Products and suitability assessments give international firms the edge over MENA rivals and investors want more international investments;
Oxford Risk research shows MENA wealth managers expect the asset management industry to hit $2 trillion faster than expected;
MENA wealth advisers expect a concerted push by international financial institutions to expand in the region. They say their product ranges and approach to investor suitability will help them win business, new research for behavioral finance experts Oxford Risk shows.
Its study with independent financial advisers and wealth managers in MENA who collectively manage assets of around $290 billion, found that 85% expect international firms to grow their presence in the region over the next three years.
The research with wealth managers in the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Egypt, Kuwait, and Oman, found that 62% believe expansion is being fuelled by increased international investment in the region.
More than half (52%) say the growing numbers of high net worth and mass affluent individuals in MENA are attracting interest from international firms.
Advisers believe the wider product ranges of international companies and their approach to investor suitability assessments give them an edge over local firms.
Around 70% point to the products that international firms can offer while 54% highlight suitability assessments. More than half (51%) believe international firms have better digital capabilities while 48% say adviser skill sets at international firms give them a competitive advantage.
The research found advisers and wealth managers believe the asset management industry in MENA is expanding faster than predicted with 69% saying it will hit $2 trillion in assets under management before 2025 compared with the $1.2 trillion achieved in 2020**.
MENA investors are also looking to increase their exposure to international assets – two out of five (39%) of advisers expect them to dramatically increase it over the next three years.
Oxford Risk is urging wealth advisers in the region to make more use of technology to provide improved services to clients based on understanding their needs through detailed profiling.
Greg B Davies, Ph.D., Head of Behavioural Finance, Oxford Risk said: “The asset management industry in MENA is expanding strongly and inevitably that is attracting the interest of international financial institutions.
“At the same time, clients in MENA want to increase their exposure to international assets with the growing use of technology by advisers in the region and the need for diversification driving demand.
“Wealth advisers in the region believe international firms have a competitive advantage on product range but also on how they assess investor suitability and in some cases adviser skills.”
Oxford Risk’s behavioral tools assess financial personality and preferences as well as changes in investors’ financial situations and, supplemented with other behavioral information and demographics, build a comprehensive profile. Oxford Risk’s financial personality tests can measure up to 18 distinct dimensions, of which six reflect preferences for ESG investing.
It believes the best investment solution for each investor needs to be anchored on stable and accurate measures of risk tolerance. Behavioral profiling then provides an opportunity for investors to learn about their attitudes, emotions, and biases, helping them prepare for the anxiety that is likely to arise. This should be used to help investors control their emotions, not define the suitable risk of the portfolio itself.