A survey of trends and developments in the global market, highlighting major banks, wealth managers, and hiring news.
According to the recently published Wealth-X Billionaire Census 2019, there are 2,604 billionaires in the world and over a quarter of these individuals (705) reside in the US. China, the country with the second-highest number of billionaires, has 285, while Germany has 146 and Russia 102. Following are the UK (97), Switzerland (91), Hong Kong (87), India (82), Saudi Arabia (57), France (55), UAE (55), Brazil (49), Italy (47), Canada (45) and Singapore (39), making these the top 15 billionaire countries. The global billionaire population fell 5.4% in 2018 compared to the previous year, and their worth declined by 7% to $8.6 trillion, as shown in the table below.1
This change is mainly due to heightened market volatility, global trade tensions and a slowdown in economic growth. The report also found that the top 15 billionaire countries accounted for 75% of the global billionaire population and 79% of global billionaire wealth in 2018, up slightly from the previous year. In absolute terms, there were 84 fewer billionaires in the top 15 countries (a total of 1,942) compared with 2017, with combined net worth falling by an annual $489bn to $6.8trn. The full report is available on the Wealth-X website.
Looking at the global HNW population, or those with over $1 million in liquid assets to invest, the growth of this segment is predicted to be greater in emerging markets than in developed countries, at 8% versus 4% per year, according to the latest Deutsche Bank Oliver Wyman Wealth Management Report, “Out of the Pit Stop - Into the Fast Lane” (2019). Asia Pacific, Latin America, Middle East & Africa and Eastern Europe are forecasted to account for over half of global wealth growth over the next five years, compared to a third today.2
Global high-net-worth wealth growth grew to $70 trillion at a decelerated rate of 4% in 2018. Private high-net-worth wealth in the Middle East & Africa region is expected to grow by 6% annually until 2023, while Asia Pacific is expected to reach a high of 9% and Latin America 8%, compared to rates of 4% in North America and 3% in Western Europe. Global private banks and wealth managers will have even greater opportunities to grow their asset base from emerging markets in coming years.
The Swiss private banking landscape, largely dominated by mergers and acquisitions in most recent years, continues to be a very competitive market, with banks contending for the wealth of the super-rich, while keeping an eye on the largest independent wealth managers, which have been fighting for a share of the pie as well. Below is the AuM ranking of the top 5 Swiss private banks, recently reported by Private Banker International.3
The Swiss banking industry is planning to tighten the rules on residential housing borrowing (which includes some 30% of all mortgages), as Finma is concerned about risks associated with the boom in this asset class. The decision followed a stress test carried out at the end of last year at 20 major Swiss banks to evaluate their resilience to a real estate crisis. The Swiss National Bank is trying to reduce their exposure, should this happen. The market boomed in recent years as investors sought low-risk alternatives to government bonds after the central bank cut interest rates below zero.
Banks seem to favour a change in how much an investor can borrow as a percentage of a property price. Currently, the maximum is 80% and the Swiss Bankers Association is said to suggest a reduction to 75% of the total price. In addition, banks will enforce a reduction in the number of years it takes the borrower to pay off their debt. Concrete proposals for these changes are expected in Q3 2019.
The CFA Institute has launched a new qualification in ESG (Environmental, Social and Governance) investing, which will be available for investment professionals later this year, making it the first formal qualification on ESG investing in the UK. The certification is recognised and supported by the Principles for Responsible Investment (PRI), an international network of investors working together to put principles of responsible investment into practice. This follows an ever-increasing interest in ESG from investors in recent years and will help to meet the investment sector’s increasing demand for further education, guidance and standards around ESG. Investment professionals in all roles, from asset management to sales and distribution, as well as students seeking a career in the investment sector will be able to enroll from September, with the first exam taking place in December 2019.
Luxembourg is the first European country to officially announce sanctions against jurisdictions designated by the European Union as ‘non-cooperative’ for tax purposes. Companies resident in Luxembourg must now state in their tax return if they have entered into transactions with ‘related enterprises’ in jurisdictions included on the EU blacklist, starting from the 2018 tax year. This refers to an enterprise that participates directly or indirectly in the management, control or capital of another enterprise; or where the same individuals participate directly or indirectly in the management, control or capital of two enterprises. Tax authorities will apply ‘reinforced control’ to companies that rely on tax structures or arrangements involving non-cooperative jurisdictions for tax purposes that are included in the EU blacklist.
Italy is making its special tax regime for newly resident workers more appealing from 2020, increasing the tax exemption from 50% to 70% for the first five years after relocation, and opening it to any workers who did not live in the country in the last two years. Until now, the tax exemption was restricted to qualified professionals, managers, executives or high-prestige entrepreneurs. Now it is open to any workers who commit to residing in Italy for at least two years and who perform their work mainly in Italy, making this a very appealing relocation package in a country where the progressive rates of income tax vary from 23% to 43%. Taxable income is further reduced for those who transfer their residence to the southern regions of Italy. The regime can be extended for a total of 10 years, subject to additional conditions (i.e. a residential property is purchased or there is an underage child).
Sheikh Mohammed bin Rashid al-Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has officially launched a permanent residency system for investors and professionals in the fields of medicine, engineering and science. The first permanent visas, or “Golden Cards”, are being issued to more than 6,800 foreign investors whose total investments into the country exceed $27bn (AED 100bn). The cabinet of the UAE approved the regulatory framework in January for the issuance of long-term residence permits to investors and entrepreneurs who have settled in the country, granting visas for five and up to 10 years.
The UAE hopes that a large influx of foreign capital will bolster the country’s economy. The decision comes as a few other GCC member states have taken an opposite direction, such as Oman, which has banned the issuance of new visas to reduce the number of expats living in the country. Similarly, Saudi Arabia is boosting a “Saudisation” of its economy.
New wealth continues to be generated in Africa, through a rising entrepreneurial class that is fuelling the growth of African private banking, which has been rapidly expanding since the early 2000s. The growth comes as a rising tide of tech-savvy entrepreneurs and local business owners are transforming their companies into larger, better-established businesses, and the countries are trying to diversify from relying on commodity exports. The top 10 African countries per number of millionaires are listed below.4
According to the Africa Wealth Report (2017) by New World Wealth on behalf of AfrAsia Bank, individual wealth in Africa totalled $2.2 trillion at the end of 2016, of which $800 billion is held by a total of 145,000 high-net-worth individuals (HNWIs), with net assets of $1 million or more. On top of access to high-quality financial services and products, such as cash-based investments, investment in government-issued securities and broad-based equity mutual funds, demand for offshore banking and family office services is broadly expanding across the continent. The study also found that the countries that have been minting the most millionaires over the past 10 years are, in order: Mauritius, Ethiopia, Rwanda, Uganda and Kenya. Growth is set to continue over the next 10 years in each of these countries.
Once again, Hong Kong continues to be the city with the most expensive prime residential prices in the world, with London and New York City in second and third place. According to property consultancy Knight Frank, an average prime price in Hong Kong was $4,251 per sq. ft. ($45,760 per sq. m.) in 2018. The firm also outlines that prices continued to rise over a five-year period, although the top price ever achieved in Hong Kong was in 2016, when a home on The Peak sold for $28,154 per sq. ft. ($303,051 per sq. m.) for a total of $38.3 million. Since then, the top price for a home in Hong Kong has dropped by 16%. London and New York average prime prices stand at $3,022 and $2,989 per sq. ft., respectively.
The most “affordable” market of those analysed by Knight Frank is Dubai, with an average price of $625 per sq. ft. ($6,729 per sq. m.), representing only 15% of the average price in Hong Kong. Despite this, Dubai has seen some of the highest price premiums over the past five years. In 2014 a house sold at $3,976 per sq. ft. ($42,796 per sq. m.).
Hong Kong has many more women in leadership roles within wealth management compared to other parts of Asia and Europe, and as many as 50% of private bankers with a managing director title are women. The ratio in the rest of Asia is below 30%, while in Europe it drops to a much lower average of 10%. According to a recent Bloomberg interview with Amy Lo, Co-Head of Wealth Management Asia Pacific at UBS Hong Kong, more than 40% of wealth management staff with a managing director title or higher in the bank are women. She cited the bank’s desire to meet diversity goals, as well as a push to capture the growing wealth of female clients in the region as the main drivers of this impressive gender diversity in high-ranked positions. On top of that, Chinese clients tend to be more comfortable with women bankers due to their attention to detail and, for female clients, their ability to relate to themselves. According to a 2018 UBS & PwC report, China mints two new billionaires a week and the number of female billionaires in Asia rose more than 20 times since 2005, making up 8% of all billionaires in the region in 2017.
Hong Kong’s $1 trillion wealth management industry is starting to be at risk, as wealthy individuals are in the process of moving money out of the city due to the new proposed Extradition Bill, a local government plan to allow extraditions of suspects to face trial in China for the first time. According to a recent Credit Suisse report (2018), the city-state has 853 individuals worth more than $100 million, just over double the number in Singapore. The bulk of wealth held by these individuals has historically been kept in the city. Although shifting assets is not an easy or speedy process, many of the super-wealthy have already started moving assets out of Hong Kong, as the bill could eventually become law despite the numerous recent protests taking place to stop it.
According to senior private banking figures in the region, Singapore is the preferred destination for these assets, although a good share of the money is moving away from Asia completely and shifting towards Europe, into Switzerland and the UK mainly. Private bankers in Hong Kong have said clients are increasingly inquiring about the impact of the bill and growing more concerned about it. A number of bankers and product specialists are also being relocated from Hong Kong to Singapore as banks’ headcounts are expected to be gradually transferred out or cut due to this shift.
The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) have recently announced the establishment of the Culture and Conduct Steering Group (CCSG), a new initiative to promote and improve conduct standards among banks in Singapore. It is chaired by Shee Tse Koon, Singapore Country Head at DBS Bank, and is comprised of members from 12 other banks in Singapore with responsibilities in business, risk management and compliance. These standards aim to strengthen ethical business practices that safeguard customers’ interests and ensure fair treatment, as well as reinforce prudent risk-taking behaviour and robust risk management that support banks’ safety and soundness.
The CCSG is aiming to provide a platform for industry-wide dialogue among banks in Singapore, aiming for a healthier banking industry based on identifying best practices in the area of culture and conduct and sharing these with the wider industry as well as monitoring trends and identifying possible conduct and culture issues within them.
The Securities Commission of the Bahamas (SCB) has released a draft Digital Assets and Registered Exchanges Bill, 2019 (“DARE Bill, 2019”) aimed at regulating the issuance or sale of digital tokens in the Bahamas and how sellers and intermediary service providers conduct themselves. The draft legislation, currently in a preliminary phase of industry and public consultation, lays out a procedure for registering such offerings and informing authorities and investors on the details of a token sale. Once the consultation phase is over, the document will be passed to the government and then to parliament and may be passed as early as this autumn.
1 The Wealth-X Billionaire Census 2019; https://www.wealthx.com/report/the-wealth-x-billionaire-census-2019/
2 Deutsche Bank Oliver Wyman Wealth Management Report, “Out of the Pit Stop - Into the Fast Lane” (2019); https://www.oliverwyman.com/our-expertise/insights/2019/may/wealth-management-industry-analysis-2019.html
3 Private Banker International, 2019; https://www.verdict.co.uk/private-banker-international/feature/largest-private-banks-switzerland/
4 Africa Wealth Report 2017; New World Wealth; https://www.afrasiabank.com/media/2457/africa-wealth-report-2017.pdf