By 2027, there will be 26 million additional millionaires worldwide UBS and Credit Suisse estimate. That's enormous potential for Swiss private banks if they gain a foothold in the right markets.
With the acquisition of Credit Suisse, UBS has risen to become the world's second-largest wealth management bank, ideally positioned to benefit from the latest trends among millionaires. High returns beckon if it manages to play to its traditional strengths even during the ongoing integration of its former rival.
Often Underestimated
How fast the number of wealthy private clients is growing is often underestimated by the public. The new «Global Wealth Report» published by Credit Suisse and UBS jointly for the first time yesterday makes it clear why not only UBS, but wealth managers in general are vying for this exclusive private clientele.
According to their latest estimates, the number of millionaires worldwide will rise to more than 85 million by 2027. In the ultra-high net worth individuals (UHNWI) segment, which UBS counts as individuals with more than $50 million in assets, the figure is expected to be around 372,000, an increase of 129,000.
China Steps on the Gas
More than half of all UHNWIs currently reside in North America. The countries of the Apac region made up of the broader Asia-Pacific region including China and India are already home to more than 66,000 super-rich people, significantly more than Europe with around 40,000. And this difference in favor of Asia-Pacific is likely to widen.
UBS expects the number of wealthy people in the APAC region to double to just under 123,000 by 2027. An estimated 56 percent will come from China alone, meaning there will be more super-rich people in the People's Republic with around 68,000 compared to Europe's 57,000.
The forecasts for Latin America are comparatively modest. Although 8 percent of the world's adult population lives there, only 2 percent of the world's ultra-rich do. This proportion is unlikely to increase much over the next four years. By contrast, the number of Latin American millionaires is expected to rise by 89 percent to 2.2 million. Africa is expected to do even better in percentage terms, with 768,000 millionaires in 2027, an increase of 113 percent.
US Lead Shrinking
However, there are currently no more millionaires anywhere than in the US. In order to attract as many of these clients as possible, wealth managers in the US market are focusing on retaining the best financial advisor teams and associated support services. Every week there are reports of entire teams moving from one bank to another. UBS has been particularly aggressive of late.
While the US still leads the global millionaire list by a significant margin over China, the gap is narrowing. UBS estimates that the number of millionaires in mainland China will increase by 112 percent to 13.2 million. For the USA, an increase of «only» 16 percent to just under 26.4 million is expected. India will also have many more millionaires in the future. In 2027, there are expected to be over 1.4 million, almost 70 percent more than today.
Iqbal Khan Prioritizes US and Asia
These trends in millionaires and the super-rich underscore why Iqbal Khan, head of UBS's core Global Wealth Management (GWM) division, is prioritizing the growth markets of Asia and the United States. While UBS is already a leader in Europe and Asia, it has so far lagged US banks in the business of managing the finances of millionaires and the super-rich.
In the world's largest wealth market, it's significantly increased the number of its US financial advisors over the past three years in order to close the gap on the Wall Street giants. It is also likely to expand its UNHWI business in the future.
Incidentally, Switzerland has no need to take a back seat in a millionaire comparison, with the prospects remaining promising for private banks and asset managers, even if the competition will be tough. By 2027, the number of millionaires in this country will exceed 1.5 million, some 39 percent more than today. By comparison, there were only 195'000 millionaires in Switzerland in 2000.