Asian Wealth to Beat Europe's for First Time Amid Brexit TurmoilBy
Private wealth in Asia-Pacific may climb more than 10% in 2017
Wealth managers forced to cut costs to stem drop in margins
Private wealth in Western Europe is set to fall behind the Asia-Pacific region for the first time this year, partly as a result of the political and economic uncertainty unleashed by Brexit, according to the Boston Consulting Group.
Western Europe’s private-household wealth grew by 3.2 percent to $40.5 trillion last year, the smallest increase of any region, while Asia-Pacific had a surge of 9.5 percent to $38.4 trillion, the consulting firm said in a report Tuesday. Those totals are expected to climb to $41.9 trillion and $42.3 trillion respectively by the end of 2017, BCG said in an email.
The wealth of the richest will climb faster than that of other groups in the years ahead. People with at least $100 million are expected to see annual increases of 9.1 percent between 2016 and 2021, while those with $20 million to $100 million will have gains of 10.2 percent, according to BCG. That compares with 3.7 percent for households with less than $1 million.
Wealth managers’ pretax profit margins dropped to 22.4 basis points last year from 33 basis points in 2007, according to BCG, in the face of falling revenue and pressure on fees caused by increased regulation and competition. That has forced companies to cut costs and sell unprofitable or high-risk businesses, BCG said.
Investors from Asia-Pacific were the biggest source of global offshore wealth last year with $2.9 trillion, followed by $2.6 trillion from Western Europe. Offshore bookings will remain a key area of growth for wealth managers, especially in the richest segments of the market, as investors seek a refuge from factors ranging from political instability to weakening currencies, BCG said.
By the end of 2021, the growth rate for global private wealth is expected to be 6 percent, up from 5.3 percent last year, according to the report. While the increases in North America and Japan will be mainly driven by the performance of existing assets, Asia-Pacific will benefit more from new savings, reflecting the region’s superior growth prospects, BCG said. In Western Europe, the growth in wealth will stem almost equally from both sources.