Issue 4, 2018. August-September

   

GEORGIAN BANKS EYE INTERNATIONAL WEALTH MANAGEMENT

Georgia has entered a new financial market - international wealth management, the domain of "high net worth" individuals. The sector, worth $63.5 trillion according to the latest World Wealth Report from international consulting group Capgemini, could be well worth the banks' efforts.

Sally White

Nini Sturua, TBC Bank

It might not be expected that Georgia, right at the beginning of its capital market development and without even a vibrant stock exchange as yet, could impress the 17 million rich individuals targeted by established international wealth management firms. Yet both Bank of Georgia (BoG) and TBC Bank (TBC)are finding a place. Others in Georgia's banking community, such as Pasha Bank, have looked, but not taken the step.

BoG offers Wealth Management (WM) services to international clients, and brokerage services for them are offered through its broker, Galt & Taggart.

BoG has offices in Israel, Germany, the British Virgin Islands, and the UK, as well as Russia and Georgia, and it plans one for Limassol, Cyprus before the year-end. Currently, its client base comprises 1,000 families with an average of half a million dollars in assets under management. Total funds under management are $640 million (1.57 billion GEL).

Eka Liluashvili, Bank of Georgia

Considerable diversification is on offer, with the range of products into which money is invested extending from banking products, such as certificates of deposit, to local and international bonds. Over 2010 to 2017, the compound average growth rate enjoyed by its investors was 27.31 percent.

At TBC, the WM department is also part of TBC Bank, with some products, such as corporate bonds or brokerage, offered through its brokerage, TBC Capital. It too, operates internationally, with the WM department overseeing services for 900 clients from 40 different countries.

How can Georgia compete with the major international names, such as the Swiss banks which have been in this business for centuries? Eka Liluashvili, Head of International Business at BoG Wealth Management names key strengths: "Georgia can offer discretion and very high levels of personal service," she said

Plus, Georgian banks have been free of the kind of international banking scandals that have hit many European and U.S. banks.

It is also easy to open an account with Georgian banks and to transfer funds and assets. They meet compliance requirements, the international rules and regulations on care-of-clients having been put in place.

There is a lot of appeal in Georgia for non-resident investors seeking global diversification and frontier-market opportunities, she points out.

These days, Georgia can tick the required boxes, with a growing spectrum of customized financial services, double tax agreements with many countries, international approval for its banking system, tax advantages and its ease of doing business, to name a few. Banks have access to wide-ranging regional and international partners to help extend the products on offer where local experience is lacking.

At TBC, Nini Sturua is Head of the Wealth Management Division for Non-Resident Customers. There, too, clients come via a variety of routes.

"There are different sources, some come through client introductions, some from agent referrals, some come themselves after doing their own research, many come because they are somehow connected to Georgia (business-wise, frequent fliers, expats). We also have Georgians who are living and working abroad. And, of course, our representative office in Israel is another source," she explained.

TBC is also seeing that as the wealth management service groups in traditional centers increasingly find it hard (because of bureaucracies and costs) to service all but the most wealthy clients, there is room for new players.

"Georgia offers a variety of products with competitive rates, low costs, less bureaucracy, a customer-centric approach with dedicated bankers and outstanding remote banking channels. Segment entry is also relatively low compared to traditional centers. I think these are the main reasons why clients use Georgia in order to diversify their assets," she said.

A strong attraction, in this yield-scarce time, is the high level of interest rates that Georgia can offer, despite its relative stability. While clients buy predominantly dollar-denominated bonds, investment in Georgia's increasing number of lari-denominated corporate bonds gives a superior rate to that available in many other countries. From their domestic strengths, the banks have also been offering property investment. The Bank of Georgia is planning to launch a dedicated investment fund in this sector on the Georgian stock market. It will have an attractive yield that should appeal to overseas investors.

As Otar Sharikadze, Managing Director of Galt & Taggart, points out, Georgia can offer the advantages of an "onshore economy with benefits similar to having funds offshore."