Capital Markets

How to keep Middle East investors satisfied

十月 14, 2022 3-分钟速读

RESEARCH REPORT

In brief

Accenture’s latest research suggests that Saudi and UAE investors—from the mass affluent to the UHNW—are underserved by wealth managers.
It also shows that these investors are younger and far more likely than peers in Asia to switch to providers who will offer the products they want.
Saudi and UAE investors are also far more likely to use a single, local wealth manager than a foreign-owned competitor.
Consequently, many Saudi and UAE wealth managers should consider expanding their product offerings—also in areas like digital assets and ESG products.

Accenture recently released an in-depth report on the future of wealth management in Asia focused on eight markets in the Far East. The underlying research also covered Saudi Arabia and the United Arab Emirates (UAE) and included 200 interviews with investors across all wealth bands in those markets.

For wealth managers in Saudi Arabia and the UAE, the crucial insights from those investor interviews can be expressed in terms of three Rs:

Relationships: Investors in the region are far more likely to invest using a local wealth manager (rather than an international one) and are also far more likely to have a relationship with just one wealth manager.
Returns: High investment returns are insufficient to engender loyalty: despite good returns, many investors are currently looking to leave their wealth manager.
Range: Wealth managers need to expand their range of product offerings to retain existing clients and to attract new customers—with a particular focus on expanding advisory services as well as the breadth and depth of digital assets products and ESG-linked propositions.

Local is highly prized

There is a large base of affluent investors in the Middle East, many of whom are young and tech-savvy. Given these young investors will not yet have built long-term relationships with wealth managers and are much more likely to want digital interactions, the traditional approach to investment advice might not serve them well.

The data from our survey backs this up and further reveals that:

7 out of 10

investors prefer investing with wealth managers based in the region over international firms.

Investors in Saudi Arabia and the UAE tend to invest using local wealth managers while their peers in Asia rely more heavily on international institutions, according to Accenture Research.

Investors in the region are also far more likely to have a relationship with just one wealth manager: 71 percent of those in the UAE and 68 percent of those in Saudi Arabia versus an average of 62 percent in Asia, as per our research.

This suggests local wealth management firms have a unique opportunity to build exclusive relationships with investors, who are unlikely to engage with multiple firms. Of course, this can cut both ways: get it wrong and wealth managers will see their clients look elsewhere. But get it right, and they could build a formidable reputation.

And this reputational element is vital. In the UAE, investors are more likely to choose their wealth manager based on the firm’s reputation or brand (20 percent do so versus 15 percent for Asia). Word of mouth is also key. In Saudi Arabia, twice as many investors (18 percent versus 9 percent in Asia) choose their wealth manager due to a recommendation from family and friends.

Good returns aren’t enough

A key challenge for firms anywhere is retaining the clients they have, and our survey shows this is much more difficult in the UAE and Saudi Arabia, where 41 percent and 29 percent of investors respectively have been with their primary wealth manager for less than three years. In Asia as a whole, that figure is just 21 percent.

It should be noted that the relatively low tenure is also affected by the relative youth of the investor base as a whole—although that doesn’t entirely mitigate the increased likelihood of these investors to look elsewhere if they feel their needs are not being met.

Local investors, then, have been more prepared in the past to switch wealth management provider, and our survey shows this will likely not change: across Asia, 30 percent of the 3,200 investors we surveyed across the eight markets in the Far East were looking to switch wealth managers in 2022 (up from 10 percent who did so in 2021); in the UAE, on the other hand, 38 percent are looking to change.

While it is little surprise that keeping investors satisfied is crucial for wealth managers, another standout finding is that local investors are as dissatisfied with their wealth manager as their peers elsewhere despite their investments performing better or somewhat better than expectations (77 percent in Saudi Arabia and 69 percent in the UAE—versus 60 percent in Asia).

In other words, affluent investors in Saudi Arabia and the UAE are comfortable with their returns, but they still seem to be unhappy with the service they’re getting. How, then, should wealth managers react?

Keeping the customer satisfied

Aside from profits, our research suggests the key to wealth managers’ success is to focus on advisory services beyond transactional offerings, as well as to offer innovative solutions across a wider array of product sets—particularly with respect to digital assets and ESG products.

57%

of investors are likely to invest in digital assets in the next 12 months.

Our main report identified digital assets as a top-five asset class for wealthy investors in Asia. Investors in Saudi Arabia led with respect to current levels of investment in digital assets (23 percent are already invested, versus 15 percent for Asia). And those in the UAE—while currently behind (just 11 percent are invested in digital assets)—are among the most likely to invest in this asset class in 2022 (57 percent say they will do so, versus 45 percent for Asia).

When it comes to digital assets, then, the lesson for wealth managers is that not only are these in demand, but investors want to be offered a greater variety and depth of products. While there is an obvious focus on the cryptocurrency market, today’s high volatility has naturally caused a degree of caution. But one should not forget that cryptocurrencies are just one aspect of digital asset investment, and the need for firms to act on this asset class more broadly will not go away.

49%

of investors currently invest in ESG products.

The situation is similar when it comes to ESG-linked products, where our survey found the penetration of ESG investing will likely more than double in 2022 across Asia. Again, the Middle East leads here, with half of affluent investors from Saudi Arabia already invested in ESG products—almost 20 percentage points more than the Asia average—while 44 percent of UAE investors plan to do so in in the next 12 months (versus 37 percent for Asia).

As levels of investment grow, though, our data shows not only a strong correlation with heightened concerns around the quality of ESG advice provided by wealth managers, but also a general perception that ESG investing could mean compromising returns.

Once again, investors are seeking out advisors who can offer both breadth and depth in terms of the quality of ESG investment advice. For example, 44 percent of investors in Saudi Arabia have concerns with ESG offerings and feel relationship managers are unable or unwilling to provide quality advice—far higher than the 31-percent figure for Asia.

First-mover advantage

Of course, it is important to remember that many wealth managers know they might be falling short in satisfying specific customer needs, and some are transforming as a result—for instance, by developing digital platforms and a wider product range. In this way they are more likely to boost their reputations, attract new investors and retain existing customers.

Firms that can show competence and an aptitude for innovation, and that can bolster this with a track record of profitable returns for clients, will find a large pool of investors looking to them for advice.