Strong growth of digital wealth managers in the MENA region
By Puja Sharma
Wealth managers in the MENA region are expecting strong growth in the number of robo advisers and digital-only wealth managers, research for behavioural finance experts Oxford Risk shows.
Its study with independent financial advisers and wealth managers in MENA who collectively manage assets of around $290b, found one in three (34%) expect the number of digital-only solutions to increase dramatically by 2025. Another 45% expect a slight increase in the number of robo advice and digital-only solutions while 21% expect no change, the research with wealth managers in the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Oman, Egypt, and Kuwait found.
In 2020, wealth management clients were planning to move assets, according to an EY global survey, 23% of wealth management clients in the Middle East are planning to move assets in the next three years, with 50% of clients have already moved their assets in the past three years.
The survey results showed that in comparison to clients in the Middle East, 32% of global clients moved their assets in the past three years, while another 32% plan to do so over the next three years. While the global sentiment has remained consistent, investors in the MENA region have shown a reduced appetite to move assets compared with just three years ago.
There is a sudden shift where, voice-enabled, digital assistants are being preferred by wealth management clients – not just for basic, transactional activities, but to manage wealth and receive financial advice. In the Middle East, 46% of clients highly value simple, intuitive digital processes for their investment activities while 25% currently receive financial advice through mobile apps.
The forecasts of expansion build on the impact of the COVID-19 pandemic in terms of the adoption of technology across the region with lockdowns and restrictions forcing companies to find new ways of working.
More than two out of three (68%) of wealth managers questioned said the pandemic has accelerated the technology revolution in the MENA wealth management sector. However, one in eight (12%) disagree that the pandemic has had an effect. Oxford Risk is urging wealth advisers in the region to make more use of technology to provide improved services to clients based on understanding their needs through detailed profiling.
“The increased use of technology is transforming businesses around the world and is having a major impact in the MENA region.” Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk said.
The rise of digital-only solutions is to be expected as the technology revolution speeds up in the MENA wealth management sector. There are major benefits for wealth managers and clients from increasing their use of technology and algorithms.
“That will help deliver more consistent support to clients and avoid issues over-assessments of risk tolerance and asset allocation. Once a specific framework for the measurement of risk tolerance, risk capacity and other relevant factors is established it can be run at scale and speed.” Davis added.
Oxford Risk’s behavioural tools assess financial personality and preferences as well as changes in investors’ financial situations and, supplemented with other behavioural information and demographics, build a comprehensive profile. It believes the best investment solution for each investor needs to be anchored on stable and accurate measures of risk tolerance.
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