The region’s wealth and asset management industry is currently undergoing radical change, driven by the twin engines of technological advancement and an emerging wealth class.
The Middle East has long been established as a global private banking hub because of the national wealth and high density of High-Net-Worth and Ultra-High-Net-Worth individuals gathered across the region.
The financial institutional space historically concentrated most of its time, manpower and resources into servicing these top-tier clients, who typically were required to have asset holdings in excess of $5 million to access a private banking relationship.
This imbalanced focus on the top of the pyramid had previously left a huge category of ‘mass affluent’ investors underserviced.
Not anymore. Now, in an era of major technological disruption, the wealth industry is transforming; banks and wealth managers are prioritising this lucrative sector by using technology to gain the cost efficiencies and scale needed.
This mass affluent target demographic includes many expats working across the GCC who boast personal savings of anywhere between $50,000 to $2 million.
The category also includes a new generation of self-directed retail investors or individuals who want to invest savings in capital markets via a ‘buy and hold’ or ‘long-only’ strategy.
While the Covid-19 crisis only accelerated this trend, with a growing number of people taking greater ownership of their financial futures, the wider transformation in demographic targeting is enabled and empowered by the rise of smartphones and a digital-first approach.
At Saxo Bank, we have long understood this emerging investor. We have decades of experience catering to them with user-friendly and intuitive products and services that offer tools, insights, and guidance for individuals to fulfil their financial aspirations and generate investment impact.
The growing pool of investors in this mass affluent segment now demand and expect more from banks and financial institutions – and if banks and institutions cannot service them, there are plenty of fintech and robo-advisory services that will.
This presents a major dilemma for the region’s banks and financial institutions. While these players understand the urgent need to serve this new client sector, technology is not their core business.
The choice facing them is to either focus on their traditional customer or seek tech partners with solutions that will enable them to expand their offerings outside of private banking.
In other words, to service and build portfolios for that wider target audience – the mass affluent – in a cost-efficient way.
Our experience informs us that banks and wealth managers cannot service this investor category profitably via human RM’s; only digital journeys driven by robo-advisory services through APIs, white label platforms, dedicated portals, and other self-direct platforms can simultaneously reduce cost and increase the volume of active clients needed. Technology-based solutions are the future of servicing the sector.
As a result, the myriad of players in the institutional space – asset managers, wealth managers, banks, and financial advisors – collectively understand the vast importance of adopting a digital-first approach to compete with industry disruptors dominating the space.
Investing in technology or partnering with global financial services partners such as Saxo Bank is an essential step for traditional institutional players as they expand their proposition to effectively manage and retain client business while delivering a vastly improved customer journey through expert digital wealth platforms, personal finance systems, efficient mobile banking apps, and much more.
The number of HNWI and UHNWI continues to trend upwards in the region. The Capgemini Research Institute’s World Wealth Report found the population of HNWIs increased 6.8 percent in 2020, with the sector’s wealth growing 10.7 percent to $3.2 trillion.
But we also know that the number of private individuals in the mass affluent realm looking to invest or build their portfolios has also grown significantly.
Saxo Bank has seen its client base grow 150 percent in new investors over the past two years. If institutions want to capitalise on this growing market, they must prioritise the utilisation of enhanced platforms and services to deliver client acquisition and satisfaction while driving profitability.
Nicholas Wright, Head of Institutional Business, Saxo Bank MENA.
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