China is poised to overtake Japan this year as the nation with the world's second-most millionaire households, behind the United States, and the Asia Pacific region will surpass North America in four years as the world's wealthiest region, according to a new Boston Consulting Group report.

In its annual study of the global wealth-management industry, BCG said global wealth grew faster last year than in the previous two years, boosting the number of millionaires and improving the outlook of the wealthy. But it predicted that revenue growth and profits at wealth management firms will decline over the next five years, as the faster creation of wealth in the Asia Pacific and other developing regions poses challenges that will rob firms of the momentum they finally started to gain in 2012.

"The global wealth-management industry has become increasingly complex," said Brent Beardsley, a co-author of the report and the global leader of BCG's asset and wealth management segment. "With the mature economies of the old world and the developing economies of the new world moving at different speeds, wealth managers in different regions are grappling with tough sets of problems."

"New world" regions such as Asia Pacific, excluding Japan, are expected to account for nearly 70 percent of the growth in global private wealth in the next five years, according to BCG's report, released Thursday. By the end of 2017, the Asia-Pacific region will see its private wealth grow to an estimated $48.1 trillion, just surpassing North America as the world's wealthiest region, the report said.

The report looked at the size of the global wealth-management market, the performance of leading institutions, and the state of offshore banking. It recommended that wealth managers focus more intensely on building a presence in high-growth markets and with high-net-worth client segments.

BCG calculates millionaires by their investable assets excluding a primary residence or business. In 2012, the US had the most millionaire households, with 5.9 million, followed by Japan with 1.5 million and China with 1.3 million. The United Kingdom had the fourth-most millionaire households (509,000), followed by Switzerland (395,000), Canada (373,000), Germany (362,000), Taiwan (312,000), Italy (274,000) and France (256,000). Hong Kong was 11th (231,000), Russia 13th (180,000) and India 15th (164,000).

Globally, the total number of millionaire households reached 13.8 million, or 0.9 percent of all households. Qatar had the highest density of millionaires, where 143 out of every 1,000 households had private wealth of at least $1 million, followed by Switzerland (116 per thousand), Kuwait (115), Hong Kong (94) and Singapore (82).

The US had the largest number of billionaires in 2012, but the highest density of billionaire households was in Hong Kong (15.1 million), followed by Switzerland (9.4 million).

Asia Pacific was the fastest growing global region in terms of private wealth in 2012, rising 13.8 percent to $28 trillion. Strong GDP growth in India and China mainly drove the expansion, aided by high savings rates, the BCG report said. The amount of wealth held in equities rose 21.9 percent, driven largely by improving economic data from China in the second half of the year, the report said.

The drivers of stronger equity markets included generally supportive monetary policies by central banks and a "measure of economic clarity" after national elections in countries such as China, the US, Japan, France and Russia, the report said.

Wealth held in bonds rose 10.6 percent, and wealth held in cash and deposits rose 10.4 percent.

Last year, China accounted for 48.2 percent of total wealth in households in Asia Pacific, excluding Japan. The region itself had 20.7 percent of global wealth.

By 2017, according to the BCG report, China's share of the Asia Pacific region's wealth will soar to 57.3 percent, helping the region's share of global wealth rise to 28.1 percent.

Propelling the 19.7 percent growth in China's wealth last year were bonds (22.9 percent), equities (20.5 percent) and cash and deposits (15.1 percent). Private wealth in China is expected to grow at a rate of 15.3 percent annually until 2017, the report said.

Among the group of emerging-market powerhouses known as BRICS - Brazil, Russia, India, China and South Africa - only China was among the top 15 wealthiest countries in 2007. In 2012, China was joined by India.

Overall, private investable assets increased 7.8 percent last year, compared with a 3.6 percent rise in 2011 and 7.3 percent growth in 2010.

michaelbarris@chinadailyusa.com

(China Daily USA 05/31/2013 page11)