June 10, 2010 / 4:37 PM / 7 years ago

CORRECTED - Global wealth up 12 pct in '09; adviser income down

* Global wealth up 12 pct to $111.5 trillion, shy of ‘07 peak * Client trust in their advisers remains diminished * North American client assets up 15 pct to $35.1 trillion (Corrects paragraph 3 to show that 22 percent represents $3.1 trillion and adds “to $17.1 trillion”, corrects figure in bullet point and paragraph 2 to $111.5 trillion instead of $11.5 trillion)

By Joseph A. Giannone

NEW YORK, June 10 (Reuters) - The combined wealth of households around the world rose 12 percent last year and nearly surpassed the 2007 high-water mark, yet money managers faced lower revenue and shrinking profit margins, according to an industry study released on Thursday.

Global assets under management rose to $111.5 trillion, just short of the 2007 year-end peak, Boston Consulting Group said in its annual study of the wealth management business. But while client assets have almost recovered from the 2008 financial crisis, client trust in their advisers has not.

North America led the world with a $4.6 trillion increase in total assets, up 15 percent to $35.1 trillion, while Asia-Pacific countries posted the strongest recovery with a 22 percent jump, or $3.1 trillion, to $17.1 trillion.

Europe remained the wealthiest corner of the world, weighing in at $37.1 trillion of assets.

Boston Consulting noted that, among world regions, only the United States and Japan had not regained 2007 levels. The collapse of debt markets, followed by a deep recession, led to a 10 percent plunge in global wealth.

Looking ahead, BCG projects global wealth will increase at an average annual rate of 6 percent this year through 2014, faster than was reported in the five year period ending last year.

Much of that growth will be driven by the Asia Pacific region where, excluding Japan, investable assets will increase at twice the global rate.

“There’s no doubt that wealth will continue to grow faster in emerging markets, fueled by strong economic growth,” said Tjun Tang, a BCG partner and a coauthor of the report.

OFFSH0RE PRESSURES

Offshoring wealth by the rich also grew 9 percent last year, with $7.4 trillion in assets placed in countries where the investor has no legal residence. Switzerland remains the largest offshore banking center with $2 trillion, BCG said.

Regulatory pressure on offshoring is expected to reverse that growth. Offshore assets are expected to shrink from 7 percent of global wealth to just over 6 percent in 2014.

”Although undeclared assets account for a small and declining share of offshore wealth,“ said Peter Damisch, a BCG partner and a coauthor of the report, ”the push for transparency will compel some clients -- particularly those in North America and Europe -- to move their assets.

Boston Consulting sees private banks adjusting their strategies and models, and perhaps abandoning certain markets.

Revenue has come under pressure as asset-levels shrink, driving down management fees. The mix of business also depressed margins, as anxious clients moved more money into cash and fixed-income investments.

On average, wealth managers’ assets grew 14 percent last year, but revenue fell 7.3 percent and revenue margins narrowed 12 basis points to 0.83 percent. At the same time, expenses rose as a proportion of revenue to 74 percent, squeezing profits.

The report also noted that, as wealth rose, it has been concentrated among fewer people. Less than 1 percent of the world’s households are millionaires and yet they hold 38 percent of the money. Families with more than $5 million represent less than one-tenth of a percent of world households, yet hold 21 percent of the wealth. (Reporting by Joseph A. Giannone; editing by Andre Grenon)

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