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Rich Chinese helped make Asia the fastest-growing region for affluent families as the increase in global wealth accelerated last year, according to a study by Boston Consulting Group.
Private wealth in the Asia-Pacific region excluding Japan jumped 31 percent to $37 trillion in 2013, supporting a 15 percent advance to $152 trillion globally. That outpaced the 8.7 percent worldwide growth in 2012 and provided a boost to companies that oversee funds for the rich, the Boston-based firm said in its 14th annual report on the subject.
“Wealth managers globally had another outstanding year of growth in 2013,” BCG said. “The Asia-Pacific region accounted for the strongest growth.”
China leapfrogged Germany and Japan in the past five years to trail only the U.S. in a ranking of countries by private financial wealth. China’s $22 trillion is expected to increase more than 80 percent to $40 trillion by 2018, while the U.S. may grow to $54 trillion from $46 trillion over the same period, BCG said.
Globally, stock-market gains averaged 21 percent in 2013, providing the primary driver of growth in private wealth, especially in North America, Europe and Japan, according to BCG. North America wealth gained 16 percent to $50.3 trillion.
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“Equity markets were up huge last year and that impacted the total wealth in the world,” Brent Beardsley, a BCG senior partner and co-author of the report, said at a press conference yesterday in New York. “Looking forward, we see much more muted growth.”
Millionaire Households
The number of millionaire households in the world jumped to 16.3 million in 2013 from 13.7 million in 2012, according to the report.
Emerging markets created new millionaires, even while a 5 percent decline in the MSCI Emerging Markets Index -- a benchmark of equities in regions such as Asia, Africa and Latin America -- negatively affected existing invested assets.
Alongside China’s soaring growth, faster-growing countries includeIndia, which may more than double private wealth assets to $5 trillion by 2018, and Russia, where wealth may advance more than 80 percent to $4 trillion.
The pace of growth in Latin American wealth was little changed compared with a year earlier after an increase of 11 percent to $3.9 trillion. It’s expected to climb 8.8 percent a year until 2018, compared with an 11 percent annual increase in the Asia-Pacific region.
Over the next five years, North America, western Europe and Japan are all expected to lag behind the world’s average annual growth in wealth of 5.4 percent.
Private Banking
BCG expects rich households to have almost $200 trillion worldwide by 2018, with the Asia-Pacific region contributing about half of global growth. Assets from Asian millionaires will help Hong Kong and Singaporeencroach on Switzerland as the world’s No. 1 offshore private-banking center.
The Asian private banking division of Lombard Odier & Cie, Geneva’s oldest bank, is seeking to increase assets under management by as much as 20 percent a year by tapping millionaires from Hong Kong, Singapore, Japan and China, said Vincent Magnenat, the firm’s head of private banking for the region. The unit now manages $8 billion in Asia, Magnenat said in an interview in Singapore last week.
In 2013, Swiss banks had $2.3 trillion of cross-border assets, a 26 percent share of the global market. Average revenue per Swiss offshore banker was $2.6 million, compared with $1.6 million at onshore European wealth-management firms and companies in the Asia-Pacific region.
Tax Dodgers
Most offshore assets were deposited by rich families from western Europe, where the wealthy historically chose Switzerland to book money outside their country of residence. These clients contributed to an outflow of 4 percent of managed assets in Switzerland and Luxembourg during 2013 as the U.S. and western European governments cracked down on tax dodgers with offshore accounts.
Switzerland “remains under heavy pressure because of its significant exposure to assets originating in developed economies, some of which are expected to be repatriated following government actions to minimize tax evasion,” the report said.
Affluent individuals from the Middle East, Africa and Eastern Europe also tend to prefer Switzerland to other offshore locations such as the Caribbean, the U.K. and the U.S., according to the report.
Secure Locations
Even with growing scrutiny on tax compliance by some governments, millionaires will still look to offshore centers for innovative financial products, the quality of investment and client-relationship advisers and the security of locations such as Switzerland or Singapore, BCG said.
Tensions between Russia and the Ukraine, and the conflict in Syria, illustrated the need for politically and economically stable wealth-management centers last year and offshore wealth is expected to grow at a rate of 6.8 percent a year to $12.4 trillion by the end of 2018, according to the report.
“They are seeking political and financial stability,” Beardsley said.
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