How to get rich: Where UAE millionaires keep their money
Dubai: There’s no magic formula for getting rich, and unless you get lucky in a lottery draw, it usually takes a lot of hard work to make $1 million.
But what do the fortunate ones do once they join the high-net-worth club? For one, they don’t keep their piles of cash under the mattress or let their fortunes sit idly in a bank account.
A recent study by New World Wealth, a company that tracks millionaires and billionaires, has offered some insights into how the UAE’s super wealthy invest or allocate their money in order to get richer.
Over the past two decades, the UAE has seen the population of the super rich increased significantly and as of the latest count, at least 88,700 millionaires now call the UAE home. These individuals are so rich that their combined net assets, estimated to be $470 billion, account for more than half (51 per cent) of the total private wealth held in UAE.
However, the study found that the country’s super rich, each with net assets of at least $1 million (Dh3.6 million) don’t put the bulk of their money within easy reach.
Instead, they keep these fortunes somewhere else, either by investing in a company or buying second homes in popular destinations like New York or London, or acquiring stocks, gold and other commodities.
• Meet the UAE billionaires in Forbes’ rich list
• 6 self-made UAE billionaires who are from India
• These UAE billionaires donate half of their wealth to charity
Based on their interviews with wealth managers and fund managers, New World Wealth found that millionaires keep the biggest proportion of their wealth (26 per cent) in non-liquid assets, such as business interests.
Also a significant amount, equivalent to 24 per cent of what they own, are placed in equities, followed by apartments, villas or properties (23 per cent).
Only a very small amount, about 16 per cent, are actually kept in cash or bank accounts, as well as in alternative investments (11 per cent), which include commodities private equity products and structured products and collectables.
A number of millionaires based in the UAE also move their fortunes to other markets, in order to maximise their returns. At the end of 2017, more than a third (38 per cent) of the wealth held by UAE millionaires were invested in foreign assets.
“This percentage is well above the worldwide average of around 24 per cent, which reflects that fact that many wealthy individuals use the UAE as base for managing their businesses and investments around the world (similar to people living in Singapore and Hong Kong),” New World Wealth noted.
They funds taken out of the UAE are mainly held in foreign businesses, as well as in foreign cash and American, European and Asian stocks.
A significant number (60 per cent) of these millionaires have also invested their money in second homes abroad, such as in London, New York, Paris, Mumbai and Istanbul.
But in terms of which industries in which millionaires have acquired their wealth, at least three sectors have stood out and on top of the list is the financial and professional services sector, which includes banks, law firms, consulting firms, fund managers and wealth managers, followed by oil and gas and basic materials, and real estate and construction.
The main industries in which UAE millionaires have acquired their wealth:
Sector/ % of HNWIs, as of 2017
Financial and professionals services: 18%
Oil and basic materials: 15%
Real estate and construction: 10%
Transport and logistics: 8%
Tech and telecoms: 7%
Hotels and leisure: 6%
Retail and fashion: 6%