How is wealth management faring across the GCC?

What are the key emerging trends in wealth management across the GCC?

Wealth management in the GCC is undergoing significant transformation. In 2021 alone, the high-net-worth-individual (HNWI) population and wealth in the Middle East grew by 5.5 per cent and 6.3 per cent, respectively.

The growth was led primarily by Israel and the UAE, which witnessed HNWI wealth and population growth higher than the global average due to their increased tech-industry focus, according to Capgemini’s World Wealth Report 2022. The UAE’s ultra-HNWIs outperformed global growth rates with a 17.5 per cent increase in population and an 18.6 per cent increase in wealth.

Having said that, shifting client expectations due to volatile market conditions and fundamentally different expectations and investment goals of next-generation investors are redefining norms in the industry, in terms of how wealth advice and investment products are offered.

The traditional, time-tested 60/40 allocation strategy to bonds and stocks is no longer viable. With challenging equity and bond markets, wealth managers are finding it harder to generate superior returns for their clients.

Another trend is the huge transfer of wealth from baby boomers to their successors. As per estimates, baby boomers are set to pass more than $68tn on to their children. This transfer will disrupt the established norms between wealth managers and their clients, while creating opportunities for technology-driven firms to grow market share.

How can wealth managers in the GCC region create a valuable client experience?

Digitalisation and technological innovation in wealth solutions across the GCC are expanding as clients seek more sophistication and ease of access.

Fintech investments in the MENA region have already reached $819m in the first half of 2022, according to data by dealroom. This is almost as much as in all of 2021 and 14 times more than in 2016. That also explains why a growing number of wealth firms, including ours, are investing substantially in technological solutions.

Having said that, digital developments have not only enhanced wealth solutions and client experience but have also enabled advisors to reach new customers and grow market share. Wealth managers must adopt a hybrid approach where their clients can access products through digital channels, while easily approaching their relationship managers and advisors to address their investment needs.

Did the pandemic change the UAE wealth management playbook fundamentally?

Wealth management is an ever-evolving industry. But in recent years, it has experienced a set of disruptions, and the Covid-19 pandemic has been among the foremost disruptions.

The severe impact of the pandemic on wealth management, particularly on advisor-client relationships, left many wealth firms navigating through uncharted waters. However,  the health crisis gave way to a significant wave of innovation and experimentation across the wealth management ecosystem.

It is therefore understandable that the attention of relationship managers would shift towards mitigating the impact of the pandemic and refocusing their efforts and priorities by aligning them with their client needs.

How is digital technology accelerating the transformation of wealth management?

In recent years, the penetration of technology into the wealth management business has been increasing, with many players offering digital-only services. While digitalisation, artificial intelligence, and robo-advisory have advantages as tools to attract and retain clients, being technology-savvy doesn’t mean compromising value.

As wealth managers adopt next-generation technology, they must provide an exceptional experience to clients and follow robust portfolio review processes to stay ahead.

The number of young wealthy people, especially millennials, is rising in the GCC. How are you adapting your platform to cater to the growing millennial segment?

Demographic shifts and the expansion of wealth globally are creating new customer segments. An estimated 250 million Generation Y and Z customers – those born between 1981 and 2012 – will have an annual income of over $100,000 by 2030, according to Bain & Company.

While millennials are expected to become one of the most significant segments of our client base, they are not a homogenous customer class. Their investment needs and strategies differ widely from one group to another.

Therefore, advisors must understand the needs of a millennial client carefully and offer bespoke services accordingly. Also, relationship managers must be flexible and adaptable in their approach to retain such clients.

Also read: The current state of the Middle East’s wealth management industry