JEDDAH – The Kingdom of Saudi Arabia ranks thirteen in the world by proportion of millionaire households, with 3.1 percent – 31 out of every 1,000 households – holding private wealth of at least $1 million, according to The Boston Consulting Group’s (BCG) fourteenth annual global wealth management report.
Saudi Arabia is also the GCC country with the highest share of assets in 2013, with 51 percent of households falling within the $5-100 million band, and 7 percent in the band with >$100 million. The United Arab Emirates (UAE) had 51 percent and 5 percent respectively within the same categories; Kuwait had 39 percent and 3 percent.
In “Riding A Wave of Growth” – BCG’s Global Wealth 2014 report, its fourteenth annual study of the global wealth-management industry, it addresses the current size of the market, the performance levels of leading institutions, and the state of offshore banking. It also provides a thorough analysis of key trends shaping the business landscape – including the growing importance of digital technology and the pursuit of optimal business models. Finally, the report offers clear action steps that players should take in their quest to build on the industry’s solid performance in 2013.
On a regional level, the report reveals that private financial wealth grew by 11.6 percent to reach $5.2 trillion in 2013. Key drivers were generally high saving rates and continued strong nominal GDP growth in oil-rich countries, such as Saudi Arabia (13.4 percent), Kuwait (13.6 percent) and the UAE (12.8 percent).
Qatar ranks first in the world with the highest density of millionaires, with 17.5 percent holding private wealth of at least $1 million. Kuwait is fifth with 9 percent, while Bahrain (5.9 percent) secured the sixth place. Oman and the UAE rank tenth and twelfth, respectively.
Qatar also ranks sixth globally by ultra-high-net-worth (UHNW) households, defined as households with more than $100 million in private wealth. Kuwait, in turn, is in seventh place while Bahrain holds the sixteenth spot.
“As in all other regions, equities were the strongest contributor,” said Markus Massi, Partner and Managing Director, The Boston Consulting Group. “The amount of wealth held in equities rose by 30.5 percent across major MEA markets, compared with 6.4 percent for bonds and 5.7 percent for cash and deposits. With a projected CAGR of 6.5 percent, private wealth in the region will reach an estimated 7.2 trillion by the end of 2018, approximately a 3.6 percent share of total global wealth.”
Moreover, the study found that MEA, in 2013, had a 32.1 percent offshore share – down from 34.4 percent in 2008. And, with the ongoing attractiveness of regional investment opportunities – compared to global opportunities – this figure is expected to continue to decrease to 31.6 percent in 2018, with Saudi Arabia holding $1.4 trillion of the overall anticipated $7.2 trillion wealth.
Cash and deposits comprised 60 percent of MEA’s wealth in 2008, which dropped to 52 percent in 2013 as equities grew in popularity. This trend is predicted to continue until 2018, with the wealth breakdown anticipated to be 48 percent in cash and deposits, 20 percent in bonds, and 32 percent in equities.
Given the positive development of onshoring and the trend towards more equities, the GCC is back on the agenda of international wealth managers. “We have observed a growing interest on behalf of international wealth managers to tap into the asset pool,” explained Massi. “However, to be successful, international wealth managers must adapt to local preferences or conditions and invest in building long-term relationships instead of short-term revenue maximization.”
According to the report, global private financial wealth grew by 14.6 percent in 2013 to reach a total of $152.0 trillion. The rise was stronger than in 2012, when global wealth grew by 8.7 percent. The key drivers, for the second consecutive year, were the performance of equity markets and the creation of new wealth in rapidly developing economies (RDEs).
The total number of millionaire households (in U.S. dollar terms) reached 16.3 million in 2013, up strongly from 13.7 million in 2012 and representing 1.1 percent of all households globally. The US had the highest number of millionaire households (7.1 million), as well as the highest number of new millionaires (1.1 million). Robust wealth creation in China was reflected by its rise in millionaire households from 1.5 million in 2012 to 2.4 million in 2013. The number of millionaire households in Japan fell from 1.5 million to 1.2 million, driven by the 15 percent fall in the yen against the dollar.
“The growth of private wealth accelerated across most regions in 2013, although it varied widely by market,” added Massi. “As in 2012, the Asia-Pacific region – excluding Japan – represented the fastest-growing region worldwide, continuing the trend of high growth in the ‘new world’. But substantial double-digit growth increases in private wealth were also witnessed in the traditional, mature economies of the ‘old world’, particularly North America.”
Private wealth booked across borders reached $8.9 trillion in 2013, an increase of 10.4 percent over 2012 but below the increase in total global private wealth of 14.6 percent. As a result, the share of offshore wealth declined slightly from 6.1 percent to 5.9 percent. Offshore wealth is projected to grow at a solid CAGR of 6.8 percent to reach $12.4 trillion by the end of 2018, driven especially by investors in developing economies seeking higher levels of political and financial stability, greater depth in wealth management products and expertise, and geographic diversification.