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The world's top domiciles for wealth management

Which is the world’s leading wealth centre? To find out Deloitte has for the last three years been ranking the world’s leading domiciles on a range of competition factors.

Which is the world’s leading wealth centre? To find out Deloitte has for the last three years been ranking the world’s leading domiciles on a range of competition factors. The release of the Panama and Paradise Paper datasets in recent years has shaken up the hierarchy of providers with tech and political instability also weighting the dice to specific markets.

Read on to find out the top domiciles of 2018

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Which is the world’s leading wealth centre? To find out Deloitte has for the last three years been ranking the world’s leading domiciles on a range of competition factors. The release of the Panama and Paradise Paper datasets in recent years has shaken up the hierarchy of providers with tech and political instability also weighting the dice to specific markets.

Read on to find out the top domiciles of 2018

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Panama & the Caribbean

Already struggling to keep up with more developed domiciles, the release of the Panama and Paradise Paper datasets to the media in 2016 and 2017 were just the ‘cherry on top of the cake’ for the central American and Caribbean nations.

Client assets managed locally fell $1.24 trillion last year, by far the largest contributor to a net $1.2 billion fall in assets managed offshore in the period. 

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Bahrain

Falling to eighth, as it was overtaken by Luxembourg, the island Gulf state was among a number of the smaller domiciles to suffer as clients shifted their attention to larger and more stable addresses.

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Luxembourg

The tiny European micro-state has bucked the trend of smaller domiciles losing out over the period, emerging as a relative haven of stability as a period of relative political instability descended on the US and UK. In common with developed states, local businesses have been squeezed by rising costs

Deloitte noted: ‘Luxembourg has experienced a steady decline in average revenue margin as a result of a shift from affluent to UHNWI clients (share of UHNWI clients increased from 41% in 2011 to 55% in 2017), who are typically granted larger rebates, and a decrease in the number of clients from neighbouring Belgium, France and Germany (down by 20% since 2013) who used to display low price sensitivity.’

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US

Also falling one place this year, the US suffered disproportionately in a lower score on political and economic stability. Intense domestic competition means ‘the US centre has the lowest average revenue margin (70bps in 2017E) and has also experienced a steady fall in margins in recent years (by 1.0 % CAGR, 2013–2017E), said Deloitte.

‘This has been driven in particular by a fall in annual transactional revenues (by 20 % between 2013 and 2017E), due to a large fall in trade volumes caused by economic uncertainty and a shift in asset allocation towards larger cash holdings, safer products and low-margin passive investment solutions.’

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United Arab Emirates

Continuing the trend established elsewhere of the small getting smaller, the United Arab Emirates managed to reverse some of that deficit because of its lack of income tax. More generally however, rated on a range of criteria to give a more balanced ranking of relative attractiveness, the Emirates drifted alongside its peer group.

‘Centres such as Panama and the Caribbean, Bahrain, and the United Arab Emirates are falling behind,’ said Deloitte.

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UK

Like the US, the UK scored well for a relatively dynamic business environment but suffered because of lower stability, as the country negotiates its exit from the European Union.

It is also at the sharp end of cost pressures, Deloitte reported, with revenue margins falling 2.4% between 2013/17, the steepest fall of any market.  

London scored highly on fintech, level pegging with Singapore, and on service, second only to Switzerland.

‘UK revenue margins have suffered an alarming erosion,’ said Deloitte. ‘Rising costs to meet requirements for client protection have led to higher charges for advisory services and so a drop in demand. Transparency requirements have led to better comparability (evoking greater price sensitivity) and a shift towards all-in pricing models (which threaten transactional revenues).’

Consolidation – ‘further advanced than in other centres’ - was now compensating for some of this however. 

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Hong Kong

By cross-border volume, Hong Kong has rocketed up the charts in recent years to claim a global market share of 9%, eclipsing the traditional markets of Panama and the Caribbean, as it picked up a disproportionate share of offshore Chinese wealth growth.  

‘Hong Kong benefits from the growth in Chinese private wealth and the changing behaviour of Chinese HNWIs,’ said Deloitte. ‘Younger HNWIs increasingly seek professional advice and the share of Chinese HNWIs investing outside the mainland has risen from 19% in 2011 to 56% in 2016.

‘Hong Kong rates highly as the preferred destination due to its proximity to mainland China and the absence of taxes on capital gains, interest deposits and dividends.’

The territory also scores relatively highly on tax.

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Singapore

Asia’s most mature and developed wealth management market has not rested on its laurels and alongside London has emerged as one of the world’s fintech hotspots. Its globally diverse spread of clients has also meant local institutions have, by necessity, been at the forefront of web applications.

That has meant the local market has a high cost base, but is able to pass much of that one in the form of the premium it is able to price into services.

‘Singapore has managed to capitalise on its yet unmatched reputation – in Asia – as a stable wealth management hub, enabling the centre to expand following the strong local (U) HNI wealth growth (14 % in APAC, compared to 1 % in the rest of the world),’ said Deloitte.

‘Clients have become acquainted with private bank offerings and now demand more sophisticated, higher-margin services (illustrated by a growth of 9 % in discretionary mandate volume in 2016), and they are willing to pay a price premium for the capabilities that Singapore offers.’

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Switzerland   

The world’s premier wealth jurisdiction still holds onto first place – but has had to work a little harder than it historically had to, to retain that edge.

Deloitte said: ‘Banks have initiated successful campaigns to increase mandate penetration, have promoted new advisory offerings (driven by upcoming regulations such as FIDLEG), reviewed historical pricing and rebate models (average price list realisations are about 60–70 %) and have pushed cross-selling opportunities.

‘All these initiatives have been assisted by a low interest rate environment and strong financial market performance.’

Following enforced client info disclosure, assets have continued to depart the country at a compound annualised rate of around 2.8% between 2013 and 2017. But the shake-up this has necessitated made Switzerland for the first time the most competitive wealth domicile.

‘While the improvements in profitability are impressive, they could be deceptive and short-lasting. Although performance has been improving in recent years, private banks struggle to attract new assets and hold on to their traditional business model rather than invest in innovation and enhanced client experience.’

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