London, Asharq Al-Awsat- Andrew Hope-Morley is the Director of Family Wealth Advisory at HSBC Private Bank. He has been a banker working in the Middle East for almost 26 years, and has a clear understanding of the traditions and values that most families would like to continue over the generations. Asharq al-Awsat spoke with Mr. Hope-Morley in August, to determine what HSBC’s Family Wealth initiative entails, and how successful it has been in the Middle East.

The Family Wealth Advisory group was established by HSBC as a type of independent consultancy, in order to provide families with advice and services, helping them to achieve a greater legacy for their assets and finances. Andrew Hope-Morley also elaborated on other aspects of the banking sector in the region, such as Islamic banking, the key investors in the Middle East, and the effects of the global financial crisis.

The text of the interview is as follows.

[Asharq Al-Awsat] What are the differences between other banks that deal with wealth management, and the services that your bank offers?

[Hope-Morley] One service, which stands out from other banks, is that HSBC Private Bank offers assistance to clients in the Middle East in drawing up their “Family Governance.” This is a service whereby our experienced team act as ‘facilitators’ to establish a sound and appropriate corporate structure for the family business, with a set of rules or ‘protocols’ that have been agreed by the family and are enshrined in the constitutive contracts of the company.

It is an unfortunate fact that in this region, as with the rest of the world, more than 96 percent of family businesses do not survive to the third generation. This is not due to the family business failing, but usually the family failing the business. All families around the world face the same issues: Continuity Planning, Succession Planning and Conflict Management. Managing these issues is essential for both the family and the family business.

[Asharq Al-Awsat] Is this successful with all family businesses, and what is the secret of your success?

[Hope-Morley] In the past some families have approached consultants for a ‘Family Rulebook’. There is no one set of “rules” that will work with every family, as each family is unique in its values and vision. Without these rules, or what we call their ‘protocols’, most families enter conflict when an unexpected event occurs, such as the passing of a parent or sibling.

Our success lies in our method. We act as facilitators and work with a multi-generational ‘Family Work Group’ to discuss and agree on all the issues that the family will face. Issues such as who can work in the business, who can become a director, how will the family be represented on the board, how will the dividend policy be agreed, how do they define a family member, and many more, are fully discussed (many for the first time) and agreed. The other key to success is having members of various generations represented on the Working Group; the future generations will rarely accept Rules imposed on them, so they must be part of the discussion and decision-making process. This includes ladies, who are and will be shareholders due to Sharia succession.

[Asharq Al-Awsat] Why is HSBC involved in the family governance and family wealth field?

[Hope-Morley] HSBC has been represented in the region for more than 60 years, and financed many of the successful and prominent family businesses from the first generation. We are now financing the same family businesses in the second generation, and it is in our interest that these businesses become ‘institutionalised’ and appropriately set up and run with clear plans for continuity and succession. Many family businesses will also seek to IPO at some time in the future, and without establishing a strong and versatile corporate structure, based around a Closed Joint Stock Company, with family rules or protocols that safeguard the family shareholding, this will not be possible.

[Asharq Al-Awsat] What are the dimensions of the Family Wealth team, and do they understand that families in the Middle East are sometimes different?

[Hope-Morley] We intend to increase the team by two individuals by 2011. It is essential that we can offer the widest number of examples of how ‘other families in the region do it’ as well as the ‘best practise’ from the rest of the world.

[Asharq Al-Awsat] How long would it take HSBC Family Wealth Advisory to work with a family, assisting them in drawing up their Family Protocols?

[Hope-Morley] This depends on how many family members we are working with; a large family may take more time to agree on all the points than just five or six family members. Generally we work for around 3 days a month for around a year with families, as we usually need approximately 30 full working days with each family group. Family business owners are busy people and can usually only spare us a few days each month, and since the decisions they make are very important to the family they need time to consider each subject.

[Asharq Al-Awsat] What is the competition like with other British banks that offer wealth services?

[Hope-Morley] Competition is very high, not only with British banks, but with other top US, EU and Swiss firms.

Despite this competitive environment, HSBC Group, and its Private Bank arm, are recognised by its peers to be the strongest brand in international and local MENA markets, due to the Group’s presence over 6 decades in the main GCC countries.

[Asharq Al-Awsat] The private banking arm is located in Geneva, yet the issue of banking secrecy is facing pressure there, how have you managed to reassure your clients?

[Hope-Morley] For our clients we speak to them on a very regular basis and keep them updated of all significant developments. We have an open two-way street dialogue, and we put the brutal facts on the table.

Secrecy issues are dealt with very seriously, along with confidentiality. Any threats towards these values are dealt with in the most rigorous manner.

Our clients have witnessed our support, amidst this challenging environment.

The Swiss model, and most generally the international model, alongside the domestic model, i.e. the presence in the MENA countries of our HSBC Global Businesses, requires our staff to deal with our clients with the highest standards of discipline, in order to protect their privacy. We aim to raise – on a continuous basis – all staff’s awareness and resistance to external/internal piracy, which could compromise the privacy of our clients.

[Asharq Al-Awsat] How popular is the Islamic private banking service that you provide, and what sort of investments are there?

[Hope-Morley] Our HSBC Amanah (meaning trust in Arabic) brand is second to none in the Sharia compliant world.

Our expertise and depth of Islamic services, ranging from Islamic deposits, bonds, structured products, property in forms of direct and indirect investments, and loans to Sharia compliant trust solutions, are regularly awarded, as is our MENA Private Banking business, as the ‘best in class’, by Institutes such as Euromoney or Bankers Magazine.

We confirm that our HSBC Islamic service constitutes a high priority in terms of product enrichment and wider distribution. The demand for this type of solution is growing rapidly within in the GCC area and Asia.

[Asharq Al-Awsat] What are the numbers and figures available about the GCC region, in terms of the nation with the most investments, and so on?

[Hope-Morley] Saudi Arabia, according to recent surveys, has the largest number of UHNWI [Ultra-High-Net-Worth Individuals], defined as individuals holding liquid investments in excess of USD 1 million. We believe that this number of UHNWI, in recent studies, has been largely in excess of 100,000.

Most importantly, the oil reserves of Saudi Arabia are believed to represent more than 20 % of the total reserves of our planet, which places Saudi Arabia on top of the list of oil rich countries. The proceeds of the oil business are reinvested by the Government in the local economy, and specifically in infrastructure projects, which are an important contributor towards the GDP of Saudi Arabia.

Other GCC countries, like Qatar (gas), and Abu Dhabi (oil), are also very attractive in terms of GDP and UHNWI.

Egypt is also a ‘Tier 1’ country within MENA for our business, and finds its strong potential from its fast growing population (over 80 Million), and domestic demand, added to a very high level quality of services offered in sectors such as IT, outsourcing, etc

[Asharq Al-Awsat] In which regions is HSBC Private Bank dominant?

[Hope-Morley] HSBC is the most cosmopolitan bank in the world, and its private banking arm is well implemented in Europe, and very strong in Asia, Middle East and South America.

[Asharq Al-Awsat] The financial crisis affected the whole industry, has your arm picked up the pace again, and how were you affected?

[Hope-Morley] HSBC Private Bank belongs to the group HSBC which did, and is still doing, particularly well during the financial crisis. We have gained the market share almost everywhere, thanks to cautious management.