July 10, 2017

Global private wealth to exceed $200 trillion as the rich get richer

http://www.consultancy.uk/news/13650/global-private-wealth-exceed-200-trillion-as-the-rich-get-richer


 10 July 2017 Consultancy.uk

Global private wealth hit $166 trillion last year, up 5.6% on the year previous. Yet as the rich get richer, reaping the benefits of globalisation opportunities and recovering economies, the rate of growth will accelerate in the coming years, taking total private wealth in the hands of the affluent to over $220 trillion by 2021.

A new report from The Boston Consulting Group explores, among others, the accretion of wealth among the world’s wealthiest people. The reported, titled 'Global Wealth 2017: Transforming the Client Experience', is based on an analysis of global private and covers both current trend and future projections. Private wealth is measured for the affluent as between $250,000 and $1 million; for lower high net worth individuals (HNWI) between $1 million and $20 million; upper HNWI as between $20 million and $100 million; and ultra HNWI as anything over $100 million.

Globally, private wealth has continued its steady increase, up from $158.2 trillion in 2015 to $166.5 trillion last year – with growth averaging 5.3%, up from 4.4% between 2014 and 2015.

North America saw solid growth of 4.5% between 2015 and 2016, with total wealth hitting $55.7 trillion last year in the region. Europe saw more lacklustre growth of 3.2% with wealth in the region hitting $40.5 trillion. The Asia Pacific region was party again to strong growth, at 9.5%, with absolute increase of $3.4 trillion to $38.4 trillion last year – growth slowed somewhat from the 12.3% recorded the year previous.

The firm is projecting strong growth in total wealth across the globe, at 6% CAGR between 2016 and 2021 – to hit $223.1 trillion. The US is expecting close to the average growth of 5.6%, with regional wealth topping $73 trillion, while the Asia-Pacific region may see 9.9% growth CAGR to hit $61.6 trillion by 2021.

The research finds that the drivers of growth globally will be relatively evenly distributed globally between growth from new wealth creation and growth from performance of existing assets. The former accounting for 49% of the $57 trillion in wealth created between 2016-2021, while the latter accounts for 51%.

North America is largely set to grow from further wealth accretion for those that already hold it, at 73% of total gains to 2021, while in the Asia-Pacific, 65% of wealth addition stems from growth from new wealth creation. Europe has a relatively balanced profile, as does Latin America and the Middle East and Africa.

The research notes that those with money are likely to be making the lion’s share of more money, in terms of CAGR between 2016 and 2021. The share of wealth by millionaire households will continue to increase, with the biggest share of that growth globally for households with $20 million - $100 million in wealth, at 10.2%, followed by >$100 million, at 9.1%. Households with <$1 million are likely to see the lowest growth of their wealth, at 3.7%.

In the US the top segment of wealthy will see significantly larger growth than the bottom, with CAGR 9.2% for households with $20 million - $100 million and 8.3% for >$100 million – while those with <$1 million will see growth of 1.9% CAGR. In the Asia-Pacific region, a similar story unfolds, with the richest group seeing growth of 14.6% CAGR while the <$1 million group sees growth of 7.7%.

The study also considered the asset classes held by the wealthy in 2016. Globally the share of wealth held in assets stood at around 43%, while 17% were invested in bonds and 39% were invested in cash and deposits. In North America, meanwhile, considerable wealth is currently held in equities, at 70% of total wealth, followed by bonds at 16% and cash and deposits at 14%.

In Western Europe around 39% of wealth is in equities, 25% in bonds and 37% in cash and deposits. The Asia-Pacific regions is the least exposed to equities, with around 65% of wealth held in cash and deposits, while in Japan, it stands at 59%.

Offshore wealth

In terms of offshore wealth, the Asia-Pacific region leads the pack, hosting $2.9 trillion – with growth of 6% CAGR expected until 2021. Western Europe follows, with offshore wealth of $2.6 trillion. North America notes offshore wealth of around $0.7 trillion.

The largest financial centres of offshore wealth are unsurprisingly largely renowned as tax havens meanwhile, with the Caribbean and Panama accounting for $1.3 trillion of the global share, while and small nation Switzerland hosts a staggering $2.4 trillion of all the world’s offshore wealth. The Channel Islands and increasingly lax Dublin account for a further $1.1 trillion. The UK itself surprisingly hosts $1.3 trillion in offshore wealth from foreign private citizens – with growth of around 4% expected to 2021, as tax of this wealth looks unlikely to increase.

“Offshore is not at risk,” according to Anna Zakrzewski, a BCG Partner and a co-author of the report. “In the future, despite the expected continued convergence of offshore and onshore, the former will remain a key growth opportunity, particularly in the upper-high-net-worth and ultra-high-net-worth segments. Amid much market uncertainty and political instability in many parts of the world, offshore centers will continue to provide a safe haven with excellent overall quality and differentiated wealth management offerings

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