Global wealth expanded at a solid rate in 2012, and offshore assets also rose, although the latter's share of the total dipped in relative terms, according to Boston Consulting Group's latest Global Wealth report.

Total private financial wealth expanded by 7.8 per cent last
year from the year before to reach a total of $135.5 trillion, outpacing the rises
in 2011 or 2010, when global wealth grew by 3.6 per cent and 7.3 per cent,
respectively, the Boston Consulting Group has reported. It also found that
offshore wealth grew, but declined in relative terms.

Wealth increased in North America (7.8 per cent), Western
Europe (5.2 per cent), and Japan
(2.4 per cent), mainly owing to the sharp rebound in equity markets in most
countries, particularly in the second half of the year. Meanwhile, new wealth
creation fuelled stronger, double-digit growth in the new-world regions of
Asia-Pacific ex-Japan (13.8
per cent), Eastern Europe (13.2 per cent), and Latin
America (10.5 per cent), BCG said in its 13^th
annual survey.

Wealth in the Middle East
and Africa (MEA) saw near-double-digit growth (9.1 per cent). New-world regions
will account for nearly 70 per cent of the growth in global private wealth over
the next five years, it said.

The report also went on to pinpoint what it sees as challenges in the
industry and how to overcome them. The study is one of a number of
global surveys of wealth trends due out in the next few weeks, such as
the RBC/Capgemini annual survey.

The total number of millionaire households reached 13.8
million globally in 2012, or 0.9 per cent of all households. The US had the largest number of millionaire
households (5.9 million), followed by Japan
(1.5 million) and China
(1.3 million). China should
surpass Japan
in 2013, it continued.

The highest density of millionaires was in Qatar, where 143 out of every 1,000 households
have private wealth of at least $1 million, followed by Switzerland (116), Kuwait
(115), Hong Kong (94), and Singapore
(82). The US had the
largest number of billionaires in 2012, but the highest density of billionaire
households was in Hong Kong (15.1 per million), followed by Switzerland (9.4 per million).

Offshore

Offshore wealth, defined as assets booked in a country where
the investor has no legal residence or tax domicile, rose by 6.1 per cent in
2012 to $8.5 trillion. Despite this increase, stronger growth in onshore wealth
led to a slight decline - to 6.3 per cent from 6.4 per cent, compared with 2011
- in offshore wealth’s share of global private wealth.

“While offshore wealth is projected to rise modestly over
the next five years, reaching $11.2 trillion by the end of 2017, wealth is
increasingly moving onshore due to the intense pressure that tax authorities
are exerting on offshore centres,” BCG said.

“Faced with troublesome industry trends that will likely
lead to lower growth and profitability over the next five years, wealth
managers need to take action on numerous fronts if they hope to maintain the
momentum they achieved in 2012,” the report, entitled, Maintaining Momentum in
a Complex World: Global Wealth 2013, said.

“The global wealth management industry has become
increasingly complex,” said Brent Beardsley, a co-author of the report and the
global leader of BCG’s asset and wealth management segment. “With the mature
economies of the ‘old world’ and the developing economies of the ‘new world’
moving at different speeds, wealth managers in different regions are grappling
with tough sets of problems. Diverse strategies will be required to succeed on
either side of the divide,” Beardsley said.

Benchmarking

BCG benchmarked the performance of more than 130
institutions - either pure private banks or the wealth management units of large
universal banking groups - from Western Europe, Eastern Europe, Asia-Pacific,
North America, Latin America, and the Middle East.

Globally, in 2012, wealth managers achieved 13 per cent
growth in assets under management over the previous year. Wealth managers in
the Asia-Pacific region accounted for the strongest growth (23 per cent),
followed by those in Latin America (18 per cent).
EU onshore and offshore institutions, as well as North American banks, achieved
AuM growth of around 10 per cent. The growth was driven largely by the rebound
in many equity markets during the second half of the year, but also by the
generation of net new assets, it said.

Among key trends identified, were: the shift in wealth creation and profit pools
toward developing economies, the decline of traditional value propositions, and
the rise in costs and complexity brought on by regulation.

To respond, the report suggested the following actions: building
a presence in high‐growth markets and with HNW client segments; offering
segment‐specific
value propositions and embracing client-centricity, and industrialising
operations and striving for lean front-to-back business processes

“Regardless of their home market or principal region of
activity, wealth managers globally still have much in common,” said Daniel
Kessler, a co-author of the report and the global leader of the wealth
management topic for BCG.

“All must find ways to gather new assets, generate new
revenues, manage costs, maximise IT capability, comply with regulators, and
find winning investment solutions that lead to deep and long-standing client
relationships. The battle to maintain the momentum they have achieved, amid a
very complex industry landscape, will continue to intensify,” Kessler added.