Stock aerial Dubai skyline
Despite having to deal with COVID-19, the UAE's rich saw their individual wealth total $600 billion in 2020. Image Credit: AFP

Dubai: The UAE’s individual financial wealth reached $600 billion in 2020 despite the pandemic impacting the local economy, according Boston Consulting Group’s latest wealth report.

“Although the pandemic posed many challenges, the UAE’s wealth segment has proven to be resilient in the face of adversity - hence the growth it has recorded," said Mustafa Bosca, Managing Director and Partner at BCG. "The National Agenda has driven economic activity, empowering the country to operate in an economy that continues to become increasingly global. As a result, growth in wealth has been recorded despite the mass disruption, placing the UAE in a favorable position for the years ahead.”

The UAE’s financial wealth has grown by a compound annual growth rate (CAGR) of 3 per cent from 2015. According to BCG’s Global Wealth 2021: When Clients Take the Lead, about 70 per cent of UAE’s financial wealth is investable wealth.

The report reveals that despite the pandemic’s enduring financial impact, global wealth grew significantly throughout the crisis and are likely to continue to expand significantly over the next five years, in line with the emerging economic recovery. The UAE, which represented 26 per cent of the GCC’s financial wealth in 2020, is expected to witness strong growth of 4 per cent CAGR to reach $700 billion by 2025 - a $100 billion increase from 2020.

Expand wealth base

The GCC’s financial wealth is forecast to reach $2.7 trillion in 2025 from $2.2 trillion in 2020. A spotlight on onshore asset allocation shows that equities and investment funds, at 47 per cent, accounted for the largest proportion of assets in 2020. The allocation of onshore assets is set to change slightly by 2025, with currency and deposits expected to take the larger share of onshore assets amounting to 47 per cent of the overall onshore asset class in the UAE.

UAE becomes the sixth largest cross-border wealth management center
Dubai: The UAE is fast emerging as a leading cross-border wealth management center with as much as half a trillion dollars of overseas wealth managed in the country in 2020.
In 2020, the country became the sixth largest offshore asset booking centre. While Switzerland with $2.4 trillion in overseas wealth managed there is the top global jurisdiction that attracted largest chunk of foreign wealth followed by Hong Kong, Singapore, USA and Isle of Man in the first five positions.
BCG expects the UAE to play a much larger role in global wealth management in the years ahead.
“The UAE has the potential and the infrastructure to manage a much larger share of overseas wealth in the country. In the years ahead, we will see more global wealth getting managed in the country,” said Mustafa Bosca, Managing Director and Partner at BCG.
Saudi Arabia and the UAE together account for 71 per cent of the financial wealth within the GCC with Saudi accounting for 45 per cent of this followed by 26 per cent by the UAE and 11 per cent each by Qatar and Kuwait.
In the GCC 66 per cent of the financial wealth is held by millennials and cash represents 46 per cent of this.

Generational shift

BCG’s report also shows the UAE’s changing landscape of the wealthy in the coming years, with the rise of the next-generation affluent and high networth clients. These individuals, between 20 and 50 years of age, have longer investment horizons, a greater appetite for risk, and often a desire to use their wealth to create positive societal impact as well as earn solid returns. Many wealth managers are not yet ready to serve these new ultras.

“Nationwide wealth has been distributed to more members of the population, and, likely, client demands and expectations will also shift as wealth demographics continue to experience change. As such, those responsible for local wealth management will be tasked with tailoring their offerings to local needs or younger wealth segments with heightened proactivity in due course,” said Mohammad Khan, Partner at BCG.

5 pillars of digital model
According to BCG, to win the the next-generation rich, wealth managers must bring a bold and new digital business model to life. The five pillars of the new digital model include:

* Supercharged relationship management: All of the legwork is done with the use of technology and relationship management to become the key support in the digital conversion funnel.

* Consumable learning: Streamlined, gamified, 100% digital content placed strategically to nudge conversion.

* Smarter user and experience design: Simple to use platforms, enriched with tools and simulators that clients can play with.

* Simplified pricing: Hybrid model combining asset-based pricing with flat subscription fees.

* Democratized access to ‘haute’ investments: Customisable discretionary mandates, and scale-down of ultra-high networth individual products.