Covid-19 will transform how region's wealth management sector delivers advice

Companies must digitalise and globalise their service to drive performance over the next five years, new report finds

Wealth Managers have benefited from more than 8% annual wealth growth on average, however, Covid-19 has introduced a different reality, according to an Oliver Wyman and Morgan Stanley study. Getty Images
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Global high net-worth wealth will decline by 4 per cent, or $3.1 trillion (Dh11.38tn) in 2020, a “major shift” that will “drastically” disrupt how the Middle East’s wealth management industry operates, according to Oliver Wyman and Morgan Stanley.

A "golden decade of growth" for the sector has been drastically disrupted by Covid-19, leading to a new reality that will require flexible planning to drive performance over the next five years, according to the Wealth Management: After the Storm report from the consultancy and the US investment bank.

Oliver Wyman said its pre-Covid-19 forecast saw wealth growing consistently at 6 per cent from 2019 onwards. However, the pandemic will account for roughly one lost year of wealth growth.

“We see global high net-worth wealth declining by 4 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 benefitted from more than 8 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.”

Despite the stock market volatility caused by the pandemic, most wealthy investors in the UAE are either retaining their current stock portfolios or planning to invest more over the next six months, according to a May survey by Switzerland's UBS bank.

In the UAE, 33 per cent of investors don’t plan any adjustments to their portfolio and 43 per cent plan to invest more, the quarterly UBS Investment Sentiment survey found.

The Oliver Wyman and Morgan Stanley report said advisers must position their business to capture longer-term growth in the “new normal” rather than relying on strong growth in client wealth, which previously offset declining margins and masked operating model inefficiencies.

To drive the transformation, Mr Souag said digitalisation and globalisation should be among the immediate priorities with strategies to include new advice delivery models and driving growth through differentiated product offerings.

While advisers remain central to client relationships, they must be supported by “strong digital capabilities”, the report found.

Before the pandemic, more than 85 per cent of high net-worth investors polled in an Oliver Wyman study said they valued talking to an adviser, versus less than a third who valued advice delivered via robo-advisers.

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