UAE’s financial wealth to hit $700 billion in 2025 despite pandemic

Financial assets held by individuals in the UAE are on track to hit $700 billion by 2025, soaring by $100 billion from 2020, according to a new report by Boston Consulting Group.

In 2020, financial wealth in the UAE surged to $600 billion, underscoring the nation’s resilience in the face of the protracted Covid-19 pandemic as globally, financial assets held by individuals jumped 8.3 per cent to a record $250 trillion.

Individuals whose net worth is more than $5 million own 51 per cent of the UAE’s financial wealth.

Total global wealth, that is, financial assets and real assets minus liabilities (such as mortgages), rose 7.9 per cent to $431 trillion, BCG said in its annual global wealth report. Real assets, in fact, effectively doubled the size of the global wealth pool last year, generating $235 trillion in wealth, BCG reported.

“Although the pandemic has posed many challenges, the UAE’s wealth segment has proven to be resilient in the face of adversity, hence the growth it has recorded,” said Mustafa Bosca, managing director and partner at BCG.

The national agenda has driven economic activity, empowering the country to operate in an economy that continues to become increasingly global. As a result, growth in wealth has been recorded despite the mass disruption, placing the UAE in a favourable position for the years ahead, said Bosca.

In five years, financial assets held by individuals across the emirates grew by a compound annual growth rate of 3.0 per cent from 2015 to reach a high of $600 billion– 69 per cent of which is investable wealth.

The report, titled “Global wealth 2021: When clients take the leads” reveals that despite the pandemic’s enduring financial impact, global prosperity and wealth grew significantly throughout the crisis and are likely to continue to expand significantly over the next five years, in line with the emerging economic recovery.

The UAE represents 26 per cent of the GCC’s financial wealth in 2020. Meanwhile, the region’s financial wealth is forecast to reach $2.7 trillion in 2025 from $2.2 trillion in 2020.

A spotlight on onshore asset allocation shows that equities and investment funds (47 per cent) accounted for the largest proportion of assets in 2020. “Looking ahead, the allocation of onshore assets is set to change slightly by 2025, with currency and deposits expected to take the larger share of onshore assets amounting to 47 per cent of the overall onshore asset class in the UAE,” BCG said.

The report also shows the UAE’s changing landscape of the wealthy in the coming years, with the rise of the next-generation affluent and high-net-worth clients. These individuals, between 20 and 50 years of age, have longer investment horizons, a greater appetite for risk, and often a desire to use their wealth to create positive societal impact as well as earn solid returns. Many wealth managers are not yet ready to serve these new ultras, it said.

“Greater economic achievements have led to new entrants among the UAE’s wealthy. Nationwide wealth has been distributed to more members of the population, and, likely, client demands and expectations will also shift as wealth demographics continue to experience change. As such, those responsible for local wealth management will be tasked with tailoring their offerings to local needs or younger wealth segments with heightened proactivity in due course,” said Mohammad Khan, partner at BCG.

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