Dubai: Covid-19 pandemic has significantly impacted the financial confidence of the affluent in the UAE, resulting in a re-setting of their financial goals, according to a Standard Chartered survey.
The survey comprising emerging affluent, affluent and high net worth consumers in the UAE showed 88 per cent of them have reset their life goals following the pandemic.
At the same time, for 43 per cent of the respondents, Covid-19 has diminished their confidence in their finances, preventing them from taking the actions necessary to achieve their new goals.
“The global pandemic impacted both the investment perception and risk profiles of UAE affluent. It prompted them to reset their financial priorities and encouraged them to seek new financial products, which increased their rate of savings for the future while being more engaged in tracking their financial performance,” said Dr. Owen Young, Regional Head of Wealth Management, Europe, Middle East and Africa, Standard Chartered Bank.
Risk aversion
COVID-19 has prompted the affluent in the UAE to become more future-focused when resetting their priorities: Over a third (47%) of people have set the goal to improve their health, followed by 39% of people setting the goal of setting aside more for their children’s future.
To meet these new goals, the affluent need new strategies to grow their wealth, which often involves more proactive investment rather than just saving cash. However, their current ‘confidence gap’ has made many increasingly averse to risk, potentially stopping them from putting their money to work through investing or making use of digital tools that simplify wealth management.
“The UAE affluent have become more risk averse and are actively adapting their finances to the global economic situation with eyes on global market volatility and interest rate levels. A sizable percentage of the affluent sample in the UAE expect future returns to drop and are aligning their portfolios to this new normal. We, at Standard Chartered, acknowledge this trend and are working closely with our clients to grow, manage and most importantly protect their money,” said Dr. Owen.
Confidence gap
The emerging affluent have disproportionately suffered a loss of confidence, with almost half (46 per cent) reporting less confidence compared with 30 per cent of high net worth (HNW) individuals. That means those lower down the wealth spectrum, still establishing their finances, stand to lose out more if they do not have the support to rebuild their confidence.
For the affluent across the wealth spectrum in the UAE, the three most common factors impacting their confidence were volatility in financial markets’ (35 per cent), ‘fear of poor returns on investments’ (30 per cent) and ‘the complexity of developing an investment strategy’ (26 per cent).
Retirement risk
A late start to retirement planning, combined with the pandemic-induced confidence gap, leaves a significant proportion of affluent consumers at risk of a shortfall for their retirement. The survey found that 31 per cent of people do not currently save/invest for retirement. For those that do, ‘investment income’ (50 per cent) and ‘cash savings / deposits’ (37 per cent) are the most common expected sources of income in retirement.
