Bahrain’s private financial wealth ‘set to reach $98.7bln by 2026’

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Bahrain’s private financial wealth is set to grow around 4 per cent every year to $98.7 billion by 2026, as per a new report by Boston Consulting Group (BCG).

Titled ‘Global Wealth 2022: Standing Still Is Not an Option’, the report however notes that the rate of growth will be slightly lower than the nearly 6pc annual expansion in wealth seen in the kingdom since 2016 to reach $81.6bn by end-2021.

The analysis also found that approximately 47pc of Bahrain’s wealth derived from the ultra high net worth (HNW) segment in 2021, which are individuals worth more than $100 million.

Financial wealth consists of cash and deposits; bonds, equities and investment fund shares; life insurance and pension; and other small asset classes and does not include real assets which comprise real estate including land owned by individuals, consumer durables and valuables, like non-monetary gold and other metals valued at current prices.

It also does not include liabilities that are made up of credit card loans, mortgage loans and other short and long-term loans.

Commenting on the outlook, Mustafa Bosca, managing director and partner at BCG, told the GDN: “We see the Middle East and Africa financial wealth growing year after year, including Bahrain, despite a tremulous global market.”

The report found financial wealth for the world as a whole grew by 10.6pc from 2020 to 2021 — the fastest rate in over a decade.

The double-digit growth created $26 trillion in new wealth and took total financial wealth and the real asset pool close to $530trn.

BCG expects $80trn in new wealth to be created over the next five years. The Middle East and Africa could see the biggest leap in growth.

Buoyed by the region’s massive energy holdings, wealth is on track to rise by a compound annual growth rate (CAGR) of 5.4pc over the next five years.

Looking ahead, the report highlights net-zero, crypto, personalisation, and digitisation as imperatives whose outcomes will determine which wealth management institutions grow client share over the next five years.

Although people tend to think of net-zero as a 2050 goal, the report notes that wealth managers must act immediately to embed sustainable investing across the entire client life cycle.

The opportunity for wealth managers is clear: nearly 80pc of clients surveyed said that they would consider increasing their crypto holdings if wealth managers offered advisory and education services.

Two-thirds of clients who sourced their crypto investment with third parties said that they did so because they didn’t think their wealth managers offered such services.

In the report, BCG identifies three actions that wealth managers vying to deliver individualised service at scale can take to improve personalisation: prioritise capabilities that recur across journeys; design for value and scale; and back good ideas with the right enablers.

The valuation multiples of digital wealth management firms are six or seven times as high as those of traditional wealth managers. Digital wealth management institutions are delivering faster customer growth, cheaper cost structures, and superior rates of innovation. To protect their future profitability, traditional wealth managers must evolve with the times.

“The wealth management agenda is getting more crowded – and the items on it more urgent. Net-zero, crypto, personalisation, and digitisation are not merely arenas that leaders can simply consider. They are imperatives whose outcomes will determine which institutions grow client share over the next five years. The most important question facing wealth managers right now is not which initiatives to prioritise – but how best to execute on all of them,” added Mr Bosca.

avinash@gdnmedia.bh

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MANAMA: Bahrain’s private financial wealth is set to grow around 4 per cent every year to $98.7 billion by 2026, as per a new report by Boston Consulting Group (BCG).