Economy
Digital Wealth Managers Threaten Traditional Players’ Dominance—BCG Report
A report by Boston Consulting Group (BCG) has revealed that online platforms offering wealth management services and delivering faster customer growth, cheaper cost structures, and superior innovation, command a significant market premium, threatening the market dominance of traditional players.
According to the study, these digital wealth managers have an edge over their traditional counterparts as they are democratising investment opportunities for a large group of investors, automating operations, providing customizable discretionary mandates at scale, using hybrid models for investment advisory and creating teams that use data for client acquisition and offering exposure to cryptocurrencies.
In the report titled Global Wealth 2022: Standing Still Is Not an Option, it was observed that in 2021, digital wealth managers attracted $14.5 billion in funding, representing 11 per cent of total global investments.
The 22nd edition of the annual report on the global wealth management industry report further disclosed that the Middle East and Africa (ME&A) could see the biggest leap in wealth growth. Buoyed by the region’s massive energy holdings, wealth is on track to rise by a CAGR of 5.4 per cent over the next five years.
The report predicts that wealth assets will continue to rise in value in all regions. But Asia-Pacific will maintain the fastest rates of wealth growth, with asset values poised to increase by a compound annual growth rate (CAGR) of 8.4 per cent through 2026. If that rate holds, the region could be home to nearly one-quarter of the world’s wealth by 2026.
In North America, wealth growth will be slower than in years past, with an estimated CAGR of 4.7 per cent through 2026, down from a prior five-year average of 9.1 per cent. Likewise, in Western Europe, wealth growth is likely to slow from roughly 4.5 per cent over the past five years to less than 4 per cent annually until 2026.
Global financial wealth reached a record high of $530 trillion in 2021, fuelled by strong equity markets, healthy corporate profits and a surge in demand for real assets.
Findings showed that despite geopolitical and economic destabilizers such as inflation and Russia’s invasion of Ukraine, approximately $80 trillion in new wealth is likely to be created over the next five years.
In a notable industry shift, Hong Kong will probably overtake Switzerland in 2023 as the domicile managing the largest amount of private cross-border wealth, ending a run of more than 200 years of Swiss dominance.
“As a new crop of technology-driven investment firms offering dollar-denominated investments to a wider investor group emerge in Nigeria, traditional wealth managers can better leverage evolving trends in private equity, digital wealth and crypto to embrace a digital service model and compete more effectively.
“Sustainable wealth creation is possible and an attractive proposition as shown by the growing number of fintech firms in Nigeria and the increased scale of investments they attract and manage. Nigerian fintech firms raised $800 million in 2021, boosting the valuation of some of these fast-growing start-ups and turning them into unicorns amid local and global economic headwinds.
“Wealth development is resoundingly resilient, and even against the backdrop of geopolitical turmoil the growth rate will remain positive,” said Anna Zakrzewski, global leader of BCG’s wealth management segment and a co-author of the report. “Although this stability provides a tremendous opportunity for wealth managers, they must make strategic choices to remain competitive. Wealth clients are looking for next-generation offers and next-level service—including net zero, crypto, personalization, and digitization.
“The most important question facing wealth managers today is not which initiatives to prioritize, but how best to implement them,” Phillipa Osakwe-Okoye, Principal, BCG Lagos, said.
Net Zero is an Immediate Imperative
Sustainable investing—of which net zero is a key component—is growing three to five times as fast as traditional investments, and by 2026 this asset class could account for 8 per cent to 17 per cent of privately invested wealth, up from 4 per cent to 11 per cent today.
Although people tend to think of net zero as a 2050 goal, the report notes that wealth managers must act immediately to embed sustainable investing across the entire client life cycle.
Crypto: An Untapped Market for Wealth Managers
Non-traditional wealth managers currently manage up to $1 trillion in crypto-related wealth, and the market capitalization for crypto could increase four- to fivefold by 2030. The opportunity for wealth managers is clear: nearly 80 per cent of clients surveyed said that they would consider increasing their crypto holdings if wealth managers offered advisory and education services.
Two-thirds of clients who sourced their crypto investment with third parties said that they did so because they didn’t think their wealth managers offered such services. To determine whether crypto is right for their businesses, wealth managers must consider if, when, and how they want to participate.
Personalization as a Driver of Top-Line Growth
On average, wealth managers that excel at customizing offers and interactions see higher rates of client satisfaction and lower rates of churn than others do. While these metrics translate into increased returns on client assets and liabilities, along with annual growth of more than 10 per cent, wealth managers that outperform on personalization are the exception rather than the rule.
Personalization is a complex undertaking that requires introducing new data and analytics, connecting processes across the firm’s front, middle, and back offices, and changing ways of working.
In the report, BCG identifies three actions that wealth managers vying to deliver individualized service at scale can take to improve personalization: prioritize capabilities that recur across journeys; design for value and scale; and back good ideas with the right enablers.
The Digital Wealth Management Premium is Real
The valuation multiples of digital wealth management firms are six or seven times as high as those of traditional wealth managers.
Furthermore, private funding in wealth tech has increased, with digital wealth management firms attracting $14.5 billion in funding in 2021 (11 per cent of total global investments). Digital wealth management institutions are delivering faster customer growth, cheaper cost structures, and superior rates of innovation. To protect their future profitability, traditional wealth managers must evolve with the times.
“Traditional wealth managers have known for years that they need to accelerate the pace of their own digitization,” said BCG’s Zakrzewski. “Now they have an additional incentive to emulate the practices of these digital leaders as they look for ways to secure future growth and increase their value to clients.”
By Aduragbemi Omiyale
The 60-megawatt (MW) Independent Power Plant (IPP) in Yenagoa, Bayelsa State, commissioned about a week ago by President Bola Tinubu, will receive gas supply from Oando Plc.
The indigenous energy solutions provider secured this exclusive gas supply deal through its upstream Joint Venture (JV) with Nigerian National Petroleum Company E&P Limited (NEPL).
Under the agreement, the company will deliver 11.2 million standard cubic feet per day (11.2 MMSCFD) through the Elebele Valve Station, interconnected with a major trunkline, ensuring an uninterrupted feedstock supply to the power plant.
This supply is underpinned by a long-term gas supply arrangement, providing a stable and predictable revenue stream while supporting higher-value domestic gas monetisation and diversifying the JV’s revenue base, Oando said in a statement on Thursday.
The Bayelsa State IPP is expected to deliver stable electricity to tens of thousands of homes, alongside commercial and industrial users in Yenagoa and its environs, reducing reliance on self-generation and lowering end-user power costs.
The plant operates as a fully integrated system, combining gas supply, embedded generation, and a ring-fenced distribution network.
The reliance on Oando for gas supply to the facility underscores its commitment to strengthening Nigeria’s power sector.
This builds on a proven track record of delivering first-of-its-kind projects, including the development and operation of Nigeria’s first combined cycle power plant, the flagship Okpai IPP, Akute IPP in Ogun State, and the Alausa IPP in Lagos, one of the earliest embedded generation projects in the country.
“This project reflects our long-standing commitment to Bayelsa State and its people. By enhancing power reliability, we are helping to unlock new opportunities for businesses, improve living standards, and stimulate broader economic growth across the State.
“Our integrated approach, connecting gas to demand and delivering stable energy where it is needed most, ensures that development is both sustainable and inclusive. As one of the largest employers in Bayelsa, we are proud to deepen our contribution to the state’s progress,” the chief executive of Oando, Mr Wale Tinubu, stated.
The deal demonstrates the potential for gas-to-power developments across the JV’s infrastructure footprint, reinforcing Oando’s strategy to deepen participation in Nigeria’s domestic gas value chain.
It further highlights public-private collaboration as an effective model for infrastructure delivery, with scope for broader application across future developments in Nigeria.
By Adedapo Adesanya
Oil prices were up on Thursday amid scepticism that forthcoming peace talks between the US and Iran would resolve disruptions to Middle Eastern energy supplies caused by the ongoing war.
Brent crude futures climbed $4.46 or 4.7 per cent to $99.39 per barrel, and the US West Texas Intermediate (WTI) crude futures gained $3.40 or 3.7 per cent to settle at $94.69 a barrel.
The US-Israeli war with Iran stands as the largest-ever disruption of global oil and gas supplies due to Iran’s interruption of traffic through the Strait of Hormuz, which typically carries about 20 per cent of the world’s oil and liquefied natural gas flows.
Reuters reported that American and Iranian negotiators have scaled back their expectations for a comprehensive peace deal and are instead seeking a temporary memorandum to prevent a return to conflict.
Iran, which has faced crippling US sanctions for years, wants a memorandum to include unfreezing some Iranian funds in return for allowing more ships through the strait. The US is demanding a halt to Iran’s nuclear enrichment work for 20 years, while Iran wants to limit it to three to five years. It also wants a timetable for lifting the sanctions imposed on the country by the United Nations, the US and the European Union (EU).
US President Donald Trump later said the Middle East nation is very close to a deal with Iran, an assertion he has previously made.
With the US blockade of Iranian ports announced after the collapse of peace talks over the weekend, the disruption could increase, although some US-sanctioned tankers have made it through.
Oil benchmarks barely reacted to his remarks, just as the markets also did not react to his announcement of a 10-day ceasefire between Israel and Lebanon in their related conflict, starting Thursday.
The supply disruptions are straining global oil inventories, particularly for jet fuel in parts of Asia and Africa. For instance, Nigerian airlines threatened to suspend all flight operations from April 20, unless there is an easing of crippling jet fuel prices, which they accused the country’s fuel marketers of artificially inflating.
The International Monetary Fund (IMF) has downgraded global growth and warns of a potential recession if the Iran war drags on.
By Dipo Olowookere
For the fourth straight trading session, the Nigerian Exchange (NGX) Limited ended on a positive note with a further 1.23 per cent growth on Thursday.
This was influenced by demand for large-cap equities like MTN Nigeria, Aradel, First Holdco and others.
According to data from Customs Street, the energy index grew by 4.76 per cent, the banking counter appreciated by 2.49 per cent, and consumer goods sector expanded by 0.34 per cent.
But the insurance and the industrial goods indices came under selling pressure, losing 0.74 per cent and 0.03 per cent, respectively, which did not put the bourse at risk.
Consequently, the All-Share Index (ASI) closed higher by 2,583.60 points to 211,901.01 points from 209,317.41 points, and the market capitalisation grew by N1.663 trillion to N136.436 trillion from N134.773 trillion.
Guinea Insurance and Trans-Nationwide Express were the best-performing stocks for the session after gaining 10.00 per cent each to sell for N1.21 and N5.50 apiece, as Aradel chalked up 9.99 per cent to trade at N1,547.50, Ecobank appreciated by 9.97 per cent to N61.20, and DAAR Communications improved by 9.93 per cent to N1.66.
The worst-performing stock was Ikeja Hotel, which depleted by 9.73 per cent to N33.40. Coronation Insurance lost 8.77 per cent to quote at N2.60, CAP went down by 8.61 per cent to N95.00, International Energy Insurance crashed by 8.18 per cent to N3.03, and McNichols slumped by 5.82 per cent to N6.31.
Unlike the preceding session, investor sentiment was strong yesterday, with 43 price gainers and 21 price losers, showing a positive market breadth index.
A total of 585.0 million equities valued at N34.8 billion exchanged hands in 45,559 deals during the trading day versus the 706.4 million equities worth N41.9 billion traded in 46,231 deals on Wednesday, indicating a decline in the trading volume, value, and number of deals by 17.19 per cent, 16.95 per cent, and 1.45 per cent, respectively.
Zenith Bank remained the busiest stock for the day with 61.7 million units sold for N7.6 billion, as UBA traded 45.9 million units worth N2.1 billion, Access Holdings exchanged 42.8 million units for N1.2 billion, Secure Electronic Technology transacted 38.5 million units valued at N37.5 million, and GTCO recorded a turnover of 25.3 million units worth N3.2 billion.
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