Personal financial wealth in the UAE from 2013 to 2018 grew by 5% a year to $400bn, and is expected to grow by 8% each year $600bn by 2023, according to the latest report by Boston Consulting Group (BCG).
Almost half (47%) of the total personal wealth in the UAE in 2018 was held by millionaires, similar to the 50% rate globally.
"The performance of global wealth segments in 2018 suggests there are a number of significant shifts underway across major segments, markets, and the wealth management model," said Markus Massi, managing director at BCG Middle East. "While international wealth managers are making strides towards innovating in a rapidly shifting environment, Middle East wealth managers have not fully embarked on that trend.
While international wealth managers are making strides towards innovating in a rapidly shifting environment, Middle East wealth managers have not fully embarked on that trend"
A spotlight on asset allocation shows that currency and deposits (66%) accounted for the largest proportion of assets, with life insurance & pensions (17%), equities & investment funds (14%), and bonds (3%) rounding out the overall composition of assets in 2018.
Looking ahead, the allocation of assets is set to change slightly by 2023, with life insurance and pensions expected to grow the fastest with 18% growth per annum (p.a.) compared to currency & deposits, which is forecast to grow the least at 5% p.a.
The cross-border share of total wealth in the UAE was 31.8% in 2018, in line with the MENA region average, but significantly higher than the global share of 4.2%. The share is expected to decrease to 28.8% by 2023, as cross-border assets show a lower growth rate than onshore assets at 6% per year.
Despite personal wealth in the UAE and the region growing at a healthy rate, Markus Massi said wealth managers should not rest on their laurels.
"While international wealth managers are making strides towards innovating in a rapidly shifting environment, Middle East wealth managers have not fully embarked on that trend," said Massi. "Local wealth managers have to tailor their offering more to either local needs and/or younger wealth segments. Offering a ‘me too' will not be sufficient to benefit from the growing wealth."
Globally, personal financial assets grew by only 1.6% in 2018, well below the five-year compound annual rate of 6.2% from 2013 to 2017. The 19th annual report includes close to 100 markets and draws on data from more than 150 wealth managers.
As a result of a fourth-quarter dip in stock indexes, as well as geopolitical threats, high valuation levels, and interest rate challenges, the report titled "Global Wealth 2019: Reigniting Radical Growth" states the slide in wealth serves as a call to action for wealth managers to reinvent business models in the years ahead.