The Middle East is experiencing substantial shifts in its investment landscape. A young demographic of affluent investors and the market opening up means investors are looking for comprehensive, self-directed investment solutions instead of more traditional investment strategies.
Demand for digital offerings, a rising interest in digital assets, and a relatively high dissatisfaction with existing wealth managers combine to create an environment ready for change.
Middle East investor dissatisfaction
A research from Accenture reveals a gap between what mass-affluent investors are looking for and the services that local wealth managers in the Middle East are offering. Velexa’s CEO Tamara Kostova commented the same in the 2023 Middle East WealthTech Landscape Report.
In the next 12 months, 38% of investors in the Middle East plan on leaving their current wealth manager, and 41% have been with their wealth manager for less than three years. This contrasts with Asia, where over 70% of investors have stuck with one primary wealth manager for over three years.
Middle Eastern investor dissatisfaction is evidently not driven by a lack of returns, where investments performed better by as much as 16% in the UAE than in Asia. Perhaps, instead this mobility can be explained by higher standards and specific demands for products.
Firms in the Middle East might consider this lack of loyalty a challenge. Still, seven out of 10 investors in the Middle East prefer working with a local manager rather than an international firm. This gives local firms a strong home team advantage.
Word-of-mouth and reputation also play a significant role in the Middle East. In Saudi Arabia, 18% of investors choose a manager based on referrals from family or friends. Local firms can maximise this home team advantage by providing the digital solutions and self-directed investment platforms that investors seek to improve client retention rates.
What modern Middle Eastern investors want
According to research from Velexa, over 75% of Gen Z investors want to manage their own finances. This is especially relevant in the Middle East because of its young and affluent investor base.
Accenture’s above research indicates that local firms must act quickly because international firms have their eyes set on the Middle East. But in what direction should local firms act?
The question is answered by an EY survey that reveals that investors in the Middle East are demanding one thing clearly: Digital options. “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 survey says. The survey also says that 20% of clients in the Middle East are ready to switch to a 24/7 online solution that they can access anywhere, anytime.
This trend matches the global trends that have existed for several years in other parts of the world. This demand might grow even stronger now that conversational AI is being added to self-investing tools, helping investors make investment decisions.
The rapidly growing mass-affluent market means that traditional wealth managers must change their strategy to capture some of this market. Conversational AI goes a long way to provide the essential advice and financial insight that many of these clients look for in self-directed investment solutions.
The demand for digital assets in the Middle East is also enormous, and not only for cryptocurrency. Investors in the Middle East want simple access to a broad range of digital assets. Currently, 12% of investors in the Middle East already own some form of digital asset, and 57% intend to invest in digital assets within the next 12 months.
The demand for sustainable investments
In alignment with other trends, investors in the Middle East are also increasingly interested in ESG investments – 49% of investors currently invest in ESG products. But 44% of investors in Saudi Arabia don’t feel their managers are willing or able to provide quality advice regarding these products. Perhaps this is due to the more conservative nature of the Middle East, but wealth managers need to be responsive to changing trends.
Digital solutions could come to the rescue here, too, with fund screeners, visualisations, and ESG analytics tools added to a product to give investors the self-directed ability to analyse products for themselves.
How Velexa meets the needs of modern investors
Reaching – and retaining – clients in the Middle East means providing a comprehensive offering in all the above and understanding that the ecosystem has changed. Until now, creating such a complete solution was not within easy reach of wealth management firms. But Velexa’s investment platform solution puts the ability in the hands of any firm to add these services to their platforms immediately.
Velexa’s investment-as-a-service platform empowers financial institutions and disruptive players to create digital investment products fast enough to meet the mercurial demands of this changing investment ecosystem.
Velexa’s suite of services accommodates institutions at all levels of integration. Wealth management firms can implement needed-only portions of the system by integrating Velexa’s wealth management API, or provide a full-scale front-end and back-end–a white-labelled investment platform that runs on Velexa’s infrastructure but is fully controlled by the firm.
ROI is no longer enough for the modern investor in the Middle East. To stay competitive, wealth management firms must adapt to consumer demands and provide a breadth of accessible digital asset classes and ESG-linked propositions for affluent investors.
By using Velexa, wealth managers can remain nimble in this rapidly evolving landscape.