In early days Wealth management service was provided exclusively to High net worth

individuals in West. With passage of time, worlds wealth moved to Middle East and
Asia due to unprecedented rise in oil price. The rising influential Muslim investors
who wished to invest their surplus funds had limitation for investments as they cant
invest in conventional western form of investment, particularly due to interest-
dealings in conventional banks (prohibited in Islam) and restrictions on assets for
investments as per Shariah policy (Fig-1).

As the number of Muslim wealthy individuals mount, demand for wealth management
services become more apparent. They needed a service provider who can manage
funds professionally and invest according to their religions beliefs.

In 1960 Islamic wealth management emerged Asset Backed

Asset Backed
to provide service to Islamic HNWI. It intend to
provide professional management of Assets by Prohibition of Interest
following Shariah compliant policies & achieves Prohibition of Interest
financial goals of HNWIs. Prohibited Activities
Prohibited Activities
The Islamic wealth management industry grows No Speculation
No Speculation
(Gambling)
onward and evolved significantly. The sector rise
(Gambling)
is underpinned by strong demand from Muslim
Profit / Loss Sharing
and non-muslin investors. For Muslim investors Profit / Loss Sharing
the investments in a Shariah compliant manner
has been Pivotal factor in growth of industry and
non Muslim investors its a way to diversify their
Shariah Compliant
investments. Shariah Compliant
Transaction
Transaction
Fig 1- Fundamental Shariah Requirement

As per industry estimated growth rate of 15% annually

by 2010 Islamic Wealth Management sector will
have 1Trillion USD under management which will
be equivalent to 6% of total assets managed in
Shariah compliant manner.

Trend of Islamic Wealth Management:

During initial days very few institutions were providing Islamic Wealth Management
service. Organizations were: Am Investment Services, DBS Investment Management,
RHB Investment Management Takaful Ikhlas etc.
The players had very limited products tailored for HNWIs and offerings were limited
to Shariah compliant funds.

The growth in sector lead to development of leasing, Islamic Fixed Income and
Shariah compliant hedge fund. It provided an opportunity for innovation and growth
for wealth management service providers.
The significant amount of available assets with HNWIs attracted attention of major
financial institutions and banks that showed interest to develop and make profit out of
this sector.
Today global players like credit Swiss, HSBC and Reliance Finance have expanded
their portfolio and banking products to accommodate Shariah focused assets.

Issues in Growth of Islamic Wealth Management:

Islamic wealth management has very limited options (Assets / Products) available for
investment. Islamic mutual fund (with assets as per Shariah policy) consists of just
450 Fund which is about 0.25 % of total funds available to traditional wealth
managers.
Islamic wealth managers also lacks Fixed Income / Short term products for which has
constrained their investment opportunities.
Islamic Private Equity has a lack of understanding the customers need and doesnt
have a proper distribution channels.
Capital Protected Notes doesnt have a universal standard and have different
standards proposed by different Scholars in terms of structure and documentation
which leads to its lesser acceptability and liquidity.

Current Status of Industry

There are a wide choice of structured products, multi manager funds, takaful and
alternative investments available from major international, regional and national
financial institutions.

Strategies for Further Growth of Islamic Wealth Management:

Sales force has to be trained to enhance advisory capacity.

Shariah co-ordination committee has to develop innovative products
frequently.
Capital Protected Notes have to be standardized and enhanced to allow for
indirect exposure to various underlings.
Discretionary Portfolio Management need to be the next steps in the
evolution of Islamic Wealth Management

Technological support for Islamic Wealth Management

The features required in Islamic Wealth management software are different from the
inherent features of software used in traditional WM organization. It needs add-on
features to handle Shariah compliant products, Shariah interpretation of the
instrument and processing which vary for every geographical region.
Software vendors providing service in this sector:
Temenos
I-flex
Misyss
Fact and Path Solutions
Equation product from Misys