Overall growth of private wealth in Bahrain is expected to increase steadily to 4.5 per cent compound annual growth rate (CAGR) and reach $200 billion over the next five years, a new report said.
Equities, at 6.7 per cent CAGR, and cash and deposits, at 3 per cent CAGR, will be the primary contributors to this growth rate over the coming five year period, added the study titled “Global Wealth 2017: Transforming the Client Experience” by The Boston Consulting Group (BCG), a global management consultancy.
While private wealth growth in Bahrain witnessed slight growth in 2016 (3.9 per cent), the amount of wealth held in equities increased to 5.8 per cent, in comparison to cash and deposits at 3 per cent and bonds at 1.6 per cent, the report said.
The 17th annual study by BCG outlines the evolution of private wealth from both global and regional perspectives, addresses key industry trends, and places special emphasis on how players can create fresh and innovative client journeys by leveraging digital technology to its fullest in wealth management business and operating models.
“Digital initiatives in the industry have centered largely on providing customers with basic portfolio functionalities and the ability to execute standard trading and payment transactions,” said Markus Massi, senior partner & managing director of BCG Middle East’s Financial Services practice.
“What’s needed is to design and implement fully rethought, reworked, and advanced client journeys that seamlessly combine digital, relationship management, and expert channels to transform the entire client experience from end to end.
“To build successful business models and optimize cost reduction, wealth managers need to increase their investments. Although companies in a number of other industries have taken this approach to the evolving digital environment, many wealth managers have not, as such segmentation of clients on the basis of their behaviour has often been neglected. Old ways of doing work are ceasing to be efficient in the new private banking environment,” Massi added.
Over the next five years, wealth in the Middle East and Africa region is set to reach $12 trillion—and the UAE, Oman, Qatar, and Saudi Arabia’s contribution will account for 21.1 per cent.
Taking an in-depth look at wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in Bahrain experienced robust growth—at 7.6 per cent— in 2016. The growth experienced by this segment is expected to continue at a steady pace; 9.8 per cent CAGR through 2021.
The upper high-net-worth (HNW) segment (those with between $20 million and $100 million) experienced very slight growth in 2016 at 0.6 per cent. In the next five years, the projected growth of this segment will see a decrease to -1.1 per cent CAGR.
In Bahrain, private wealth held by the lower HNW segment (those with between $1 million and $20 million) witnessed burgeoning growth of 6.1 per cent in 2016. Private wealth in this segment has a projected CAGR of 7 per cent over the next five years.
The total number of millionaire households (those with more than $1 million in net investable assets) in Bahrain increased by 1 per cent CAGR in 2016. Looking ahead, growth is set to decline slightly at 0.4 per cent CAGR by 2021.
The findings of BCG’s report also revealed that, in 2016, Switzerland remained the largest destination for the Middle East and Africa’s offshore wealth, accounting for 31 per cent with a projected CAGR of 4.7 per cent over the next five years. This was followed by the UK/Channel Islands at 23 per cent with a CAGR of 5 per cent, and Dubai at 18 per cent with a CAGR of 4.5 per cent.
“In the Middle East and Africa (MEA), wealth expansion should stem, in relatively equal portions, from existing assets and higher household savings,” said Massi. “Looking ahead, the share of wealth allocated to each asset class is expected to remain stable, with regional wealth projected to rise at an annual rate of roughly 8 per cent through 2021. In the coming years, more local players will enter the wealth management market as traditional revenue pools become more competitive.”
– Trade Arabia