Thursday, June 02, 2011 6:51:11 AM
Millionaires Control 39% of the World’s Wealth
By Robert Frank
Last year was another good year for millionaires – though their pace of growth is slowing.
According to a new report by Boston Consulting Group [ http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-77753 (next below)] out today, the number of millionaire households in the world grew by 12.2% in 2010, to 12.5 million. (BCG defines millionaires as those with $1 million or more in investible assets, excluding homes, luxury goods and ownership in one’s own company).
The U.S. continues to lead the world in millionaires, with 5.2 million millionaire households, followed by Japan with 1.5 million millionaire households, China with 1.1 million and the U.K. with 570,000. Singapore leads the world in “millionaire density,” or the percentage of millionaires, with 15.5% of its population now millionaire households.
The most important trend, however, is the global wealth distribution. According to the report, the world’s millionaires represent 0.9% of the world’s population but control 39% of the world’s wealth, up from 37% in 2009. Their wealth now totals $47.4 trillion in investible wealth, up from $41.8 trillion in 2009.
Those higher up the wealth ladder also gained. Those with $5 million or more, who represent 0.1% of the population, controlled 22% of the world’s wealth, up from 20 percent in 2009.
As you can see from the accompanying chart, millionaires control 29% of North America’s wealth, while millionaires control about 38% of the wealth in the Middle East and Africa. While the chart makes it look like millionaire-wealth in America is more concentrated, we also have far more millionaires, so their wealth is more spread out among the millionaire population.
Still, the data supports a trend we have been seeing for years: the rise of the global, winner-take-all (or most) economy.
Copyright ©2011 Dow Jones & Company, Inc.
http://blogs.wsj.com/wealth/2011/05/31/millionaires-control-39-of-the-worlds-wealth/ [with comments]
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PRESS RELEASES
May 31, 2011
Global Wealth Continues Its Strong Recovery with $9 Trillion Gain, but Pressures on Wealth Managers Persist, Says Study by The Boston Consulting Group
Assets Under Management Rise by 8.0 Percent to Hit a Record $121.8 Trillion; the Number of Millionaire Households Jumps by 12.2 Percent; but Changes in Regulations and Client Behavior Continue to Dampen Wealth Managers’ Results
NEW YORK, May 31, 2011—Propelled by growth in nearly every region, global wealth continued a solid recovery in 2010, increasing by 8.0 percent, or $9 trillion, to a record of $121.8 trillion.1 That level was about $20 trillion above where it stood just two years prior during the depths of the financial crisis, according to a new study by The Boston Consulting Group (BCG).
Findings from the study appear in BCG’s eleventh annual Global Wealth report titled Shaping a New Tomorrow: How to Capitalize on the Momentum of Change, which was released today at a press briefing in New York. Among the other key findings:
* North America had the largest absolute gain of any regional wealth market in assets under management (AuM), at $3.6 trillion, and the second-highest growth rate, at 10.2 percent. Its $38.2 trillion in AuM made it the world’s richest region, with nearly one-third of global wealth.
* In Europe, wealth grew at a below-average rate of 4.8 percent, but the region still had a gain of $1.7 trillion in AuM.
* Wealth grew fastest in Asia-Pacific (excluding Japan), at a 17.1 percent rate. In the Middle East and Africa, growth was somewhat above the global average, at 8.6 percent. In Latin America, wealth grew by 8.2 percent. Together, these three regions accounted for 24.4 percent of global wealth in 2010, up from 20.9 percent in 2008.
* Wealth declined by 0.2 percent in the Japanese market to $16.8 trillion. As recently as 2008, Japan accounted for more than half of all the wealth in Asia-Pacific. In 2010, it accounted for about 44 percent.
* In terms of individual countries, the nations showing the largest absolute gains in wealth were the United States, China, the United Kingdom, and India.
The strong performance of the financial markets accounted for the lion’s share (59 percent) of the growth in AuM. Its impact was amplified by the ongoing reallocation of wealth. From year-end 2008 through 2010, the share of wealth held in equities increased from 29 percent to 35 percent. “During the crisis, cash was king,” said Monish Kumar, a BCG senior partner and a coauthor of the report. “Since then, clients have been steering their assets back into riskier investments.” North America continued to have the highest proportion of wealth held in equities—44 percent, up from 41 percent in 2009.
“The wealth management industry has overcome tremendous adversity over the past several years [(items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=56694192 ], and the sustained recovery of global wealth bodes well for its future,” added Kumar, who is the global leader of asset and wealth management at BCG. “But the positive signs should not be misread as a return to normal. A number of disruptive forces, including increased regulatory oversight and changes in client behavior, are rewriting the rules of the game—both literally and figuratively.”
Millionaire Households Grow in Number and Wealth
Millionaire households represented just 0.9 percent of all households but owned 39 percent of global wealth, up from 37 percent in 2009. The number of millionaire households increased by 12.2 percent in 2010 to about 12.5 million.
* The United States had by far the most millionaire households (5.2 million), followed by Japan, China, the United Kingdom, and Germany.
* Singapore continued to have the highest concentration of millionaire households, with 15.5 percent of all households having at least $1 million in AuM. Switzerland had the highest concentration of millionaire households in Europe and the second-highest overall, at 9.9 percent.
* Three of the six densest millionaire populations were in the Middle East—in Qatar, Kuwait, and the United Arab Emirates.
* The proportion of wealth owned by millionaire households increased the most in Asia-Pacific, at 2.9 percentage points, followed by North America, at 1.3 percentage points.
* The country with the fastest-growing number of millionaire households was Singapore, with 170,000—up nearly a third from 2009.
This year, for the first time, BCG published figures on the countries with the highest number of “ultra-high-net-worth” (UHNW) households, defined as those with more than $100 million in AuM. The United States had the largest number of these super-wealthy households (2,692), while Saudi Arabia had the highest concentration of UHNW households, measured per 100,000 households, at 18, followed by Switzerland (10), Hong Kong (9), Kuwait (8), and Austria (8). China experienced the fastest growth in the number of super-wealthy households, which jumped by more than 30 percent to 393.
Pressures Continue to Mount for Offshore Private Banks
The amount of offshore wealth—defined as assets booked in a country where the investor has no legal residence or tax domicile—increased to $7.8 trillion in 2010, up from $7.5 trillion in 2009. At the same time, however, the percentage of wealth held offshore slipped to 6.4 percent, down from 6.6 percent in 2009. The decline was the result of strong asset growth in countries where offshore wealth is less prominent, such as China, as well as stricter regulations in Europe and North America, which prompted clients to move their wealth back onshore.
“Offshore private banking remains a tumultuous part of the business,” said Anna Zakrzewski, a BCG principal and a coauthor of the report. “The relative importance of offshore centers is changing rapidly. Some are benefiting from continued asset growth, while others are suffering large asset outflows, with wealth being repatriated to onshore banks, transferred to other offshore centers, redirected into nonfinancial investments, or simply spent at a faster rate.”
For most clients, however, the core value proposition of offshore banking remains, Zakrzewski said. “Offshore wealth managers offer a sense of stability and security that these clients cannot find in their home countries. Other clients value the expertise or access to certain investments provided by offshore private banks. To continue to grow, offshore wealth managers will need to adapt to the changes imposed by the push for greater transparency while accentuating their strengths in areas that remain extremely relevant to clients around the world.”
Mixed Results for Wealth Managers
To gauge the performance of wealth managers (both private banks and wealth management units of large universal-banking groups), BCG gathered benchmarking data from 120 wealth-management institutions [(items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=56694192 ] worldwide. The survey revealed wide variations in margins, cost ratios, and AuM growth across and within regions. On the whole, the industry experienced mixed results. The average pretax profit margin of wealth managers increased by 4 basis points to 23 basis points in 2010. In most regions, however, revenue margins remained lower than they were before the crisis (and in some places continued to decline), while cost-to-income ratios remained higher (and in some places continued to rise).
“In some markets, changes in regulations and client behavior have had a profound impact on wealth managers,” said Peter Damisch, a BCG partner and a coauthor of the report. “Especially in parts of Europe, clients are becoming more price sensitive, demanding more price transparency, and still avoiding higher-margin products.”
He continued, “For most wealth managers, pricing remains a vastly underutilized tool for improving revenue margins. At many wealth-management institutions, pricing strategies are more arbitrary than deliberate and are often decoupled from the services provided to specific client segments. Wealth managers simply cannot afford to overlook the importance of pricing and the need to adapt their pricing strategies and practices to the new realities of wealth management. Smarter pricing models and a more contained approach to discounting will become increasingly critical.”
Outlook
Tjun Tang, another BCG partner who worked on the report, said that the firm expects global wealth to grow at a compound annual rate of 5.9 percent from year-end 2010 through 2015—to about $162 trillion—driven by the performance of the capital markets and the growth of GDP in countries around the world. Wealth will grow fastest in emerging markets. In India and China, for example, it is expected to increase at a compound annual rate of 18 percent and 14 percent, respectively. As a result, the Asia-Pacific region’s share of global wealth (ex Japan) is projected to rise from 18 percent in 2010 to 23 percent in 2015.
In Japan, the amount of wealth is expected to decrease slightly in 2011 and then grow slowly for several years. The impact of the recent disaster on private wealth is still unclear, but it could put further stress on the growth of AuM in Japan.
“As much as the sustained recovery of global wealth reaffirms wealth management’s place as a relatively stable and attractive part of the financial services world,” Tang said, “it also masks important and lasting changes to the dynamics of this industry. Perhaps more than ever, a wealth manager’s adaptability—its capacity to anticipate and respond to a combination of regulatory, client-driven, and competitive changes—will determine how well it prospers from the continued growth of wealth.”
To request a copy of the report, please email Global.Wealth@bcg.com. For media inquiries or to arrange an interview with one of the authors, please contact Alexandra Corriveau at +1 212 446 3261 or corriveau.alexandra@bcg.com.
1 Global wealth is defined as total assets under management (AuM) across all households. AuM includes cash deposits, money market funds, listed securities held directly or indirectly through managed investments, and onshore and offshore assets. It excludes wealth attributed to investors’ own businesses, residences, or luxury goods. Unless stated otherwise, AuM figures and percentage changes are based on local AuM totals that were converted to U.S. dollars using a constant year-end 2010 exchange rate for all years. This approach excludes the effects of fluctuating exchange rates.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 74 offices in 42 countries.
© 2011 The Boston Consulting Group
http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-77753
===
Leaving North Las Vegas no option for many 'underwater' homeowners
Steve Shoaff peers over a fence at a ransacked backyard in North Las Vegas, Nev. -- a telltale sign of another foreclosed home. In some parts of town, more than 80% of homeowners, including Shoaff, owe more on their mortgages than their homes are worth.
(Gina Ferazzi, Los Angeles Times)
In parts of North Las Vegas, more than 80% of homeowners owe more on their mortgages than their homes are worth. Staying is expensive, but many can't afford to move.
May 31, 2011 | By Ashley Powers and Alejandro Lazo, Los Angeles Times
Charles Mills can barely afford to stay here. But he also can't afford to move.
That's why the 44-year-old heavy-equipment operator was preparing to leave his wife and young daughter here and go where he could find work — the Oklahoma oil fields. Mills has a mortgage to pay, even if its size pains him.
He purchased his house in 2006 for $308,500. Current value: $105,797.
"We talked about it: What can we do with the house?" Mills said. "Nobody's going to buy it. Nobody's going to rent it. If we walk away, my credit's shot. We're stuck."
In some parts of North Las Vegas, more than 80% of homeowners have plunged "underwater," meaning they owe more on their mortgages than their properties are worth — a stunning concentration of aborted plans and upended lives.
Mobility in search of new opportunity has long been a cornerstone of the American economy, much the way homeownership has long offered a path to firmer financial footing. But the housing bust has left tens of thousands of homeowners across Nevada essentially trapped.
They're considered the new normal here. They turn down higher-paying jobs elsewhere because they can't move. They tidy the yards of houses left vacant by foreclosure. They realize it's unlikely their children will receive tidy inheritances from the sale of their suburban homes.
When they look about their neighborhood, they question things they never questioned before. Are dead plants a sign that someone forgot to water? Or did the water get turned off? Does a garage sale mean more neighbors are about to bail?
"We don't even walk around our own neighborhood anymore," Mills said. "Why? To say hi to strangers?"
Elsewhere on Midnight Breeze Street are Steve and Gay Shoaff, who once talked of selling their house and retiring somewhere pretty. Gay, 57, even toured a place in Wyoming.
But the Shoaffs have been living mostly off savings since the construction industry sputtered. Steve, 60, worked as a drywall taper and foreman.
"I'd say, 'Gay, we're going to become millionaires on this house,' " Steve recalled one day as he and his wife unwound in the backyard they'd spent thousands of dollars sprucing up. Gay mustered a smile.
Their $187,980 home is now assessed at $99,220.
"This house won't be worth what we paid on it until after we die," she said.
Some economists would agree, predicting that a full recovery in parts of the West's "foreclosure belt" — California, Nevada and Arizona — won't occur until at least 2030.
Nationwide, 23.1% of homeowners with mortgages are underwater. No state is more underwater than arid Nevada, with about two-thirds of borrowers holding such mortgages, according to CoreLogic, a Santa Ana research firm.
Some economists argue that, in a way, these homeowners are worse off financially than those who lost their houses through foreclosure and were forced to move on. Those borrowers often were able to live rent-free for years because of the snail's pace of foreclosure proceedings.
Meanwhile, their underwater neighbors poured money into mortgages, not savings or investments. They couldn't chase higher-paying work. Homeowners with negative equity are at least a third less mobile than other homeowners, according to a recent study in the Journal of Urban Economics.
But abandoning their homes was an option that appeared too dicey. "Walking away, it does wreck your credit history for a while and you can't get another mortgage for seven years," said Richard Green, director of the USC Lusk Center for Real Estate. Defaulting also makes it harder to rent an apartment. "The other thing is, there is also some sense of obligation to repay your bills," he said.
Indeed, some North Las Vegas residents would rather forge a community here. Some feel blessed to have held on to their homes when so many people lost theirs.
The Shoaffs purchased their house in 2004 so Steve could shorten his commute to jobs on the Las Vegas Strip. Home buying was so frenzied that, to snatch up the property at a model home, Gay had to shoo away an investor who tried to push her out of line.
They plowed money into a shaded patio, a neatly kept yard and other renovations. Financially, it made sense: There was so much building that Steve could work up to 100 hours a week.
Home to Nellis Air Force Base and more than 200,000 residents, North Las Vegas arrived late to the home-building frenzy.
"It had a historical reputation as working class, blue collar, and some may have viewed it as a high-crime type of an area," said John Restrepo, who runs an economic consulting firm in Las Vegas. Developers snubbed it — until more desirable land grew scarce.
When the Shoaffs arrived after selling another home, neighborhoods were sprouting so quickly that services struggled to catch up. Trash pickups were infrequent. For a time, there was no home mail delivery. Their ZIP code kept changing.
Still, they planned to stick around to see the desert transformed. The nearby streets of Slow Breeze and Tropic Breeze were filling up. The University of Nevada, Las Vegas, planned a satellite campus. There was talk of building a shopping center to rival Minnesota's Mall of America.
"We grew up with the mentality that you buy your house and stay in it for a while," Steve said. "You don't buy and sell and buy and sell."
But as the recession pummeled Nevada's tourism and construction industries, the promise of North Las Vegas collapsed as spectacularly as its home prices. Plans for the satellite campus and mall crumbled. So did the Shoaffs' dreams of a retirement home.
Mills, who was lured here from Los Banos, Calif., in 2006 by good-paying work and cheap housing, started seeing more neighbors padding around during the day, suggesting they had lost their jobs. Suddenly, they would vanish — sometimes after ripping out their toilets and sinks.
A family who lived near Mills, whose little boy played with his daughter, recently moved after his secretary mom and construction worker dad were laid off.
"I told my wife we don't have friends anymore. They all move away," he said.
Mills' wife, Maria, was let go by the entertainment department of a casino. He bounced from job to job, sometimes trucking cooking oil around Utah and Nevada, sometimes juggling security and janitorial work.
Determined to hang on to their four-bedroom house, he and his wife returned two new Nissans. "The cars, those are toys. Those are material things," Mills said. "This is home."
They waded through a mound of paperwork — and instructions to temporarily stop paying their mortgage — to cut their $1,600 monthly payment to about $900. The total amount they owe, however, remains the same.
James R. Follain, a senior fellow at the State University of New York's Rockefeller Institute of Government, argued in a recent study that former home-building hot spots, such as Las Vegas and California's Inland Empire, may crumble in the manner of Rust Belt manufacturing towns.
"There is a different mechanism leading to a similar outcome," Follain said. "It was built on this upbeat set of assumptions about the future of house price growth, of population growth."
So last month, while Mills was gearing up for Oklahoma, the Shoaffs tried to keep their neighborhood from looking like so many in the Las Vegas Valley, the ones marred by one decaying home after another.
Drive down Midnight Breeze, and you'll spot few obvious signs of the real estate bust: no bank-owned signs, no broken windows, no doors jammed with unclaimed pizza fliers. That's partly because Gay busies herself yanking weeds from yards and ripping foreclosure notices from garage doors so the vacant homes won't tempt vandals.
On a recent evening, however, the Shoaffs took a walk through the neighborhood. In a backyard a few blocks away, someone had shoved over a foosball table, smashed a computer, tossed around stuffed animals and ruined the hot tub with what appeared to be white paint.
Gay's face fell. This house was likely another foreclosure casualty, its owner long gone.
The Shoaffs aren't going anywhere.
ashley.powers@latimes.com
alejandro.lazo@latimes.com
Times photographer Gina Ferazzi contributed to this report. Powers reported from North Las Vegas, and Lazo from Los Angeles.
Copyright 2011 Los Angeles Times
http://articles.latimes.com/2011/may/31/nation/la-na-underwater-homeowners-20110531
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in particular further to the previously-linked (items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63086576 and preceding and following, (items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63743420 and following
(items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63766708 and preceding and following
By Robert Frank
Last year was another good year for millionaires – though their pace of growth is slowing.
According to a new report by Boston Consulting Group [ http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-77753 (next below)] out today, the number of millionaire households in the world grew by 12.2% in 2010, to 12.5 million. (BCG defines millionaires as those with $1 million or more in investible assets, excluding homes, luxury goods and ownership in one’s own company).
The U.S. continues to lead the world in millionaires, with 5.2 million millionaire households, followed by Japan with 1.5 million millionaire households, China with 1.1 million and the U.K. with 570,000. Singapore leads the world in “millionaire density,” or the percentage of millionaires, with 15.5% of its population now millionaire households.
The most important trend, however, is the global wealth distribution. According to the report, the world’s millionaires represent 0.9% of the world’s population but control 39% of the world’s wealth, up from 37% in 2009. Their wealth now totals $47.4 trillion in investible wealth, up from $41.8 trillion in 2009.
Those higher up the wealth ladder also gained. Those with $5 million or more, who represent 0.1% of the population, controlled 22% of the world’s wealth, up from 20 percent in 2009.
As you can see from the accompanying chart, millionaires control 29% of North America’s wealth, while millionaires control about 38% of the wealth in the Middle East and Africa. While the chart makes it look like millionaire-wealth in America is more concentrated, we also have far more millionaires, so their wealth is more spread out among the millionaire population.
Still, the data supports a trend we have been seeing for years: the rise of the global, winner-take-all (or most) economy.
Copyright ©2011 Dow Jones & Company, Inc.
http://blogs.wsj.com/wealth/2011/05/31/millionaires-control-39-of-the-worlds-wealth/ [with comments]
===
PRESS RELEASES
May 31, 2011
Global Wealth Continues Its Strong Recovery with $9 Trillion Gain, but Pressures on Wealth Managers Persist, Says Study by The Boston Consulting Group
Assets Under Management Rise by 8.0 Percent to Hit a Record $121.8 Trillion; the Number of Millionaire Households Jumps by 12.2 Percent; but Changes in Regulations and Client Behavior Continue to Dampen Wealth Managers’ Results
NEW YORK, May 31, 2011—Propelled by growth in nearly every region, global wealth continued a solid recovery in 2010, increasing by 8.0 percent, or $9 trillion, to a record of $121.8 trillion.1 That level was about $20 trillion above where it stood just two years prior during the depths of the financial crisis, according to a new study by The Boston Consulting Group (BCG).
Findings from the study appear in BCG’s eleventh annual Global Wealth report titled Shaping a New Tomorrow: How to Capitalize on the Momentum of Change, which was released today at a press briefing in New York. Among the other key findings:
* North America had the largest absolute gain of any regional wealth market in assets under management (AuM), at $3.6 trillion, and the second-highest growth rate, at 10.2 percent. Its $38.2 trillion in AuM made it the world’s richest region, with nearly one-third of global wealth.
* In Europe, wealth grew at a below-average rate of 4.8 percent, but the region still had a gain of $1.7 trillion in AuM.
* Wealth grew fastest in Asia-Pacific (excluding Japan), at a 17.1 percent rate. In the Middle East and Africa, growth was somewhat above the global average, at 8.6 percent. In Latin America, wealth grew by 8.2 percent. Together, these three regions accounted for 24.4 percent of global wealth in 2010, up from 20.9 percent in 2008.
* Wealth declined by 0.2 percent in the Japanese market to $16.8 trillion. As recently as 2008, Japan accounted for more than half of all the wealth in Asia-Pacific. In 2010, it accounted for about 44 percent.
* In terms of individual countries, the nations showing the largest absolute gains in wealth were the United States, China, the United Kingdom, and India.
The strong performance of the financial markets accounted for the lion’s share (59 percent) of the growth in AuM. Its impact was amplified by the ongoing reallocation of wealth. From year-end 2008 through 2010, the share of wealth held in equities increased from 29 percent to 35 percent. “During the crisis, cash was king,” said Monish Kumar, a BCG senior partner and a coauthor of the report. “Since then, clients have been steering their assets back into riskier investments.” North America continued to have the highest proportion of wealth held in equities—44 percent, up from 41 percent in 2009.
“The wealth management industry has overcome tremendous adversity over the past several years [(items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=56694192 ], and the sustained recovery of global wealth bodes well for its future,” added Kumar, who is the global leader of asset and wealth management at BCG. “But the positive signs should not be misread as a return to normal. A number of disruptive forces, including increased regulatory oversight and changes in client behavior, are rewriting the rules of the game—both literally and figuratively.”
Millionaire Households Grow in Number and Wealth
Millionaire households represented just 0.9 percent of all households but owned 39 percent of global wealth, up from 37 percent in 2009. The number of millionaire households increased by 12.2 percent in 2010 to about 12.5 million.
* The United States had by far the most millionaire households (5.2 million), followed by Japan, China, the United Kingdom, and Germany.
* Singapore continued to have the highest concentration of millionaire households, with 15.5 percent of all households having at least $1 million in AuM. Switzerland had the highest concentration of millionaire households in Europe and the second-highest overall, at 9.9 percent.
* Three of the six densest millionaire populations were in the Middle East—in Qatar, Kuwait, and the United Arab Emirates.
* The proportion of wealth owned by millionaire households increased the most in Asia-Pacific, at 2.9 percentage points, followed by North America, at 1.3 percentage points.
* The country with the fastest-growing number of millionaire households was Singapore, with 170,000—up nearly a third from 2009.
This year, for the first time, BCG published figures on the countries with the highest number of “ultra-high-net-worth” (UHNW) households, defined as those with more than $100 million in AuM. The United States had the largest number of these super-wealthy households (2,692), while Saudi Arabia had the highest concentration of UHNW households, measured per 100,000 households, at 18, followed by Switzerland (10), Hong Kong (9), Kuwait (8), and Austria (8). China experienced the fastest growth in the number of super-wealthy households, which jumped by more than 30 percent to 393.
Pressures Continue to Mount for Offshore Private Banks
The amount of offshore wealth—defined as assets booked in a country where the investor has no legal residence or tax domicile—increased to $7.8 trillion in 2010, up from $7.5 trillion in 2009. At the same time, however, the percentage of wealth held offshore slipped to 6.4 percent, down from 6.6 percent in 2009. The decline was the result of strong asset growth in countries where offshore wealth is less prominent, such as China, as well as stricter regulations in Europe and North America, which prompted clients to move their wealth back onshore.
“Offshore private banking remains a tumultuous part of the business,” said Anna Zakrzewski, a BCG principal and a coauthor of the report. “The relative importance of offshore centers is changing rapidly. Some are benefiting from continued asset growth, while others are suffering large asset outflows, with wealth being repatriated to onshore banks, transferred to other offshore centers, redirected into nonfinancial investments, or simply spent at a faster rate.”
For most clients, however, the core value proposition of offshore banking remains, Zakrzewski said. “Offshore wealth managers offer a sense of stability and security that these clients cannot find in their home countries. Other clients value the expertise or access to certain investments provided by offshore private banks. To continue to grow, offshore wealth managers will need to adapt to the changes imposed by the push for greater transparency while accentuating their strengths in areas that remain extremely relevant to clients around the world.”
Mixed Results for Wealth Managers
To gauge the performance of wealth managers (both private banks and wealth management units of large universal-banking groups), BCG gathered benchmarking data from 120 wealth-management institutions [(items linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=56694192 ] worldwide. The survey revealed wide variations in margins, cost ratios, and AuM growth across and within regions. On the whole, the industry experienced mixed results. The average pretax profit margin of wealth managers increased by 4 basis points to 23 basis points in 2010. In most regions, however, revenue margins remained lower than they were before the crisis (and in some places continued to decline), while cost-to-income ratios remained higher (and in some places continued to rise).
“In some markets, changes in regulations and client behavior have had a profound impact on wealth managers,” said Peter Damisch, a BCG partner and a coauthor of the report. “Especially in parts of Europe, clients are becoming more price sensitive, demanding more price transparency, and still avoiding higher-margin products.”
He continued, “For most wealth managers, pricing remains a vastly underutilized tool for improving revenue margins. At many wealth-management institutions, pricing strategies are more arbitrary than deliberate and are often decoupled from the services provided to specific client segments. Wealth managers simply cannot afford to overlook the importance of pricing and the need to adapt their pricing strategies and practices to the new realities of wealth management. Smarter pricing models and a more contained approach to discounting will become increasingly critical.”
Outlook
Tjun Tang, another BCG partner who worked on the report, said that the firm expects global wealth to grow at a compound annual rate of 5.9 percent from year-end 2010 through 2015—to about $162 trillion—driven by the performance of the capital markets and the growth of GDP in countries around the world. Wealth will grow fastest in emerging markets. In India and China, for example, it is expected to increase at a compound annual rate of 18 percent and 14 percent, respectively. As a result, the Asia-Pacific region’s share of global wealth (ex Japan) is projected to rise from 18 percent in 2010 to 23 percent in 2015.
In Japan, the amount of wealth is expected to decrease slightly in 2011 and then grow slowly for several years. The impact of the recent disaster on private wealth is still unclear, but it could put further stress on the growth of AuM in Japan.
“As much as the sustained recovery of global wealth reaffirms wealth management’s place as a relatively stable and attractive part of the financial services world,” Tang said, “it also masks important and lasting changes to the dynamics of this industry. Perhaps more than ever, a wealth manager’s adaptability—its capacity to anticipate and respond to a combination of regulatory, client-driven, and competitive changes—will determine how well it prospers from the continued growth of wealth.”
To request a copy of the report, please email Global.Wealth@bcg.com. For media inquiries or to arrange an interview with one of the authors, please contact Alexandra Corriveau at +1 212 446 3261 or corriveau.alexandra@bcg.com.
1 Global wealth is defined as total assets under management (AuM) across all households. AuM includes cash deposits, money market funds, listed securities held directly or indirectly through managed investments, and onshore and offshore assets. It excludes wealth attributed to investors’ own businesses, residences, or luxury goods. Unless stated otherwise, AuM figures and percentage changes are based on local AuM totals that were converted to U.S. dollars using a constant year-end 2010 exchange rate for all years. This approach excludes the effects of fluctuating exchange rates.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 74 offices in 42 countries.
© 2011 The Boston Consulting Group
http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-77753
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Leaving North Las Vegas no option for many 'underwater' homeowners
Steve Shoaff peers over a fence at a ransacked backyard in North Las Vegas, Nev. -- a telltale sign of another foreclosed home. In some parts of town, more than 80% of homeowners, including Shoaff, owe more on their mortgages than their homes are worth.
(Gina Ferazzi, Los Angeles Times)
In parts of North Las Vegas, more than 80% of homeowners owe more on their mortgages than their homes are worth. Staying is expensive, but many can't afford to move.
May 31, 2011 | By Ashley Powers and Alejandro Lazo, Los Angeles Times
Charles Mills can barely afford to stay here. But he also can't afford to move.
That's why the 44-year-old heavy-equipment operator was preparing to leave his wife and young daughter here and go where he could find work — the Oklahoma oil fields. Mills has a mortgage to pay, even if its size pains him.
He purchased his house in 2006 for $308,500. Current value: $105,797.
"We talked about it: What can we do with the house?" Mills said. "Nobody's going to buy it. Nobody's going to rent it. If we walk away, my credit's shot. We're stuck."
In some parts of North Las Vegas, more than 80% of homeowners have plunged "underwater," meaning they owe more on their mortgages than their properties are worth — a stunning concentration of aborted plans and upended lives.
Mobility in search of new opportunity has long been a cornerstone of the American economy, much the way homeownership has long offered a path to firmer financial footing. But the housing bust has left tens of thousands of homeowners across Nevada essentially trapped.
They're considered the new normal here. They turn down higher-paying jobs elsewhere because they can't move. They tidy the yards of houses left vacant by foreclosure. They realize it's unlikely their children will receive tidy inheritances from the sale of their suburban homes.
When they look about their neighborhood, they question things they never questioned before. Are dead plants a sign that someone forgot to water? Or did the water get turned off? Does a garage sale mean more neighbors are about to bail?
"We don't even walk around our own neighborhood anymore," Mills said. "Why? To say hi to strangers?"
Elsewhere on Midnight Breeze Street are Steve and Gay Shoaff, who once talked of selling their house and retiring somewhere pretty. Gay, 57, even toured a place in Wyoming.
But the Shoaffs have been living mostly off savings since the construction industry sputtered. Steve, 60, worked as a drywall taper and foreman.
"I'd say, 'Gay, we're going to become millionaires on this house,' " Steve recalled one day as he and his wife unwound in the backyard they'd spent thousands of dollars sprucing up. Gay mustered a smile.
Their $187,980 home is now assessed at $99,220.
"This house won't be worth what we paid on it until after we die," she said.
Some economists would agree, predicting that a full recovery in parts of the West's "foreclosure belt" — California, Nevada and Arizona — won't occur until at least 2030.
Nationwide, 23.1% of homeowners with mortgages are underwater. No state is more underwater than arid Nevada, with about two-thirds of borrowers holding such mortgages, according to CoreLogic, a Santa Ana research firm.
Some economists argue that, in a way, these homeowners are worse off financially than those who lost their houses through foreclosure and were forced to move on. Those borrowers often were able to live rent-free for years because of the snail's pace of foreclosure proceedings.
Meanwhile, their underwater neighbors poured money into mortgages, not savings or investments. They couldn't chase higher-paying work. Homeowners with negative equity are at least a third less mobile than other homeowners, according to a recent study in the Journal of Urban Economics.
But abandoning their homes was an option that appeared too dicey. "Walking away, it does wreck your credit history for a while and you can't get another mortgage for seven years," said Richard Green, director of the USC Lusk Center for Real Estate. Defaulting also makes it harder to rent an apartment. "The other thing is, there is also some sense of obligation to repay your bills," he said.
Indeed, some North Las Vegas residents would rather forge a community here. Some feel blessed to have held on to their homes when so many people lost theirs.
The Shoaffs purchased their house in 2004 so Steve could shorten his commute to jobs on the Las Vegas Strip. Home buying was so frenzied that, to snatch up the property at a model home, Gay had to shoo away an investor who tried to push her out of line.
They plowed money into a shaded patio, a neatly kept yard and other renovations. Financially, it made sense: There was so much building that Steve could work up to 100 hours a week.
Home to Nellis Air Force Base and more than 200,000 residents, North Las Vegas arrived late to the home-building frenzy.
"It had a historical reputation as working class, blue collar, and some may have viewed it as a high-crime type of an area," said John Restrepo, who runs an economic consulting firm in Las Vegas. Developers snubbed it — until more desirable land grew scarce.
When the Shoaffs arrived after selling another home, neighborhoods were sprouting so quickly that services struggled to catch up. Trash pickups were infrequent. For a time, there was no home mail delivery. Their ZIP code kept changing.
Still, they planned to stick around to see the desert transformed. The nearby streets of Slow Breeze and Tropic Breeze were filling up. The University of Nevada, Las Vegas, planned a satellite campus. There was talk of building a shopping center to rival Minnesota's Mall of America.
"We grew up with the mentality that you buy your house and stay in it for a while," Steve said. "You don't buy and sell and buy and sell."
But as the recession pummeled Nevada's tourism and construction industries, the promise of North Las Vegas collapsed as spectacularly as its home prices. Plans for the satellite campus and mall crumbled. So did the Shoaffs' dreams of a retirement home.
Mills, who was lured here from Los Banos, Calif., in 2006 by good-paying work and cheap housing, started seeing more neighbors padding around during the day, suggesting they had lost their jobs. Suddenly, they would vanish — sometimes after ripping out their toilets and sinks.
A family who lived near Mills, whose little boy played with his daughter, recently moved after his secretary mom and construction worker dad were laid off.
"I told my wife we don't have friends anymore. They all move away," he said.
Mills' wife, Maria, was let go by the entertainment department of a casino. He bounced from job to job, sometimes trucking cooking oil around Utah and Nevada, sometimes juggling security and janitorial work.
Determined to hang on to their four-bedroom house, he and his wife returned two new Nissans. "The cars, those are toys. Those are material things," Mills said. "This is home."
They waded through a mound of paperwork — and instructions to temporarily stop paying their mortgage — to cut their $1,600 monthly payment to about $900. The total amount they owe, however, remains the same.
James R. Follain, a senior fellow at the State University of New York's Rockefeller Institute of Government, argued in a recent study that former home-building hot spots, such as Las Vegas and California's Inland Empire, may crumble in the manner of Rust Belt manufacturing towns.
"There is a different mechanism leading to a similar outcome," Follain said. "It was built on this upbeat set of assumptions about the future of house price growth, of population growth."
So last month, while Mills was gearing up for Oklahoma, the Shoaffs tried to keep their neighborhood from looking like so many in the Las Vegas Valley, the ones marred by one decaying home after another.
Drive down Midnight Breeze, and you'll spot few obvious signs of the real estate bust: no bank-owned signs, no broken windows, no doors jammed with unclaimed pizza fliers. That's partly because Gay busies herself yanking weeds from yards and ripping foreclosure notices from garage doors so the vacant homes won't tempt vandals.
On a recent evening, however, the Shoaffs took a walk through the neighborhood. In a backyard a few blocks away, someone had shoved over a foosball table, smashed a computer, tossed around stuffed animals and ruined the hot tub with what appeared to be white paint.
Gay's face fell. This house was likely another foreclosure casualty, its owner long gone.
The Shoaffs aren't going anywhere.
ashley.powers@latimes.com
alejandro.lazo@latimes.com
Times photographer Gina Ferazzi contributed to this report. Powers reported from North Las Vegas, and Lazo from Los Angeles.
Copyright 2011 Los Angeles Times
http://articles.latimes.com/2011/may/31/nation/la-na-underwater-homeowners-20110531
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