Comeback for global wealth but proportion kept offshore expected to fall, study shows

Global wealth staged a remarkable comeback in 2009, increasing by 11.5% to $111.5 trillion, but the rebound in wealth should not be seen as a return to business as usual, according to a new survey.

It may be just short of the year end peak set in 2007 but client trust and wealth manager performance are still lower than they were before the global economic crisis, a study from The Boston Consulting Group (BCG) shows.

 
Its tenth annual Global Wealth report, Regaining Lost Ground: Resurgent Markets and New Opportunities, shows that North America posted the largest absolute gain in wealth at $4.6 trillion, 15%, but the largest percentage gain, and the second largest in absolute terms, was in Asia-Pacific (excluding Japan), where wealth increased by 22% or $3.1 trillion. That was nearly double the global rate.
 
Latin America had the second highest growth rate at 16% and Europe remained the wealthiest region with a third of the world’s wealth. It was one of several regions where wealth surpassed its precrisis year-end peak.
 
North America and Japan were the only regions where wealth remained below the year-end 2007 levels.
 
BCG projects global wealth to grow at an average annual rate of nearly 6% from year-end 2009 through 2014, much slower than the sharp recovery in 2009 but still higher than the 4.8% annual growth rate from 2004 to 2009.
 
‘There’s no doubt that wealth will continue to grow faster in emerging markets, fuelled by strong economic growth. We expect Asia-Pacific, excluding Japan, to grow at nearly twice the global rate, raising its share of global wealth from 15% in 2009 to almost 20% in 2014,’ said Tjun Tang, a BCG partner and a co-author of the report. The recovery in wealth was driven by resurgent financial markets and increased savings.
   
The number of millionaire households rose by about 14% in 2009, to 11.2 million, about where it stood at the end of 2007. The US had by far the most millionaire households at 4.7 million, followed by Japan, China, the UK and Germany.
 
Singapore saw the highest growth in millionaire households, up 35%, followed by Malaysia at 33%, Slovakia at 32% and China 31%. Smaller markets had the highest concentrations of millionaire households. In Singapore and Hong Kong, millionaire households accounted for 11.4% and 8.8% respectively.
 
Switzerland had the highest concentration of millionaire households in Europe and the third highest overall at 8.4%. Three of the six densest millionaire populations were in the Middle East in Kuwait, Qatar, and the United Arab Emirates.
 
Offshore wealth, defined as assets booked in a country where the investor has no legal residence or tax domicile, grew to $7.4 trillion in 2009, up from $6.8 trillion in 2008, largely driven by the market recovery. Switzerland remained the largest offshore centre, with about 27%, $2 trillion, of global offshore wealth, according to the study.
 
But despite the recovery, banks in traditional offshore centres face considerable regulatory and competitive pressures. BCG projects the share of global wealth held offshore to fall from close to 7% in 2009 to just over 6% in 2014.
 
‘Although undeclared assets account for a small and declining share of offshore wealth, the push for transparency will compel some clients, particularly those in North America and Europe, to move their assets. More important, it will force private banks to adjust their strategies and operating models and perhaps even to abandon certain markets,’ said Peter Damisch, a BCG partner and a co-author of the report.