Global wealth grew by 4.9 per cent in 2007, to $109.5 trillion, according to the latest study in the global wealth by The Boston Consulting Group. A Wealth of Opportunities in Turbulent Times is BCG’s eighth annual study of wealth around the globe. This year’s study covers 62 markets representing more than 98 per cent of global GDP.

The report covers data from the whole of 2007 and shows that in North America wealth grew by 3.8 per cent in 2007, down from 8.9 per cent in 2006.

“The financial crisis continues to cast a pall over established wealth markets,” said Victor Aerni, a Zurich-based partner and co-author of the report. “It has prompted many investors to move their assets to more conservative products, resulting in lower margins for some wealth managers. As clients have moved their assets elsewhere or have curtailed new investments, some wealth managers have even seen the volume of assets under management decline.”

North America and Western Europe accounted for about two-thirds of the world’s wealth in 2007. The remaining third—what BCG call the other third of global wealth—was spread across emerging or less mature markets around the world, where wealth has been growing at much faster rates, according to the report.

According to BCG, wealth markets in Asia-Pacific, Latin America, Eastern Europe, and the Middle East had about $33 trillion in AuM in 2007. The consultancy says that most of these markets share a common set of challenges such as high entry costs, a scarcity of relationship managers, and increasing competition.

“To grow, wealth managers will need to overcome these challenges while developing products and services that suit specific markets,” Mr Holley said.

Wealth in Asia-Pacific totalled about $25.5 trillion in 2007. China’s wealth market is characterised by high growth, scarce RMs, and a client base dominated by entrepreneurs. India’s wealth market is small and underdeveloped, but many clients are investment savvy and have an appetite for risk. Japan’s wealth market is massive but growing slowly and difficult to access.

In Latin America, AuM reached $3.1 trillion in 2007. Brazil and Mexico accounted for 60 per cent of this wealth. Brazil’s banking sector has exceptionally strong local competition, relative to other emerging markets. Mexico’s wealth market has two valuable attributes: growth and stability. The competitive environment is heating up, but it is not yet overcrowded, says BCG.

Russia is by far the largest wealth market in Eastern Europe. Its AuM totalled $950 billion in 2007. But markets in Central and Eastern Europe had the strongest growth in AuM. From 2002 through 2007, four of the ten fastest-growing wealth markets worldwide were Poland, Slovakia, Hungary, and the Czech Republic.

The report says that the growth opportunity in the Middle East is concentrated in the six markets of the Gulf Cooperation Council: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. In 2007 this region had an estimated $1.5 trillion in AuM. All but one of the six GCC markets were among the top 15 markets ranked by percentage of millionaire households.  

BCG says that the financial crisis has created a new sense of urgency around how to position and structure the front office.

“Success in wealth management always seems to boil down to a small set of client-focused capabilities that are critical to driving growth,” the report says. “The front office is the common denominator of these capabilities—it is where clients are acquired and served.” The report details a variety of issues that are critical to the success of the front office.

Globally, the report points out that millionaire households represented just 0.8 per cent of all households but owned 35 per cent of global wealth.

In 2007 the number of millionaire households grew by 11.2 per cent to reach 10.7 million. The US again had the largest number of millionaire households, followed by Japan, the UK, Germany, and China.

Small markets were found to have the greatest concentrations of millionaire households. In Singapore one in ten households had at least $1 million in AuM. Three of the five densest millionaire populations were in the Middle East—in Qatar, the UAE, and Kuwait. Switzerland had the highest concentration in Europe, at 7.3 per cent.

In 2007 the amount of wealth held offshore grew to $7.3 trillion but declined as a proportion of total AuM. Traditional offshore centers such as Switzerland face a number of pressures, including the rise of new offshore centres in Singapore and Dubai. The report details steps traditional offshore centres can take to maintain their competitiveness.