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The wealth management industry will stand transformed in the coming years.  The forces that will reshape the industry are already stirring. Their march cannot be stopped. Smart bankers are seeing the opportunity created by these forces and are looking to be the first movers to establish a dominant position in the market.

That said, the MENA wealth market is becoming more and more competitive with the addition of new fintechs and non-traditional wealth management providers. The presence of multiple players in the field is intensifying the battle to capture HNI and UHNI market, which constitute only 17% of the total market.

A considerable part of the HNI and UHNI client bases have already been tapped however, the wider segment of mass affluent market is growing at a faster pace than the HNIs. Occupying 83% of the MENA market and a sizeable wealth of nearly USD 600bn, the affluent market provides a lucrative and untapped business opportunity for bankers.

Let’s take a look at some factors further propelling this shift.

 

1.Concentration of Skills

A sizeable wealth outside the purview of investment managers provides good headroom for private bankers to migrate to affluents. This can cement the reputation of centers like DIFC, which can in turn attract more talent. Over time, this virtuous circle can create an immense opportunity, making talent move, to focus on the affluent segment, to provide them with quality service. This quality of service will kindle the need for more assistance, thus deepening the mass affluent market.

 

 

2. Need for Retirement Planning

The GCC region, a heavily oil dependent economy, is beset by the shift in energy usage patterns which is further pressuring the economies and state finances. States across the GCC are exhibiting foresight and responding prudently.  For instance, the policy of Emiratization – or Tawteen in Arabic – is a key priority of the UAE.This has led to the slow withdrawal of the welfare state in GCC, which in turn is increasing the demand for retirement planning by the mass affluent.

 

 

3. Shifting Demographics

The median age of GCC currently is 27; technology is the crucial capability needed to acquire and retain the young investors who will drive the future of the industry. The population of the GCC is expected to grow about 20% in the next 15 years. This increasing population is likely to become too much for the existing welfare system, leaving people to fend for themselves. This makes the need for more goal based wealth planning all the more pertinent.

 

 

 

4. Change in Family and Labour Structure

As more women move into the workforce, the relative family affluence will increase. These working women, as they would now get a say in the family’s financials, would be more interested in long term and safe investment products– ideal for wealth management. As they enter the workforce, they are going to make a demand for better and personalized service.

 

 

5. Robo-assisted Advisory

Targeting the affluent market in the past could have been difficult due to high servicing costs. In order to service the affluents cost-effectively, bankers need to find the perfect combination of automation and personal interaction while ensuring that they satisfy the customers’ changing needs and expectations. Integrating robo-advisory to enhance relationship managers efficacy for delivering hyper-personal advise, en masse, would be the game-changer here.

 

Systems that augment the relationship managers and advisors, is where the leaders of tomorrow must invest today. The ones who take the first mover advantage would achieve unassailable position. It takes foresight and not much more to acquire such systems. A typical all-inclusive operating cost of such a system would be around USD 1 million per year. Spread over 5 years, with conservative assumptions about interests, it would mean acquiring 250 mass affluent customers a year on the upper side and 50 customers at a lower end for the system to pay for itself.  Not a daunting challenge at all, if one wishes to be the future leader in this fast evolving market.

The associated article “Stirring the wealth, forces on march” by Jaideep Billa, President, Wealth & Private banking, first appeared in Wealth Arabia, in their March 2020 edition.

You can read the complete in-depth opinion piece here.

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