MercoPress. South Atlantic News Agency

A new map of wealthy people has emerged from the financial crisis

Collapse of stock markets knocked out the wealthiest in North America

The economic and financial crisis of the last 18 months has transformed the global map of the world’s wealthiest people, with Europe nudging out North America as the richest region, according to a new report by The Boston Consulting Group.

BCG said that global wealth fell 11.7% to 92.4 trillion US dollars in 2008, the first decline since 2001. BCG said it is unlikely to return to its pre-2007 levels for four years.

North America saw the biggest decline in wealth, falling by 21.8% last year. The big drop was partly put down to the large percentage of wealth held by US citizens in equities. Latin America was the only region where wealth grew, by 3%. Total wealth in Europe fell 5.8% to 32.7 trillion last year.

Offshore wealth fell by 8.2% to 6.7 trillion last year. Switzerland remained the largest offshore centre, accounting for 28% of the total.

The number of millionaire households worldwide fell by 17.8% to nine million last year. But the crisis also narrowed the gap between the wealthy and non-wealthy, with wealth owned by households with less than $100,000 in assets under management increasing by 2% last year, but declining in all other segments.

Those households with more than 5 million saw their wealth falling by 21.5% last year.

“Wealth will begin a slow recovery in 2010 but may not reach its pre-crisis level until 2013”, said Peter Damisch, a BCG partner and a co-author of the report.

“We expect wealth to grow at an average annual rate of about 4% from year-end 2008 through 2013”.

The BCG study said regulatory pressure is changing the landscape of cross-border wealth management.

“Once their tax and legal advantages evaporate, so too will their appeal” said Damisch.

“Being inconspicuous is a tenuous value proposition in an era of increasing oversight”

BCG said the wealth management industry had weathered the storm better than most other financial-services sectors, but of the 124 institutions surveyed, the median pretax profit margin fell to 30% in 2008, down from 36.4% in 2007.

Clients shifting their investments to basic, low-margin investments hurt the industry, according to BCG.

“Dazzling product complexity is no longer seen as a positive attribute, if it ever really was” said Bruce Holley, a BCG senior partner.

“It is unclear when, and to what extent, assets will migrate back to high-margin investments, but wealth managers cannot count on a strong resurgence of these products in the short term”.

By David Bain - Financial News