Complex Made Simple

The UAE is fortunes’ oasis: Can you emulate wealth making?

According to a new report by The Boston Consulting Group (BCG), Global Wealth 2018: Seizing the Analytics Advantage,  global personal financial wealth grew by 12 percent in 2017 to $201.9 trillion in US dollar terms.

Personal wealth in the Middle East rose by 11 percent to $3.8 trillion in 2017.

UAE personal wealth has grown at 8 percent between 2016 and 2017. In 2016 to 2017, private wealth was driven primarily by the positive development of equities and investment funds. Going forward personal wealth in the UAE is projected to continue to grow at a Compound Annual Growth Rate of 8 percent and expected to reach $590 billion in investable assets by 2022.

Read: How’s the Middle East’s wealth multiplying, and where is all money going?

BCG research suggests that over 70 percent of wealth management clients see hugely personalized services as a key factor in deciding whether to stay with their current provider or switch to another,” said Markus Massi, Senior Partner & Managing Director of BCG Middle East’s Financial Services practice.

“Value creation opportunities touch all parts of the wealth management business and success depends on having or developing a foundation of key management capabilities. We expect leading firms to further separate themselves from the pack over the next few years, a gap that will be increasingly difficult for slow-moving players to close.”

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Spotlight on UAE

“Taking an in-depth look at wealth distribution, UAE non-investible assets are expected to increase at 11 percent in the next five years, while investible wealth growth is projected to remain constant at 7 percent,” explains Markus Massi.

“When it comes to asset allocation, currency and deposits, at 46 percent, were the highest proportion of assets in the UAE in 2017, followed by offshore assets at 30 percent, life insurance and pensions at 15 percent and equities and investment funds at 9 percent. For the most part, this asset allocation is expected to experience slight growth by 2022, with currency and deposits, life insurance and pensions, and equities and investment funds projected to reach 48 percent, 17 percent and 11 percent respectively,” Massi added.

As the regulatory climate has tightened over the last decade, there have been significant flows back onshore. In the UAE, this is signified by the expected decrease in offshore assets of 6 percent between 2017 and 2022.

At 15 percent, equities and investment funds drove growth by asset class between 2016 and 2017 in the UAE. Other drivers of asset class growth included currency and deposits at 11 percent, life insurance and pensions at 10 percent, and offshore at 2 percent. What is interesting is that while bonds experienced a significant global decline of -10 percent, in the UAE bonds grew by 1 percent in the 2016 to 2017 period.

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Looking to the future, growth by asset class will experience a slightly slower, but steady growth in equities and investment funds at 12 percent, and currency and deposits at 9 percent over the next five years.

While offshore share is expected to decline over the next five years from 30 percent in 2017 to 24.1 percent in 2022, it will continue to grow at 3 percent to reach $140 Billion in the UAE in the same period.

BCG is a global management consulting firm and the world’s leading advisor on business strategy.

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