Steady gains in global personal wealth slid by more than 5 percentage points in 2018, according to a new report by Boston Consulting Group (BCG), titled Global Wealth 2019: Reigniting Radical Growth. As a result of a fourth-quarter dip in stock indexes, as well as geopolitical threats, high valuation levels, and interest rate challenges, the report states the slide in wealth serves as a call to action for wealth managers to reinvent business models in the years ahead.
In contrast, personal financial wealth in the Middle East bucked global trends, with positive returns driving a growth in overall wealth by 5.7%. This pattern was consistent in the UAE with stock markets across the Arabian Peninsula experiencing a good year. Personal financial wealth in the UAE from 2013 to 2018 grew by 5% p.a. to USD 0.4 trillion, and is expected to grow by 8% p.a. to USD 0.6 trillion by 2023.
The report, BCG’s nineteenth annual study of the global wealth management industry, features a market sizing review that encompasses 97 markets and draws on data from more than 150 wealth managers on performance pressures and critical strategic areas for improvement. The report also includes insights on growing the customer base by targeting the expanding affluent segment, increasing scale and revenue by transforming client engagement models, and girding cyber defenses to protect client data and preserve client trust.
“The performance of global wealth segments in 2018 suggests there are a number of significant shifts underway across major segments, markets, and the wealth management model,” said Markus Massi, Managing Director & Senior Partner at BCG Middle East. “While international wealth managers are making strides towards innovating in a rapidly shifting environment, Middle East wealth managers have not fully embarked on that trend. Several, even large players are still offering standard products and services, lacking the breadth and depth of international wealth managers. Local wealth managers have to tailor their offering more to either local needs and/or a younger wealth segments. Offering a ‘me too’ will not be sufficient to benefit from the growing wealth”
The UAE in Focus
“Overall, the UAE is in good stead with investable wealth growth expected at 6% p.a. to USD 0.5 trillion by 2023,” added Massi.
A spotlight on asset allocation shows that currency and deposits (66%) accounted for the largest proportion of assets, with life insurance & pensions (17%), equities & investment funds (14%), and bonds (3%) rounding out the overall composition of assets in 2018. Looking ahead, the allocation of assets is set to change slightly by 2023, with life insurance and pensions expected to grow the fastest with 18% growth p.a. compared to currency & deposits, which is forecast to grow the least at 5% p.a.
The cross-border share on total wealth was 31.8% in 2018, which is in line with the Middle Eastern and African average, yet significantly higher than the global share of 4.2%. With cross-border assets showing a lower growth rate than onshore assets at 6% p.a., the share is expected to decrease to 28.8% by 2023.
Regarding the UAE’s wealth segments, roughly half of the total personal wealth in 2018 is held by millionaires (47%). In the near future, the share of wealth held in the UAE by millionaires is expected to remain the same at 47%.