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Influence of UHNW individuals anticipated to remain consistent
KUWAIT CITY, Sept 12: Kuwait’s financial wealth is anticipated to experience a steady Compound Annual Growth Rate (CAGR) of 2.7% in new wealth, rising to USD 302 billion by 2027, according to a new report by Boston Consulting Group (BCG). The BCG report, titled ‘Global Wealth Report 2023: Resetting the Course,’ reveals that equities and investment funds in Kuwait continue to make up the largest asset class at 57% of total personal wealth in 2022, while bonds are expected to grow the fastest with a CAGR of 6.5% between 2022 – 2027. Life insurance & pensions are set to become the third largest asset class by 2027. “Representing 3.6% of the Middle East and Africa’s financial wealth in 2022 and growing at a rate of 1.7% per annum from 2017 to reach USD 265 billion in 2022, Kuwait’s trajectory signals calculated risktaking and continued economic development, despite global market challenges,” said Markus Massi, Managing Director and Senior Partner at BCG.
UHNW Individuals Remain Major Contributors to Kuwait’s Wealth Growth
In 2022, a significant portion of Kuwait’s wealth, approximately 24%, originated from Ultra High Net Worth (UHNW) individuals worth more than USD 100 million. The influence of these individuals is anticipated to continue to remain consistent until 2027. Furthermore, individuals with wealth between USD 1 million – USD 20 million held 24% of Kuwait’s wealth in 2022, with this expected to remain the same in 2027. A significant 30% of the wealth was held by individuals’ worth under USD250,000, which is expected to remain the same by 2027. “The concentration of Kuwait’s wealth in the hands of UHNW individuals garners its sustained growth. These individuals are driving investments in the region and their contribution to the economic landscape is significant,” said Markus Massi, Managing Director and Senior Partner at BCG.
Real Assets and Liabilities on the Rise
The report also presents notable findings on Kuwait’s real assets and liabilities. Real assets in Kuwait grew by 1% per year from 2017 to 2022, reaching USD 219 billion, and are projected to increase by 3.3% per annum to USD 257 billion by 2027. Simultaneously, Kuwait’s liabilities sector expanded by 4.9% per annum to USD34.1 billion during the same period and is expected to grow by 3% per annum to USD 39.6 billionby 2027. This balanced growth invokes a financial profile of a nation that is confident in taking calculated risks, potentially enhancing the all-around growth narrative.
Achieving Sustainable Profitability in Wealth Management
The report provides a detailed analysis of the performance of wealth managers across different areas of their businesses, as well as market-sizing and the quest for long-term profitability. It outlines eight initiatives on both the revenue and cost sides that can aid firms in positioning themselves optimally for the future.
The aim is to provide actionable information and insights for wealth managers looking for a competitive advantage amidst a challenging marketplace and tough overall economic conditions. On the revenue side, the strategies include scalable client acquisition, distinctive private-market offerings, revising product shelves towards fixed-income products, and incorporating generative artificial intelligence (GenAI) in financial advice. For cost reduction, the focus is on end-to-end (E2E) process review, making informed shoring decisions, utilizing third-party tech and operational solutions, and simplifying products and services via advice like discretionary portfolio management (DPM) to streamline operations and cater to various client needs effectively.
“To ensure long-term profitability in wealth management, strategic adoption of initiatives such as scalable client acquisition, distinctive private-market offerings, and the integration of new technologies into financial advice can accelerate revenue generation. Simultaneously, focusing on reviews, decisions, and tech-based solutions is key to strategic cost management. By redesigning wealth management with these insights, we can unlock a future of growth, efficiency, and scalability,” concluded Nimrod Pais, Managing Director, and Partner at BCG.
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