Singapore and Hong Kong will attract wealth at more than twice the rate of Switzerland, says Boston Consulting Group in an annual private banking study. 

Global private wealth gained momentum in 2016, but wealth managers face numerous challenges if they hope to fight off competitors and put both revenue and profit growth on a sustainable positive trajectory, according to a new report by The Boston Consulting Group (BCG), «Global Wealth 2017: Transforming the Client Experience.»

Global Wealth Growth

According to the report, global private financial wealth grew by 5.3 percent in 2016, to $166.5 trillion, primarily because of faster economic growth and strong equity markets in many parts of the world. The rise was greater than in the previous year, when global wealth rose by 4.4 percent.

All regions experienced an increase in overall wealth, and Asia-Pacific once again was the fastest-developing region, with nearly double-digit growth of 9.5 percent.

Asia's Unstoppable Rise

By the end of 2017, the level of private wealth in Asia-Pacific is projected to surpass that in Western Europe, and by 2019, the combined level of private wealth in Asia-Pacific and Japan is projected to surpass that in North America.

While Switzerland remains the world’s leading offshore wealth management hub with $2.4 trillion in assets, twice as much as Singapore’s, the safety and stability of the city-state is expected to ensure continued asset growth.

Swiss Role Diluted 

«Relative to Switzerland, Hong Kong and Singapore are growing faster because of the economic growth from China to India, the Singapore government is also very supportive of the wealth management industry,» said Mariam Jaafar, a Singapore-based BCG partner and one of the authors of the report.

The BCG report also reported that North Asia's wealth hub Hong Kong will see assets climb by 7 percent, more than Switzerland’s 3 percent.

Asia’s biggest wealth centers are attracting clients from within the region who are becoming richer in tandem with its rising economic output. Asian clients feel more comfortable knowing their wealth is being managed geographically closer.

China In or Out

The Asian wealth expansion is expected to continue in the long term, but China’s ongoing restrictions on investment outflows may slow it down to some degree in the short term.

On the other hand the private wealth units of China's largest banks are beginning to spread their influence opening overseas branches within Asia to create offshore conduits for the country's burgeoning wealth.

Digital Threat

Although a number of institutions have been cutting costs to help mitigate negative trends, many have not commensurately increased investments to help adapt to the new digital environment.

«Digital initiatives in the industry have been largely focused on providing customers with basic portfolio functionalities and the ability to execute standard trading and payment transactions.» said Brent Beardsley, a BCG senior partner, the leader of the firm’s global wealth and asset management segment, and a coauthor of the report. 

«What’s needed is to design and implement fully rethought, reworked, and advanced client journeys that seamlessly combine digital, relationship management, and expert channels to transform the entire client experience from end to end,» Beardsley added.