The economic crisis is transforming the global map of the world’s wealthiest people, with Europe nudging out North America as the the richest region, a study has shown.

The report by global management consulting firm, The Boston Consulting Group (BCG), shows that global wealth fell from $104.7 trillion in 2007, measured in assets under management (AuM), to $92.4 trillion in 2008 – a decline of 11.7 per cent. It was the first decline since 2001. 

• The steepest decline was in North America, where wealth plummeted by 21.8 per cent last year

• In North America, the share of wealth held in equities fell from 50 per cent in 2007 to 38 per cent in 2008 – but the region still had the highest proportion of wealth held in equities

• Europe had $32.7 trillion in AuM, down 5.8 per cent from the previous year, followed by North America, with $29.3 trillion in AuM

• Latin America was the only region where wealth increased – its AuM grew by three per cent in 2008

The number of millionaire households worldwide fell from 11 million to about nine million – a drop of 17.8 per cent. The decline was steepest in North America and Europe, at 22 per cent in both regions, although the United States continued to have the most millionaire households – nearly four million.

• Singapore had the highest concentration of millionaires, with 8.5 per cent of the country’s households owning more than $1 million

• Three of the six densest millionaire populations were in the Middle East – in Kuwait, the United Arab Emirates and Qatar

The crisis also narrowed the gap between the wealthy and non-wealthy. Wealth owned by households with less than $100,000 in AuM increased by two per cent in 2008. It declined in all other segments. Among households with more than $5 million in AuM, wealth fell by 21.5 per cent.

Peter Damisch, a BCG partner and a co-author of the report, said: “Wealth will begin a slow recovery in 2010 but may not reach its pre-crisis level until 2013. We expect wealth to grow at an average annual rate of about four per cent from year-end 2008 through 2013.” Wealth will grow fastest in Asia-Pacific (excluding Japan) at 9.5 per cent per year over the same period, he added.

Pressure mounting on offshore wealth

Offshore wealth fell to $6.7 trillion in 2008, down from $7.3 trillion in 2007. Switzerland remained the largest offshore centre. It accounted for $1.8 trillion, or 28 per cent, of offshore wealth last year.

Increased regulatory scrutiny is changing the landscape of cross-border wealth management, with pressure mounting on offshore centres that have based their edge primarily on tax avoidance. “Once their tax and legal advantages evaporate, so too will their appeal,” Damisch said. “Being inconspicuous is a tenuous value proposition in an era of increasing oversight.”

Some non-traditional offshore centres – including several outside Europe – remain poised for growth. Singapore and Hong Kong, in particular, will continue to benefit from their proximity to other Asian countries, where wealth is expected to stage a faster recovery, predicts BCG.

“Iconic offshore centres, like Switzerland, will remain competitive, but even the most venerable institutions will need to emphasise their underlying capabilities as international wealth managers,” said Damisch.