WealthTech firm Velexa recently highlighted how the Middle East is proving to be a key hotspot for self-investing.
The Middle East is witnessing a significant transformation in its investment landscape. With a younger, affluent demographic increasingly seeking control over their investments, the region is moving away from traditional investment strategies towards comprehensive, self-directed solutions.
This shift is fueled by a growing interest in digital assets, a rising demand for digital offerings, and widespread dissatisfaction with current wealth managers, setting the stage for a significant change.
Research by Accenture highlights a disconnect between mass-affluent investors’ expectations and the services provided by local wealth managers in the Middle East. Velexa’s CEO, Tamara Kostova, echoed these findings in the 2023 Middle East WealthTech Landscape Report. Surprisingly, 38% of Middle Eastern investors are planning to switch wealth managers within the next year, and 41% have been with their current manager for less than three years.
This trend starkly contrasts with Asia, where loyalty to a single wealth manager is more common. Despite superior investment performance in regions like the UAE, investor mobility in the Middle East seems driven by higher standards and specific product demands.
Despite the apparent lack of loyalty, a majority of investors in the Middle East still show a preference for local over international firms. This presents an opportunity for local firms to leverage their home team advantage, especially since word-of-mouth and reputation are highly influential in the region. By focusing on digital solutions and self-directed investment platforms, local firms can better retain clients and maximise their competitive edge.
Velexa’s research indicates that over 75% of Gen Z investors in the Middle East prefer managing their own finances, underscoring the necessity for local firms to adapt quickly. An EY survey supports this, showing a clear demand for digital options among Middle Eastern investors, with many expressing a readiness to switch to online, 24/7 investment solutions. The global trend towards digital investment tools, including the integration of conversational AI, is now becoming prominent in the Middle East, necessitating a strategic shift among traditional wealth managers.
There’s also a growing interest in digital assets, beyond just cryptocurrencies, with 12% of Middle Eastern investors already owning digital assets and 57% planning to invest within the next year. Moreover, ESG investments are gaining traction, with 49% of investors engaged in ESG products. However, there’s a perceived gap in the quality of advice provided by managers on these products, especially in more conservative regions like Saudi Arabia. Wealth managers need to adapt to these changing preferences, potentially leveraging digital tools like fund screeners and ESG analytics to empower investors.