ShareKUWAIT: Kuwait’s financial wealth is anticipated to experience a steady compound annual growth rate (CAGR) of 2.7 percent in new wealth, rising to $302 billion by 2027, according to a new report by Boston Consulting Group (BCG). The BCG report, titled ‘Global Wealth Report 2023: Resetting the Course,’ reveals that equities and investment funds in Kuwait continue to make up the largest asset class at 57 percent of total personal wealth in 2022, while bonds are expected to grow the fastest with a CAGR of 6.5 percent between 2022 - 2027.
Life insurance and pensions are set to become the third largest asset class by 2027. “Representing 3.6 percent of the Middle East and Africa’s financial wealth in 2022 and growing at a rate of 1.7 percent per annum from 2017 to reach $265 billion in 2022, Kuwait’s trajectory signals calculated risk-taking and continued economic development, despite global market challenges,” said Markus Massi, managing director and senior partner at BCG. In 2022, a significant portion of Kuwait’s wealth, approximately 24 percent, originated from ultra high net worth (UHNW) individuals worth more than $100 million.
The influence of these individuals is anticipated to continue to remain consistent until 2027. Furthermore, individuals with wealth between $1 million – $20 million held 24 percent of Kuwait’s wealth in 2022, with this expected to remain the same in 2027. A significant 30 percent of the wealth was held by individuals’ worth under $250,000, which is expected to remain the same by 2027. “The concentration of Kuwait’s wealth in the hands of UHNW individuals garners its sustained growth. These individuals are driving investments in the region and their contribution to the economic landscape is significant,” said Massi.
The report also presents notable findings on Kuwait’s real assets and liabilities. Real assets in Kuwait grew by 1 percent per year from 2017 to 2022, reaching $219 billion, and are projected to increase by 3.3 percent per annum to $257 billion by 2027. Simultaneously, Kuwait’s liabilities sector expanded by 4.9 percent per annum to $34.1 billion during the same period and is expected to grow by 3 percent per annum to $39.6 billion by 2027. This balanced growth invokes a financial profile of a nation that is confident in taking calculated risks, potentially enhancing the all-around growth narrative.
Nimrod PaisSustainable profitability
The report provides a detailed analysis of the performance of wealth managers across different areas of their businesses, as well as market-sizing and the quest for long-term profitability. It outlines eight initiatives on both the revenue and cost sides that can aid firms in positioning themselves optimally for the future. The aim is to provide actionable information and insights for wealth managers looking for a competitive advantage amidst a challenging marketplace and tough overall economic conditions. On the revenue side, the strategies include scalable client acquisition, distinctive private-market offerings, revising product shelves towards fixed-income products, and incorporating generative artificial intelligence (GenAI) in financial advice.
For cost reduction, the focus is on end-to-end (E2E) process review, making informed shoring decisions, utilizing third-party tech and operational solutions, and simplifying products and services via advice-like discretionary portfolio management (DPM) to streamline operations and cater to various client needs effectively. “To ensure long-term profitability in wealth management, strategic adoption of initiatives such as scalable client acquisition, distinctive private-market offerings, and the integration of new technologies into financial advice can accelerate revenue generation. Simultaneously, focusing on reviews, decisions, and tech-based solutions is key to strategic cost management. By redesigning wealth management with these insights, we can unlock a future of growth, efficiency, and scalability,” concluded Nimrod Pais, managing director, and partner at BCG.
