DUBAI — Private wealth growth in the United Arab Emirates (UAE) witnessed a significant increase in 2016 (8.3 percent) as it continued to lead GCC private wealth growth, according to a new report by The Boston Consulting Group (BCG) titled “Global Wealth 2017: Transforming the Client Experience” released Sunday. In the UAE, the growth of private wealth was driven primarily by equities. In 2016, the amount of wealth held in equities increased by 9.3 percent, in comparison to cash and deposits at 8.4 percent and bonds at 3.8 percent.
Based on the 2017 Global Wealth Report, overall growth of wealth in the UAE is expected to decrease to 7.4 percent over the next five years. Cash deposits, at 5.5 percent compound annual growth rate (CAGR) and bonds, at 3.6 percent CAGR, will be the primary contributors to this over the next five years.
This 17th annual study by BCG outlines the evolution of private wealth from both global and regional perspectives, addresses key industry trends, and places special emphasis on how players can create fresh and innovative client journeys by leveraging digital technology to its fullest in wealth management business and operating models.
“Digital initiatives in the industry have centered largely on providing customers with basic portfolio functionalities and the ability to execute standard trading and payment transactions,” said Markus Massi, Senior Partner & Managing Director of BCG Middle East’s Financial Services practice. “What’s needed is to design and implement fully rethought, reworked, and advanced client journeys that seamlessly combine digital, relationship management, and expert channels to transform the entire client experience from end to end.”
“To build successful business models and optimize cost reduction, wealth managers need to increase their investments. Although companies in a number of other industries have taken this approach to the evolving digital environment, many wealth managers have not, as such segmentation of clients on the basis of their behavior has often been neglected. Old ways of doing work are ceasing to be efficient in the new private banking environment,” Massi added.
Over the next five years, wealth in the Middle East and Africa region is set to reach $12 trillion—and the UAE, Oman, Qatar, and Saudi Arabia’s contribution will account for 21.1 percent.
Taking an in-depth look at wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in the UAE grew significantly—by 8.8 percent— in 2016. Steady growth is expected to continue through 2021, with private wealth held by this specific segment growing at a CAGR of 9.4percent.
The upper high-net-worth (HNW) segment (those with between $20 million and $100 million) experienced the strongest growth in 2016 at 11.2 percent. In the next five years, the projected growth of this segment will see a slight slowdown to 9.9 percent CAGR.
In the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) witnessed a steady growth of 10.5 percent in 2016. Private wealth in this segment has a projected CAGR of 8.8 percent over the next five years. The segment is also expected to experience a slight slowdown in growth in the next five years.
The total number of millionaire households (those with more than $1 million in net investable assets) in the UAE increased by 5.9 percent in 2016. Looking ahead, growth is set to slow to 4.8 percent by 2021.
The findings of BCG’s report also revealed that, in 2016, Switzerland remained the largest destination for the Middle East and Africa’s offshore wealth, accounting for 31 percent with a projected CAGR of 4.7 percent over the next five years. This was followed by the UK/Channel Islands at 23 percent with a CAGR of 5 percent, and Dubai at 18 percent with a CAGR of 4.5 percent.
“In the Middle East and Africa (MEA), wealth expansion should stem, in relatively equal portions, from existing assets and higher household savings,” said Massi. “Looking ahead, the share of wealth allocated to each asset class is expected to remain stable, with regional wealth projected to rise at an annual rate of roughly 8 percent through 2021. In the coming years, more local players will enter the wealth management market as traditional revenue pools become more competitive.” — SG
