BCG: Land-locked Switzerland seen retaining ‘offshore’ crown through 2020
Land-locked Switzerland is expected to remain the largest single offshore financial centre through 2020, owing to its “high service quality, diverse product offerings, political stability, safe-haven currency, and attractive location in the centre of Europe”, the Boston Consulting Group says, in its sixteenth annual report on the global wealth management industry.
And although Asian wealth centres Hong Kong and Singapore saw the strongest growth in 2015, of about 10%, the UK remained in second place behind Switzerland, followed by the Caribbean, BCG’s 2016 Global Wealth report noted.
The wide-ranging report, this year entitled “Navigating the New Client Landscape”, details the “speed bump” the global private wealth industry hit last year, especially in the developed markets, noting that “all regions other than Japan experiencing a slowdown”. This, it added, was forcing wealth managers to reevaluate their strategies.
For example, demographic and socioeconomic trends, BCG says in an introduction to its findings, “are setting the stage for the rise of nontraditional client segments – currently under-served or rising in importance – that do not necessarily fit the standard, net-worth-based service approach”. It identifies as two key market segments in this category that it says offer “significant growth opportunities”: female investors and so-called millennials, or those born between 1980 and 2000.
Other key findings in the 31-page report:
* The shift from developed regions (the “old” world) to developed regions (the “new” world as the primary source of offshore wealth has become more pronounced; today, “65% of offshore wealth originates from the new world, compared with 57% five years ago”
* The share of total wealth held offshore varies significantly among regions, with MEA and Latin America being “front-runners, both with roughly 25% of total private wealth held offshore”, fueled by economic and political tensions at home as well as a lack of desirable onshore financial products
* Private wealth booked in offshore centres grew by about 3% in 2015 to almost US$10trn; but offshore wealth held by investors in North America, Western Europe and Japan actually declined, by 3% last year
* In total, global private financial wealth grew by 5.2% in 2015, to US$168trn; this compared with a more than 7% rise the previous year. And unlike in recent years, “the bulk of global wealth growth in 2015 was driven more by the creation of new wealth, such as rising household income, than by the performance of existing assets, as many equity and bond markets stayed fairly flat or even fell
* Several countries, particularly China and India, saw large increases in the number of millionaire households in 2015, although there were no significant shifts in “millionaire density” compared with 2014, with Liechtenstein and Switzerland maintaining the highest concentrations
* The level of interaction between offshore clients and their relationship managers increased in 2015, due both to “difficult market conditions, such as low interest rates and high stock-market volatility, and the amount of client information banks must gather to satisfy new transparency obligations”, which are making offshore banking “more resource intensive, leading to front-office costs per client that are close to those of onshore operations”
To read and download a copy of the report from the Boston Consulting Group’s website, click here.