The world’s richest people may not be as wealthy as they were, according to French technology consulting firm Capgemini’s 2019 World Wealth Report that points to a loss of US$2 trillion worldwide in 2018, after consecutive seven years of growth.
However, Middle East seems to have bucked that trend, becoming the only part of the world where High Net Worth Individual (HNWI) wealth grew in 2018, adds the report. The region generated 4% growth in HNWI wealth and increasing its HNWI population by 6% due to strong GDP growth and financial market performance.
According to the World Wealth Report, “The Middle East put up impressive HNWI population and wealth growth numbers in spite of the global scenario. Improving oil prices combined with significant fiscal and structural reforms to combat the impact of declining oil prices, stabilised the region’s economic platform.”
The picture was not as favourable for the UAE where HNWI population and wealth declined by 6% and 9% respectively, primarily due to market capitalisation decline.
Saudi Arabia and Kuwait, two major Middle Eastern economies, demonstrated impressive growth on account of improving GDP growth and strong financial market performance. In Saudi Arabia, HNWI population and wealth increased by 7% and 4%, respectively, while in Kuwait, it increased by 8% and 6% respectively. The picture was not as favourable for the UAE where HNWI population and wealth declined by 6% and 9% respectively, primarily due to market capitalisation decline.
The key drivers of the 3 per cent global decrease in HNWI wealth are the slump in equity markets and slowing regional economies with Asia-Pacific, and especially China, worst affected by accounting for 25 per cent of the global market decline in 2018. The report states that HNWI wealth declined across nearly all other regions: Latin America declined by 4%, Europe by 3% and North America by 1%. Similar to the previous year, the markets with the largest HNWI populations – the United States, Japan, Germany, and China – represented 61% of the total global HNWI population.
In terms of financial loss, the Ultra-HNWIs were the most affected and accounted for 75 per cent of the overall HNWI wealth decline, with their population seeing a decline of 4% and their wealth declining around 6%.
Cash was king as according to the report, cash replaced equities to become the most held asset class in Q1 2019, representing 28% of HNWI financial wealth, while equities slipped to the second position at nearly 26% (a decline of 5 percentage points).
The report further added that Investment in next-gen technologies will be critical in order to enhance the client experience.
“While the volatile economic environment of 2018 led to HNWI wealth decline globally, wealth managers have been extremely successful in maintaining strong levels of client trust,” said Anirban Bose, CEO of Capgemini’s Financial Services and Member of the Group Executive Board. “However, future success will depend on the agility of wealth management firms to evolve the client experience and find new ways to add value through more personalized services. Next-gen technology and closing expectation gaps will aid this, but the landscape is shifting so quickly that companies must not be afraid to overhaul their strategy and business models if needed.”