. In the absence of any such instructions from his end, we will reinvest his dividends automatically as per his portfolio composition mix," concluded Saleh.
By Nawara Fattahova