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As the number of millionaires and billionaires grows by the day, wealthy Kenyans are hiring managers and paying millions of shillings to minimise risk of loss and for legacy.
This has seen an upsurge of wealth consultants in the market in recent years, and financial institutions such as Stanbic Bank are providing this service to clients who own at least $1 million (Sh118 million) in investible assets. Essentially, dollar millionaires.
Lilian Onyach, the head, consumer and high net worth and a senior wealth manager at Stanbic, says these investible assets must be outside one’s primary home. These could be shares, bonds, a second home or a fixed deposit in a bank. ‘‘They must be shares that you can quickly convert into liquidity.’’
Stanbic offers services that span insurance, cross-border investments and acquisition of foreign citizenship. Others are accounts – corporate and fixed deposits – and lending for those starting to build their wealth.
She says: ‘‘Should a client wish to acquire the citizenship of another country for geopolitical reasons, we have lawyers who help to facilitate the process. There is also a product for clients who want to go into philanthropy and change society.’’
So, why does one need a wealth manager and what are the repercussions of not consulting one? She explains: ‘‘Primarily, it is for legacy. What is wealth if it is destroyed tomorrow? It takes time to build a fortune. Wealth management allows you to protect and preserve the wealth for future generations.’’ It also creates order in how the wealth is managed and shared among the beneficiaries.
Over the years, wealth for the majority of Kenyan families has been held in form of land, property, buildings and cash. This, though, is changing.
‘‘Kenyan and Africans are now moving into sovereign debt, by taking Kenyan and Ghanaian bonds, for instance. They are also big in the equity market and stocks.’’
Stanbic Bank Head Consumer & High Networth Lilian Onyach poses for a photo after the interview at the bank’s offices in Westlands on July 15, 2022. PHOTO | FRANCIS NDERITU | NMG
She cites reduced tenancy and the consequent loss of income from property during the pandemic as one of the factors driving departure from investment in property among the wealthy in Kenya. While the value of these properties is still up, income from them has been on a downward trend.
‘‘We have seen a shift to fixed income investments. There is a huge uptake in infrastructure bonds, Eurobonds and government debts to try and diversify their income, boost cash flows and balance their wealth portfolio.’’
There are also those who are capitalising on turbulence in the market to buy stocks in stable areas with better prospects such as technology and banking, she adds. ‘‘More young people are getting into the entrepreneurship space, manufacturing and technology to build their wealth.’’
For these wealthy people, the biggest anxiety is direction on where to put their money, the risks involved, beliefs and family dynamics.
‘‘Part of the assessment for us is to understand if they are comfortable where they want to invest their wealth. People have different beliefs on what to invest in and where not to put their money.’’
Establishing where a client’s risk appetite lies is among the first steps of wealth management, Onyach adds. ‘‘It is important to establish who manages the family wealth and how big the family is. The distribution of the family is critical. The children may be living abroad and some could be married.’’
During the process, a wealth manager must also establish the family’s interests. ‘‘How is the wealth spread? Is it only in Kenya and Africa or is it abroad as well?’’ Onyach notes that wealth management takes the approach of ‘‘open architecture’’ where nothing is proposed to the client and instead they are allowed to put everything on the table.
‘‘Until we know where you are and where you are going, we cannot solve the puzzle. The philosophy is to create value for you along the journey, not just bank for you. After all, anyone can bank for you.’’
Adds Onyach: ‘‘What we do is to offer our clients world-class banking solutions, including opening them up to international probabilities in countries such as Australia and Mauritius, and in Europe.’’
This type of banking features bespoke services that go beyond traditional offerings such as cross-border lending and payments through collaborations with other banks.
‘‘We offer advisory services to our clients on what to buy through our partner investors in the UK and South Africa. It is more about the longevity of a client’s wealth and the wellbeing of their family when they are no longer there.’’
What are the demographics like? And what is the persona of these individuals? Onyach says these cut across gender, race and family. ‘‘You rarely bank an individual. Most of our clients tend to be families, including the extended family.’’
Every year, Knight Frank maps individuals, their preferred areas of investment and movement of wealth in different markets in the world. From its reports, there has been a rise in Kenya’s dollar millionaires.
This is corroborated by the Africa Wealth Report of 2022 by New World Wealth and Henley & Partners, whose survey puts the number of Kenya’s millionaires and billionaires at 8,500.
Onyach says on the growth of the wealth portfolio of clients in the country: ‘‘Surprisingly, dollar millionaires in Kenya increased in the post-Covid year owing to the level of exchanges and market volatility.’’
Besides the pandemic, the tax amnesty announced by the government in the 2018/2019 financial year encouraged Kenyans with wealth overseas to bring it back to the country without stringent conditions. ‘‘Within that period, we saw increased inflows from around the world,’’ she reveals.
The expert observes that wealth management is sometimes driven by the fear factor and uncertainty, and adds: ‘‘Many families in Kenya make a lot of money but struggle with legacy issues. When the patriarch passes on, for instance, it becomes difficult to distribute this wealth and to pass it on to the next generation.’’
This, she notes, has triggered an upswing ‘‘from a risk management and trust services perspective’’ as families try to put up relevant structures to avoid wealth-related court battles.
‘‘Most of the wealthy families are led by kin, where, say, the CEO is the daughter and the director is the [brother]. More often than not they disagree. The uptake of these services is to have the right corporate governance structures to protect their wealth.’’
Some Kenyans have taken wealth management internationally as they seek to position themselves geographically. ‘‘Extremely wealthy families have those frameworks in place.’’
Onyach notes that Kenya is growing as a wealth leader in the region, adding: ‘‘Our exchange control is one of the best in the world. This attracts many foreign investors to Kenya. Kenya is well positioned as a hub. Investors from Dubai who are doing investments in Rwanda, Uganda and the Democratic Republic of Congo will always have an office in Nairobi because of the geographical location. We bank many such clients.’’
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