How should High-Net-Worth Individuals (HNWIs) in the UAE actively invest their wealth?
For high-net-worth individuals (HNWIs) in the UAE, keeping large cash reserves might feel secure, but here’s the reality: with UAE banks typically offering less than 1% interest, your cash is likely to actually be losing buying power, especially when compared to the UAE’s current inflation rate of 2.3%.
So, your cash sits idle, losing value to inflation, while banks potentially benefit from using it to earn more by lending at higher interest rates.
Essentially, your money is working hard – but for the bank’s profit, not yours.
A recent study by Vault, the UAE’s first private wealth super app, showed that 62% of HNWIs in the UAE do not trust banks and wealth management companies when receiving investment recommendations, with 52% being mis-sold whole life insurance as an investment product.
With low interest rates, a lack of trust, and frequent instances of mis-sold products, many HNWIs in the UAE are looking to invest the right way. Read on to find out how HNWIs in the UAE can benefit from investing their wealth, as opposed to holding it in cash.
Combating inflation and preserving wealth
Holding cash may feel safe, but in reality, it slowly chips away at purchasing power – especially with many UAE banks offering less than 1% in interest, far below inflation rates. By investing in growth assets like equities, bonds, and private markets, HNWIs can safeguard and grow their wealth, ensuring that it keeps pace with, or even surpasses inflation. With active investing, your wealth works for you, not the other way around. Alternatively, a high-yield savings account is your best option to counteract inflation if you’re set on holding cash.
Growing wealth and managing risk through diversification
For high-net-worth individuals, diversification is key to increasing growth potential. By actively investing, HNWIs can strategically spread investments across asset classes, industries, and even global markets, reducing exposure to any single downturn and building a portfolio that withstands volatility. Expert advisors understand how to tailor your portfolio to your unique goals, helping you secure a balanced mix of assets that drive growth whilst managing risk.
Here’s where a good financial advisor, such as Vault, can help. Unfortunately in the UAE and the region at large, affluent individuals often find themselves on the receiving end of a barrage of calls and pitches from various financial professionals. The key to tackling this is figuring out if you’re dealing with a broker or an advisor. A knowledgeable financial advisor understands the importance of a well-diversified investment portfolio tailored to your individual goals, risk tolerance and time horizon. They can help you choose the right mix of asset classes that align with your objectives, and continuously monitor and adjust your portfolio to keep it on track.
Higher returns through private markets
Private equity, venture capital, and private real estate deals can yield higher returns, albeit with greater risk. HNWIs can incorporate these unique opportunities within a well-diversified portfolio, enhancing growth potential and long-term returns. Traditionally, such opportunities would require an average minimum investment of $1-$2M, but with private wealth apps like Vault, professional clients can access these opportunities with a minimum investment as low as $50K.
Achieving FIRE (Financial Independence and Retire Early) in the UAE
Imagine reaching financial independence where work is optional. For HNWIs, actively investing can help build a passive income stream, from the returns generated, that supports long-term independence.
Private wealth apps like Vault are designed exclusively to help high-net-worth individuals with financial planning, asset allocation and implementation. With Vault, HNWIs will receive personalised guidance from a dedicated financial advisor who is incentivised to put the client’s best interests first. They will also gain access to high-yield savings accounts and a suite of investment opportunities, ranging from customisable diversified portfolios of equities and bonds, to enviable market opportunities such as private equity and venture capital.
Frequently Asked Questions
Who is considered a HNWI?
A high network individual, or HNWI, is defined as someone holding financial assets over USD 1M (excluding their primary residence).
What is the difference between a broker and a financial advisor?
A broker typically works on behalf of their client to execute trades and ensure that they receive the best results. Financial advisors offer financial advice specific to their clients. Brokers are paid commissions when they buy and sell assets, which may not be the case for financial advisors.
How many high-net-worth individuals are there in the UAE?
According to a survey by Henley and Partners, there were 163k HNWI in the UAE in 2021, which is expected to rise up to 228k by 2026 – a 39% increase.
Where do HNWI invest?
HNWI usually have investments in hedge funds, private equity and real estate assets to create a diverse portfolio. Investing puts you in control, protecting your assets from inflation, harnessing exclusive growth opportunities and building a future where your wealth isn’t just preserved – it’s thriving. Don’t let your cash sit idle, instead invest…and invest the right way.
If you’re thinking about investments in the UAE, check out our detailed guide to the UAE Ministry of Investment. Discover more tips to staying ahead with your finances on MyBayut, the region’s finest UAE property and lifestyle blog.
