Wealth managers and financial advisers across the Middle East and north Africa (Mena) expect clients to switch more money into collective schemes such as mutual funds over the next three years, according to behavioural finance experts Oxford Risk.
The firm surveyed 100 independent financial advisers and wealth managers in Mena and found more than three-out-of-four (77%) expect a surge in investment in collective schemes.
More than a fifth (21%) questioned believe there will be a dramatic expansion in the use of mutual funds and ETFs.
The switch to mutual funds and ETFs is set to change the focus on cash in wealth management across the region – currently as much as 45% of total wealth in Mena is in cash.
Some 61% of wealth managers predict the share of cash will drop by 2025 with nearly a quarter (23%) forecasting it will drop significantly.
Not all are convinced, with 20% saying the share of total wealth in cash will rise, while 19% expect no change.
Greg Davies, head of behavioural finance at Oxford Risk, said: “The shift to more use of mutual funds and ETFs puts the onus on advisers to deliver more consistent support to clients focused on risk tolerance and asset allocation.
“The same applies to the reliance on cash – the worry is that many potential investors are missing out on stronger returns because they are not emotionally comfortable with taking appropriate amounts of risk.
“Employing software to guide decisions helps them become more consistent. Once a specific framework for the measurement of risk tolerance, risk capacity and other relevant factors is established it can be run at scale and speed.”