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Wealth Management for Expats in Saudi Arabia

Submitted: August 2014

Private banking services may range from traditional lending or investment management to inheritance tax planning or asset protection.

If you are an expat in Saudi Arabia with some investable wealth, the first thing to know is if you should go for onshore or offshore private banking services. There is no set answer to this, as this will depend on your personal circumstances.

Expats tend to be better off going offshore if their stay in Saudi Arabia is just temporary, but onshore investing may provide better exposure to the Middle East markets. It is likely to be more tax-efficient as well.

 

Private banking in Saudi Arabia

Saudi Arabia strives to build up its financial sector, though it still has quite some way to go before having modern financial markets. Most of Saudi banks do have a private banking department, and you might wish to enquire if their services may suit your needs. It shouldn’t be a problem to find an English-speaking banker in Saudi Arabia.

In Saudi Arabia, private banking services are designed to attract wealthy expats. The definition of “wealthy expat” varies from one bank to another, but you would typically need to have either a monthly salary of USD10,000 or assets of between USD100,000 and USD250,000.

Generally speaking, you should look for a wealth manager if you think you need help with financial planning. Your wealth manager will take fees for that, but this may be offset by the higher returns you can get for your money.

 

Islamic finance

If you are looking for Sharia-compliant financial products, Saudi private banks are quite experienced in that field. For that matter, you don’t need to be wealthy to have a good access to Islamic finance products. Investment products based on the Mudarabah concept are virtually available for all customers in Saudi banks.

 

Private banking – practical tips

There are various ways you can be charged for private banking services. Typically, a financial institution is prone to offer you more sophisticated services when you are or get wealthier. There is a hidden charge for this though, because it may lead to conflicts of interest. In such circumstances, the financial institution would expect you to hold investments in products of its own. The problem is, these investments are not necessarily the best you can find on the market.

Apart from the conflicts of interest issue, commission-based pricing structures are frequently offered for fund investments. Flat fee pricing structures can be considered as well. Such an option would typically be justified if you need to ensure high-quality, independent financial advice. Your investable wealth must be high enough, however.

As in any country, caution is required prior to sign up for a financial product. In all circumstances, you must check:

  • Product transparency, especially with regard to the underlying risk
  • Fee structure – this should be clear enough from the beginning
  • If you understand the product at all – if not, you had better walk away.

 

Issues for expatriates

Financial planning complexity increases dramatically when you become an expatriate, as additional cross-border issues must be taken into account. These include, but are not limited to:

  • International availability of liquid assets
  • If your stay in Saudi Arabia affects your ability to invest in some jurisdictions, directly or indirectly
  • Social security arrangements in the countries you have previously been to
  • Your residency status for income tax purposes
  • Asset protection
  • Foreign exchange exposure
  • Inheritance law considerations, and
  • Inheritance tax planning.

It is essential to check if your wealth manager is qualified enough to deal with your specific cross-border issues. In all cases, be wary of:

  • Language issues
  • Cultural differences, and
  • How contactable your wealth manager is.

 

US citizens

It may be harder for US citizens to find a relevant wealth manager outside the US. This is because US citizens remain subject to US tax rules, even when they are resident outside the US. Consequently, they have to deal with US tax compliance issues, which Saudi finance professionals are not necessarily qualified for.

If you are a US taxpayer, you are likely to need a specialist wealth manager or to stay with your US-based private bank.

 

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