Offshore Wealth Hubs – Asian Countries the World’s Future
Singapore and Hong Kong could ride a boom in offshore wealth management services to become the world’s largest wealth hubs during the coming years. Global asset managers are likely to channel greater resources to the region to achieve scale, while local managers are likely to draw on the scope of their domestic businesses to woo clients from other regions.
Global asset managers to vie for Asian wealth services
Global asset managers are likely to compete aggressively for Asia’s proliferating wealth management business. The region could be home to the greatest concentration of investable wealth assets worldwide in the next two years, surpassing North America. It could also see the world’s fastest growth in the number of millionaires, according to our analysis based on BCG statistics. Over the next five years, BCG expects a 14% annual increase in investable assets for individuals worth $250,000 to $1 million, significantly higher than 4.2% growth in North America and 6.5% in Western Europe.
UBS, Merrill Lynch, Morgan Stanley, and Credit Suisse are likely to vie for a growing share of Asia’s offshore wealth pie. Barclays and Deutsche Bank’s potential re-entries may herald others joining the fray.
Singapore and Hong Kong will be destinations of choice
Singapore and Hong Kong could become the world’s largest wealth hubs in the next few years. Despite strong growth in onshore wealth management, the two city-states are likely to emerge as the destinations of choice for offshore wealth stewardship. A strong banking sector, effective regulation, and favorable policies are likely to keep promoting capital flows into Singapore. Its regulator’s proactive role in policy formulation, and being at the forefront of technology adoption, are factors likely to stoke investors’ confidence and trust.
Hong Kong’s proximity positions it favorably to gain from China’s wealth boom, yet that could also pose the biggest challenge for it to sustain capital inflows from the north.
Asian Offshore Wealth Managers Likely to Gain Dominance.
Asian wealth managers are likely to gain dominance as their products and platforms improve. Domestic managers have been more efficient, with cost-to-income ratios at 60-80% vs. 85% for global rivals in Asia, driving their higher profit margins. Sharing across mass-affluent and high-net-worth platforms, and maintaining relationships as clients graduate to the next tier, should bolster local asset managers. Asian clients, unlike their western counterparts, tend to be price sensitive, opting to actively manage their own portfolios rather than delegate those duties to a wealth advisor.
Local wealth managers may use the domestic scale to capture greater market share overseas. European clients may increasingly seek the services of Singapore-based wealth managers to diversify their portfolios and capitalize on Asia’s growth.
Asian managers raise their product and platform offering
Asian managers have made a push to compete with the top league wealth managers in Asia such as UBS, Credit Suisse, and Citibank, by improving their product and platform offering. OCBC’s Bank of Singapore hosted Barack Obama to meet with its top clients from around the world. Asian wealth is dominated by first-generation and second-generation entrepreneurs, who seek more control and growth in their investments, unlike European counterparts who tend to seek wealth preservation. Domestic managers may be well positioned to leverage their regional presence in Asia to service the needs of these clients, and gradually provide access to products and insights comparable with the global majors.
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