Dubai—The Gulf Cooperation Council (GCC) financial wealth is projected to experience a steady Compound Annual Growth Rate (CAGR) of 4.7% in new wealth, rising from USD 2.8 trillion to USD 3.5 trillion from 2022 to 2027, as per a new report by Boston Consulting Group (BCG) titled 'Global Wealth Report 2023: Resetting the Course.'
"Accounting for 38% of the region's financial wealth in 2022, the GCC showcases its resilience and vision for the future. With a growth rate of 4.8% per annum from 2017 to reach USD 2.8 trillion in 2022, the GCC's trajectory reflects its commitment to economic development and innovation," said Markus Massi, Managing Director and Senior Partner at BCG.
UHNW Individuals Remain Key Contributors to GCC's Wealth Growth
In 2022, approximately 27% of the GCC's wealth originated from Ultra High Net Worth (UHNW) individuals worth more than USD 100 million. It is projected that these individuals will continue to play a significant role in the region's wealth until 2027. Moreover, 29% of the wealth was held by individuals' worth under USD250,000 while individuals with wealth between USD1 million - USD20 million held 24% of the GCC's wealth in 2022, and this proportion is expected to remain the same in 2027.
"High net worth individuals have played a vital role in solidifying the GCC's economic position. Not only do they foster innovation and investment in the region, but they also drive its sustained growth," said Farouk El Hosni, Principal at BCG.
Real Assets and Liabilities Witness Substantial Growth
The report also highlights the significant growth of real assets and liabilities in the GCC. Real assets in the GCC grew by 4.2% per year from 2017 to 2022, reaching USD 5.2 trillion, and are projected to increase by 6.0% per annum to USD 7.0 trillion by 2027.
Simultaneously, the GCC's liabilities sector expanded by 8.0% per annum during the same period and is expected to grow by 7.7% per annum to USD 0.7 trillion by 2027. This balanced growth underscores the GCC's financial stability and calculated risk-taking approach.
Achieving Sustainable Profitability in Wealth Management
The report provides an in-depth analysis of the performance of wealth managers across various aspects of their businesses, as well as strategies for long-term profitability. It outlines eight initiatives on both the revenue and cost sides that can assist firms in positioning themselves optimally for the future. The aim is to provide actionable information and insights for wealth managers seeking a competitive advantage in a challenging marketplace and tough overall economic conditions.
On the revenue side, the strategies include scalable client acquisition, distinctive private-market offerings, a shift towards fixed-income products, and the integration of generative artificial intelligence (GenAI) in financial advice. For cost reduction, the focus is on end-to-end (E2E) process review, informed shoring decisions, utilization of third-party technology and operational solutions, and simplification of products and services through advice-like discretionary portfolio management (DPM) to streamline operations and effectively cater to various client needs.
"To ensure long-term profitability in wealth management, firms can revolutionize revenue generation through the strategic adoption of initiatives such as scalable client acquisition, distinctive private-market offerings, and integration of GenAI in financial advice. Additionally, focusing on reviews, decisions, and tech-based solutions is crucial for strategic cost management. By implementing these insights, we can reshape wealth management and unlock a future of growth, efficiency, and scalability," concluded Massi.
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