Over the next five years, wealth in the Middle East and Africa region is set to reach $11.8 trillion, with Kuwait, Saudi Arabia, and the UAE’s contribution together accounting for 22.7 percent of that sum.
Private wealth in Kuwait is projected to post a compound annual growth rate of 5.9 percent to reach US$500 billion in 2020. Over the next five years, private wealth held by upper high-net-worth households in the country is also expected to increase by 14.2 percent, says a new report by the global management consulting firm, Boston Consulting Group (BCG).
The report, ‘Global Wealth 2016: Navigating the New Client Landscape’, which was released last week notes that in the next five years, the growth of private wealth in Kuwait will be driven primarily by equities (8.5 percent), followed by cash and deposits (4.7 percent) and bonds (2.8 percent).
In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in Kuwait is expected to grow by 8.3 percent in the next five years. During the same period, private wealth held by the upper high-net-worth (HNW) segment (those with between $20 million and $100 million) will witness the highest growth and is projected to increase at a rate of 14.2 percent. In parallel, private wealth held by the lower HNW segment (those with between $1 million and $20 million) will go up by 6.3 percent.
And lastly, looking ahead, the total number of millionaire households (those with more than $1 million in net investable assets) in Kuwait is set to grow by just 1.8 percent in five years.
Meanwhile, global private financial wealth grew by 5.2 percent in 2015 to a total of $168 trillion. The rise was less than a year earlier, when global wealth rose by more than 7 percent. All regions except Japan experienced slower growth than in 2014. Unlike in recent years, the bulk of global wealth growth in 2015 was driven by the creation of new wealth (such as rising household income) rather than by the performance of existing assets, as many equity and bond markets stayed flat or even fell. Assuming that equity markets regain momentum, private wealth globally is expected to rise at a compound annual growth rate of 6 percent over the next five years to reach $224 trillion in 2020.
The sixteenth annual study by BCG, which outlines the evolution of private wealth from both a global and regional perspective, addresses key industry trends and explores evolving client needs —particularly those of underserved, non-traditional segments such as female investors and those in the early thirties, whose investment goals are not necessarily well-addressed by the standard, net-worth-based service approach.
The report says that two nontraditional client groups whose investment needs and size (population-wise) merit special attention are female investors — whose success as corporate executives and entrepreneurs (in addition to being the beneficiaries of inheritances and legal settlements) have raised their wealth levels significantly—and millennials (people born between 1980 and 2000), whose overall wealth accumulation is rising steadily.
In 2015, women held an estimated 30 percent of global private wealth, with the share slightly higher in developed markets than in emerging ones. Yet just 2 percent of wealth managers surveyed by BCG said they considered women a specific client segment — fully investigating their investment needs and how they wish to be served — and had adjusted their service models accordingly. Similarly, 50 percent of wealth managers surveyed said they did not possess a clear view on how to address millennials in terms of service model, products, and overall approach.
The report warns that by continuing to take a segmentation approach based mainly on wealth level, which neglects what clients are truly willing to pay for, many wealth managers are not capitalizing on the full potential of the market.