- 51% of the country’s wealth is in the hands of individuals with assets exceeding $5 million.
The financial wealth of the United Arab Emirates (UAE) grew at a compound annual growth rate (CAGR) of 3% from 2015 to peak at $600 billion in 2020 – 69% of which is investable assets – as the UAE showed resilience in the face of the long lasting COVID-19 pandemic, according to a new report from Boston Consulting Group (BCG).
The report, entitled ‘Global Wealth 2021: when customers lead the way‘, reveals that despite the lasting financial impact of the pandemic, global prosperity and wealth grew significantly during the crisis and is likely to continue to grow significantly over the next five years, in line with the emerging economic recovery.
“Although the COVID-19 pandemic has brought many challenges, the wealth segment of the UAE has proven to be resilient in the face of adversity hence the growth it has recorded. The National Agenda has boosted economic activity, enabling the country to operate in an increasingly global economy. As a result, despite the massive disruption, there is prosperity growth, which puts the UAE in a favorable position for the coming years,” said Mustafa Bosca, Managing Director and Partner at BCG.
The UAE, which accounted for 26% of the Gulf Cooperation Council (GCC) financial wealth in 2020, is expected to experience strong growth of 4% CAGR to reach $700 billion by 2025, an increase of $100 billion as of 2020. Meanwhile, the region’s financial wealth is expected to reach $2.7 trillion in 2025, from $2.2 trillion in 2020.
A spotlight on onshore asset allocation shows that equities and mutual funds (47%) accounted for the bulk of assets in 2020. Looking ahead, the allocation of onshore assets will change slightly by 2025, with currency and deposits expected to account for the larger share of onshore assets at 47% of the total onshore asset class in the UAE.
The Changing Landscape of the Rich in the UAE
BCG’s report also shows the changing landscape of the wealthy in the UAE in the coming years, with the emergence of the next generation of affluent and high-net-worth clients. These individuals, aged between 20 and 50, have a longer investment horizon, greater risk appetite and often a desire to use their assets to create positive societal impact and achieve solid returns. Many asset managers are not yet ready to operate these new ultras.
“Greater economic performance has led to new entrants among the UAE’s wealthy. Rural wealth is distributed among more members of the population, and it is likely that customer demands and expectations will also shift as demographic wealth continues to change. As such, those responsible for local asset management will in due course be tasked with tailoring their offerings to local needs or younger asset segments with increased proactivity,” said Mohammad Khan, partner at BCG.
To win the new segment of the next-generation segment, asset managers must bring a bold and new digital business model to life. The five pillars of the new digital model are:
- Supercharged relationship management: All the work is done using technology and relationship management to become the main support in the digital conversion funnel
- Contextual and consumable learning: Streamlined, gamified, 100% digital content, strategically placed to drive conversion
- Smarter user and experience design: Easy-to-use platforms, enriched with tools and simulators for customers to play
- Simplified Pricing: Hybrid model that combines asset-based pricing with fixed subscription fees
- Democratized access to “Haute” investments: Adjustable discretionary mandates and phasing out of (U)HNWI products