UAE’s financial wealth to grow to $1tn in 2026: BCG

The UAE’s financial wealth is expected to see a sturdy compound annual growth rate (CAGR) of 6.7 per cent in new wealth, rising from $0.7 trillion in 2021 to a high of $1tn in 2026, according to a new report published by Boston Consulting Group (BCG).

The report titled, Global Wealth 2022: Standing Still Is Not an Option, shows equities and investment funds in the UAE, which constituted the largest asset class at 64 per cent of total personal wealth in 2021, are expected to grow the fastest with a CAGR of 8.8 per cent by 2026.

Currency and deposits represent the second largest class at 29 per cent of total personal wealth in 2021, bonds make up a mere 3 per cent.  It is expected life insurance and pensions will become the fourth largest asset class over the next five years.

“We see the Middle East and Africa financial wealth growing year after year, with the UAE in particular, excelling, despite a tremulous global market. In fact, the UAE represented 10.2per cent of the Middle East and Africa’s financial wealth in 2021, having grown 6.4 per cent every year since 2016 to $0.7tn,” said Mustafa Bosca, managing director and partner, BCG.

In 2021, approximately 41 per cent of the UAE’s wealth derived from ultra-high net worth (HNW) individuals who are worth more than $100m, with this expected to grow to 43 per cent in 2026, whereas individuals with wealth ranging above 41m held 28 per cent of the UAE’s wealth in 2021 and is expected to remain the same by 2026.

Other key findings from the report show that:

• Although people tend to think of net-zero as a 2050 goal, the report notes that wealth managers must act immediately to embed sustainable investing across the entire client life cycle.
• The opportunity for wealth managers is clear: nearly 80 per cent of clients surveyed said that they would consider increasing their crypto holdings if wealth managers offered advisory and education services. Two-thirds of clients who sourced their crypto investment with third parties said that they did so because they didn’t think their wealth managers offered such services. To determine whether crypto is right for their businesses, wealth managers must consider if, when, and how they want to participate.
• On average, wealth managers that excel at customising offers and interactions see higher rates of client satisfaction and lower rates of churn than others do. The report identifies three actions that wealth managers vying to deliver individualised service at scale can take to improve personalisation: prioritise capabilities that recur across journeys; design for value and scale; and back good ideas with the right enablers.
• The valuation multiples of digital wealth management firms are six or seven times as high as those of traditional wealth managers. Digital wealth management institutions are delivering faster customer growth, cheaper cost structures, and superior rates of innovation. To protect their future profitability, traditional wealth managers must evolve with the times.

“The wealth management agenda is getting more crowded—and the items on it more urgent. Net-zero, crypto, personalisation, and digitisation are not merely arenas that leaders can simply consider. They are imperatives whose outcomes will determine which institutions grow client share over the next five years. The most important question facing wealth managers right now is not which initiatives to prioritise—but how best to execute on all of them,” said Bosca.