Private banks, which in recent years have been rushing headlong to expand Asian businesses, should find new research on wealth trends over the next decade sobering reading. It projects that developed, rather than emerging markets, will provide the lion’s share of wealth. PBI takes a look at Deloitte’s millionaire research.
The conventional view that Asia-Pacific is the place to be for wealth managers looking to grow their business has been questioned in new research projecting wealth trends out to 2020.
The study, from the Deloitte Center for Financial Services, signals that personal wealth among the rich in the developed world will continue to hugely outstrip that in the emerging economies, dominated by Asia.
Deloitte’s study sees millionaire households among 25 key economies more than doubling their wealth, growing from an estimated $92trn this year to $202trn in 2020.
Wealth in Deloitte’s study includes financial assets (stocks, bonds and other investments) and non-financial assets including primary residence, durables, business ownership and other assets.
Developed markets hit $177trn by 2020
The broader definition compares to the 2010 Merrill Lynch/Capgemini World Wealth Report which estimated total high net worth (HNW) wealth at $39trn.
Merrill Lynch/Capgemini’s study only considers HNW liquid investable assets and excludes collectibles, consumables, consumer durables and real estate used for primary residences.
“In spite of exceptional growth in emerging markets, it is developed markets that are expected to remain the global centres of wealth over the next decade, in terms of both the amount of wealth held and the number of millionaire households,” Deloitte’s study suggests.
By contrast, emerging markets by 2020 will only boast $25trn of wealth versus the $177trn amassed by rich households in the Western nations.
US still a magnet to millionaires
At the end of this decade, America will remain the world’s top country for millionaires, accounting for nearly half of the world’s population of high net worth individuals.
The study estimates the number of millionaire American households will increase from an about 10.5m in 2011 to 20.6m in 2020.
The aggregate wealth of millionaire US houses will likely reach $87trn by 2020, up from $39trn currently, Deloitte forecasts.
Still, growth in emerging markets will remain high.
Deloitte forecasts that in emerging markets, the growth over the next decade is potentially “quite impressive”, at 260% versus the 107% growth expected in developed markets.
Private banks still eager on emerging markets
Merrill Lynch/Capgemini’s World Wealth Report found that, in 2009, Asia’s millionaire ranks rose to 3m individuals, matching Europe for the first time. Asian millionaires’ combined wealth surged 31% to $9.7trn, surpassing Europe’s $9.5trn. In North America, the ranks of the rich rose 17% and their wealth grew 18% to $10.7trn, the report calculated.
Still, there are good reasons to stay with the potential of Asia, bankers say. For example, Swiss private banking, seeking to make good the shortfall of revenues from its traditional offshore banking business, sees Asia as a substitute market.
Banks like Julius Baer even bill Asia nowadays as its “second home” after Switzerland. LGT has moved out of the German market and continued to build its 25-year-old business in Asia.
Emerging markets: growing, growing strong
When it comes to wealth segments, Deloitte analysis suggested that although the growth in the total wealth of millionaire households in the emerging economies will outpace the West, the latter will continue to remain home to a significant share of millionaires.
In the developed markets, the $5 to $30m segment will likely grow substantially over the next decade. The $1 to $5m segment will comprise the largest group both in developed and emerging markets.
As for individual countries, China is likely to be among the top 10 wealthiest economies by as soon as 2015, with an estimated $3.6trn in wealth.
Deloitte forecasts that India is likely to experience the largest growth in total millionaire wealth over the next decade at 405%. For China, the projection is close on India’s heels, at 394%. Brazil scores a 257% growth rate and Russia, 241%.
By segment, South Korea may have the largest number of millionaires among emerging economies, with 1.51 households by 2020. China will follow closely with 1.5m householders.