Global high net worth wealth to dip by $3.1 trillion in 2020 – study

The Covid-19 pandemic will change the way the wealth management (WM) industry in the Middle East operates, a new report by Oliver Wyman and Morgan Stanley revealed.

The report Wealth Management: After the Storm, suggests how a ‘golden decade’ of growth for the WM industry has been disrupted by the pandemic, introducing the need for flexible planning to drive performance over the next five years.

Oliver Wyman’s pre-Covid-19 estimates saw wealth growing consistently at six per cent from 2019 onwards, however, the pandemic will see roughly one lost year of wealth growth.

“We see global high net worth wealth declining by four per cent, or $3.1 trillion in 2020, which is a major shift from the previous decade’s consistent annual growth trajectory,” said Raji Souag, partner at Oliver Wyman Middle East.

“Wealth managers have benefited from more than eight per cent annual wealth growth on average, however, Covid-19 has introduced a different reality. Although wealth managers have proven to be a stable anchor to group profitability, the industry has seen a transformational change during this period.

“To drive this transformation, digitalisation and globalisation will be among the immediate priorities of wealth management firms. This will allow the industry to sustain its profit margins whilst adhering to rapidly changing client expectations.”

To adapt and succeed, wealth managers must:

· Adapt by rolling out new advice delivery models and accelerating digital capabilities

· Defend business economics by finding operating leverage through improved approaches to cost

· Consolidate share and drive growth via differentiated product offerings and ‘inorganic’ opportunities

Increased digital engagement has supported the need for wealth managers to redefine their delivery models and grow their digitisation efforts. Meanwhile, advisors will remain pivotal to client relationships, supported with strong digital capabilities, according to the report.

Although the GCC countries have traditionally preferred in-person interaction, there has also been a shift in behaviour, driven by emerging wealth segments and generational shifts.

Over 85 per cent of high-net-worth investors polled in an Oliver Wyman pre-Covid-19 survey valued the ability to talk with an advisor, versus less than one third who valued advice delivered via ‘robo-advisors’.

“The market turmoil prompted by the current situation has underscored the value of having access to human advisors driven by the complexity, diversity and urgency of client requests during this period of change,” said Souag.