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Middle East: COVID-19 will permanently change the way wealth managers deliver advice and serve clients

Source: Middle East Insurance Review | Jul 2020

COVID-19 will fundamentally change the way the wealth management industry in the Middle East operates, according to a new report released by Oliver Wyman and Morgan Stanley.
 
The report, ‘Wealth Management: After the Storm’, highlighted how a ‘golden decade’ of growth for the wealth management industry has been drastically disrupted by COVID-19 and has introduced a new reality that will require flexible planning to drive performance over the next five years.
 
Oliver Wyman’s pre-COVID-19 estimates saw wealth growing consistently at 6% from 2019 onwards; however, the pandemic will see roughly one lost year of wealth growth.
 
“We see global high net worth wealth declining by 4%, or $3.1tn in 2020, which is a major shift from the previous decade’s consistent annual growth trajectory,” said Mr Raji Souag, partner at Oliver Wyman Middle East.
 
“Wealth managers have benefitted from more than 8% 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,” Mr Souag said.
 
Wealth managers have previously benefitted from strong growth in HNW client wealth, which has offset declining margins and masked operating model inefficiencies, the report said. With this ‘tailwind’ gone for the immediate future, wealth managers need to act now to position their business to capture longer-term growth in the ‘new normal’.
 
To 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; and consolidate share and drive growth via differentiated product offerings and ‘inorganic’ opportunities, according to the report. M 
 
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