QATAR. Private wealth continued to experience positive growth between 2016 and 2017 (8 percent), and this growth is projected to remain steady over the next five years according to a new report by The Boston Consulting Group (BCG), Global Wealth 2018: Seizing the Analytics Advantage.
Personal wealth in the Middle East rose by 11 percent to $3.8 trillion in 2017, a significant increase compared with the CAGR for the previous five years. In comparison, personal wealth in Qatar has grown at 9 percent between 2016 and 2017. In 2016 to 2017, private wealth was driven primarily by the positive development of life insurance and pensions.
In Qatar, personal wealth is projected to grow at a Compound Annual Growth Rate (CAGR) of 8 percent and expected to reach $270 billion in investible assets by 2022.
The report, BCG’s eighteenth annual study of the global wealth management industry, uses global and regional perspectives to examine such topics as the evolution of personal financial wealth, the widening revenue gap and how institutions can narrow it, and the state of offshore business. The report also takes a comprehensive look at a critical initiative for staying competitive in the marketplace: unleashing the power of advanced analytics.
“Taking an in-depth look at wealth distribution, Qatar non-investible assets are expected to increase at a CAGR of 23 percent in the next five years, while investible wealth growth is projected to accelerate at a CAGR of 7 percent,” explains Markus Massi.
“When it comes to asset allocation, currency and deposits, at 45 percent, were the highest proportion of assets in Qatar in 2017, followed by offshore assets at 41 percent, equities and investment funds at 10 percent, and life insurance and pensions at 3 percent. By 2022, currency and deposits, and life insurance and pensions are expected to experience slight growth to 53 percent and 5 percent respectively. For offshore assets, and equities and investment funds will experience a decline to a respective 36 percent and 6 percent respectively,” Massi added.
At 24 percent, life insurance and pensions drove growth by asset class between 2016 and 2017 in Qatar. Other drivers of asset class growth included currency and deposits at 21 percent, and offshore assets at 5 percent. In Qatar, equities and investment funds and bonds experienced negative growth at -16 percent and -2 percent respectively.
Looking to the future, growth by asset class is expected to experience a slightly slower, but steady growth with life insurance and pensions at 23 percent, and currency and deposits at 11 percent CAGR over the next five years. In the same period, growth in offshore assets will remain constant at CAGR of 5 percent and equities and investment funds and bonds will accelerate to -2 percent CAGR and -1 percent CAGR respectively.
While offshore share is expected to decline over the next five years from 41.4 percent in 2017 to 35.5 percent in 2022, it will continue to grow at a CAGR of 4.6 percent to reach $95 billion in Qatar in the same period.
• The Evolution of Personal Financial Wealth. According to the report, global personal financial wealth grew by 12 percent in 2017 to $201.9 trillion in US dollar terms. The main drivers were the bull market environment in all major economies—with wealth in equities and investment funds showing by far the strongest growth—and the significant strengthening of most major currencies against the dollar. In general, developed markets held a higher share of wealth in non-investable assets—particularly pension fund entitlements—than developing markets. The share of global wealth held by millionaires increased to almost 50 percent in 2017, compared with just under 45 percent in 2012. If recent patterns of wealth expansion continue, under an optimistic scenario, personal financial wealth could rise at a compound annual growth rate of around 7 percent from 2017 to 2022 in US dollar terms.
• The Offshore Perspective. The amount of global offshore wealth held in 2017 was around $8.2 trillion, 6 percent higher than in the previous year in US dollar terms. Switzerland remained the largest offshore center, domiciling $2.3 trillion in personal wealth in the country. The next-largest booking centers were Hong Kong ($1.1 trillion) and Singapore ($0.9 trillion), which have grown at yearly rates of 11 percent and 10 percent, respectively—more than three times the rate (3 percent) of Switzerland over the past five years. Net offshore inflows from 2012 through 2017 totaled over $800 billion, with Hong Kong and Singapore the key destinations. Some offshore centers, notably the Channel Islands and the Isle of Man, saw net outflows during the same period.
• Bridging the Revenue Gap. According to BCG industry data gathered from more than 150 wealth managers, top performers—defined as the quartile of institutions with the highest pretax profit margins—achieved a significant lead over average performers in overall revenue growth and return on assets (RoA) over the past three years. BCG estimates that wealth managers can achieve a revenue uplift of 8 percent to 12 percent by adjusting price levels, correcting unnecessary discounts, and simplifying overall pricing structures. Product and service bundling can contribute to higher revenues if properly linked to the pricing architecture and to the value proposition for each client segment. Overall, smart revenue practices can accomplish the dual goal of increasing the top line and enhancing client satisfaction.
• Unleashing the Value of Advanced Analytics. Firms that deliver smart, individualized products, services, and prices—digitally and through a relationship manager or financial advisor—will significantly bolster their top-line growth and occupy a differentiated position in the market. But seizing this opportunity requires the deployment of cutting-edge capabilities in advanced analytics—encompassing such elements as new technology platforms, fresh development capacities, next-generation tech and data architectures, updated data and digital organizational structures and skills, and improved access to internal and external data. A full transformation along these lines can lead to top-line growth of 15 percent to 30 percent and drive efficiency gains of 10 percent to 15 percent.
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