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Global private wealth tops $200 trillion, offshore assets keep growing

31/07/2018 John Evans, international editor of thewealthnet,

Personal financial wealth grew by 12 percent in 2017 to $201.9 trillion, driven by the bull market environment in all major economies as well as strong growth in equities and investment funds, according to the Boston Consulting Group.

The significant strengthening of most major currencies against the dollar also played a part, BCG said, in its annual wealth report.

In general, developed markets held a higher share of wealth in non-investable assets - particularly pension fund entitlements - than developing markets.

The share of global wealth held by millionaires increased to almost 50 percent in 2017, compared with just under 45 percent in 2012.

If recent patterns of wealth expansion continue, under an optimistic scenario, personal financial wealth could rise at a compound annual growth rate of around seven percent from 2017 to 2022, according to BCG projections.

At the same time, the amount of global offshore wealth held in 2017 was around $8.2 trillion, six percent higher than in the previous year. Switzerland remained the largest offshore centre, domiciling $2.3 trillion in personal wealth in the country.

The next-largest booking centres were Hong Kong ($1.1 trillion) and Singapore ($0.9 trillion), which have grown at yearly rates of 11 percent and 10 percent, respectively - more than three times the rate (three percent) of Switzerland over the past five years.

Net offshore inflows from 2012 through 2017 totalled over $800 billion, with Hong Kong and Singapore the key destinations. But some offshore centres, notably the Channel Islands and the Isle of Man, saw net outflows during the same period.

Top performers - defined as the quartile of institutions with the highest pre-tax profit margins - achieved a significant lead over average performers in overall revenue growth and return on assets (RoA) over the past three years, according to industry data gathered by BCG from more than 150 wealth managers.

Wealth managers can achieve a revenue uplift of eight percent to 12 percent “by adjusting price levels, correcting unnecessary discounts, and simplifying overall pricing structures”, the consultancy said.

“Product and service bundling can contribute to higher revenues if properly linked to the pricing architecture and to the value proposition for each client segment. Overall, smart revenue practices can accomplish the dual goal of increasing the top line and enhancing client satisfaction.”

It declared that firms that deliver smart, individualised products, services, and prices - digitally and through a relationship manager or financial adviser - will significantly bolster their top-line growth and occupy a differentiated position in the market.

Seizing this opportunity requires the deployment of cutting-edge capabilities in advanced analytics - encompassing such elements as new technology platforms, fresh development capacities, next-generation tech and data architectures, updated data and digital organizational structures and skills, and improved access to internal and external data.

A full transformation along these lines can lead to top-line growth of 15 percent to 30 percent and drive efficiency gains of 10 percent to 15 percent, BCG asserted.

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