In Fast-Growth Markets Such As the Middle East, Wealth Managers Must
Pursue Opportunities Carefully Amid Intensifying Local Competition, BCG
ZURICH, Oct. 4 /CNW/ - Global wealth grew by 7.5 percent in 2006 to reach
$97.9 trillion, measured in local currencies. This increase marked the fifth
consecutive year of expanding wealth, according to a new study by The Boston
Consulting Group (BCG).
Despite the industry's sustained growth and strong performance, wealth
managers still have plenty of room to grow profitably. But as they pursue
opportunities in rapidly developing regions such as Asia-Pacific, Latin
America, and the Middle East, they face a host of challenges that require
careful planning, the report cautions.
Tapping Human Assets to Sustain Growth: Global Wealth 2007 -- BCG's
seventh annual global-wealth report -- is based on a comprehensive market
study of wealth in 62 countries (representing more than 96 percent of global
GDP) and a benchmarking survey of 111 wealth managers who oversaw almost
$10 trillion in client assets and liabilities. Among the findings:
Global Market Sizing. Wealth remained concentrated in certain regions.
North America (the United States and Canada) and Europe again had the deepest
pools of wealth, at $36.2 trillion and $33.0 trillion, respectively.
"Together, these countries accounted for 27 percent of all households and
71 percent of global wealth," said Christian de Juniac, coauthor of the report
and a BCG senior partner. The next-largest wealth markets were Japan and the
rest of Asia-Pacific, with $11.9 trillion and $10.6 trillion in assets under
management (AuM), respectively. The smallest markets were Latin America, with
$3.4 trillion in AuM, and the Middle East and Africa, with $2.9 trillion in
China and Brazil had the highest compound annual growth rates in AuM from
2001 to 2006, followed by four countries of Central and Eastern Europe:
Hungary, Poland, Slovakia, and the Czech Republic. China's wealth market is
expected to outpace all others over the next five years, with a projected
growth rate of 17.4 percent per year, well above the global rate of
The number of millionaire households grew by 14.0 percent in 2006, to
9.6 million. "These were the richest 0.7 percent of households, and they owned
$33.2 trillion -- or about one-third -- of global wealth," said Bruce Holley,
another of the report's authors and a BCG partner. "North America was home to
nearly half of all millionaire households, Europe had about one-quarter, and
Asia-Pacific accounted for about one-fifth."
The United States had, by far, the highest number of millionaire
households, followed by Japan, the United Kingdom, and Germany. Remarkably,
China ranked fifth, ahead of major European economies such as France and
The Middle East. The countries of the Cooperation Council for the Arab
States of the Gulf -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the
United Arab Emirates -- represent an attractive, high-profile wealth market.
The average AuM of the region's wealthy households (more than $100,000 in AuM)
was close to $1 million in 2006, compared with the global average of less than
$400,000. At the same time, however, this market is challenging and highly
"Intensified competition has led to range of issues," de Juniac said,
"including margin pressure, eroding prices, product commoditization, and a
tightening market for talent. Foreign players must contend with increasingly
competitive Islamic banks, whose products not only comply with shari'a, or
Islamic law, but also -- in many cases -- mirror both the performance and
variety of conventional offerings."
Performance Benchmarking. Wealth managers in BCG's benchmarking survey
had a median pretax profit margin of 34.7 percent, and fewer than 5 percent of
participants reported a loss. The survey uncovered broad patterns of
profitability across regions and business models. The median pretax margin of
North American brokers, for example, was less than one-third that of European
"Despite these patterns," said Holley, "we also found that strong
performance transcended a player's region and business model. What mattered
more were players' efforts to manage the most important drivers of
performance, such as the growth of new assets, the productivity of
relationship managers (RMs), and the cost base."
Tapping Human Assets. Although a wide range of factors contribute to a
wealth manager's performance, the most decisive factor is often its human
assets. "Human assets can have a particularly strong impact on organic growth,
a chronically underappreciated lever for performance," de Juniac said.
The report found wide variations in performance among RMs catering to the
same markets and regions, which suggests that most players have tremendous
potential to grow by getting more from their people. The report details proven
actions that will allow wealth managers to do this. The actions are grouped
around three themes: improving sales force productivity, reinvigorating and
broadening the role of the team leader, and managing and developing human
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
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This ensures that our clients achieve sustainable competitive advantage, build
more capable organizations, and secure lasting results. Founded in 1963, BCG
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please visit www.bcg.com.
For further information:
For further information: To receive a copy of Tapping Human Assets to
Sustain Growth: Global Wealth 2007, or to schedule an interview with one of
the authors, Victor Aerni, Christian de Juniac, Bruce Holley, and Tjun Tang,
please contact Dorenda McNeil at (416) 300-0269 or firstname.lastname@example.org