Private wealth in the United Arab Emirates (UAE) witnessed robust growth in 2015 (10.2 percent), according to a new report by The Boston Consulting Group (BCG), Global Wealth 2016: Navigating the New Client Landscape.
In the UAE, the growth of private wealth was driven primarily by cash and deposits. In fact, between 2014 and 2015, the amount of wealth held in cash and deposits increased by 16.7 percent across the nation, compared with 0.7 percent for bonds, and 3.8 percent for equities.
Based on BCG’s study, the UAE is set to show solid growth in the next five years, with the wealth breakdown anticipated to be 19.2 percent in equities, 12.1 percent in cash and deposits, and 4.8 percent in bonds.
This annual study outlines the evolution of private wealth from both a global and regional perspective, addresses key industry trends, and explores evolving client needs—particularly those of underserved, nontraditional segments such as female investors and millennials, whose investment goals are not necessarily well-addressed by the standard, net-worth-based service approach.
“Segmentation approaches based mainly on wealth level continue to be used by the majority of wealth managers, neglect what clients are truly willing to pay for,” said Markus Massi, Partner & Managing Director of BCG Middle East’s Financial Services practice. “Such approaches no longer allow wealth managers to capitalize on the full potential of the market.”
Massi also added: “Local asset managers still provide a standard product program with limited differentiation. International asset managers have embarked on a journey designed to tailor their offering around specific customer segments, leveraging increasingly digital opportunities. They use technology to offer additional communication channels and services to their customers and tap into big data to generate customer insights—so they can further customize their offering and make it more personal. Local wealth managers in the GCC are only now starting to recognize this opportunity, which could become a source of true differentiation.”
Over the next five years, wealth in the Middle East and Africa region is set to reach $11.8 trillion—and the UAE, Saudi Arabia, and Kuwait’s contribution will account for 22.7 percent of that sum.
In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in the UAE grew slightly —by 6.3 percent— in 2015. However, by 2020, private wealth held by this specific segment is expected to increase by a healthy 20 percent.
In the UAE, private wealth held by the upper high-net-worth (HNW) segment (those with between $20 million and $100 million) grew at a rate of 11.8 percent in 2015. It is projected to grow by 18.2 percent over the next five years.
Interestingly, in the UAE, private wealth held by the lower HNW segment (those with between $1 million and $20 million) witnessed the highest growth in 2015.
Private wealth in that segment soared by an impressive 13.6 percent in 2015 and with a projected CAGR of 16.5 percent over the next five years, this segment will continue to undergo significant growth.
The total number of millionaire households (those with more than $1 million in net investable assets) in the UAE went up by 8.5 percent in 2015. Looking ahead, it is set to grow by another 7.9 percent by 2020.