Switzerland is currently the largest destination for offshore wealth, holding nearly a quarter of all assets, followed by the UK and the Caribbean, including Panama.
Hong Kong and Singapore saw the biggest growth – 10% – in the numbers of high net-worth individuals (HNWI) storing their money offshore in 2015, according to Boston Consulting Group’s (BCG) Global Wealth 2016 report.
The research predicts that offshore wealth booked in Hong Kong and Singapore will continue to grow at 10% through 2020, increasing their combined share of the world’s offshore assets from 18% in 2015 to 23% in 2020.
The report, which questioned more than 130 wealth managers, found London’s $1.6trn (£1.1trn, €1.4trn) offshore financial industry is likely to be surpassed by Singapore’s, which is estimated to grow to $1.7trn over the next four years.
Overall, individuals around the world stashing their cash in offshore centres declined by a marginal 3%.
‘New world’
In addition, the share of offshore wealth coming from people based in developing regions – the ‘new world’ – such as the Middle East and Africa, has risen significantly to 65% in 2015, compared with 57% five years ago.
“In these regions economic and political tensions (as well as access to financial products not available on-shore) have continued to contribute to the flow of wealth offshore as investors search for the most attractive locations to domicile their assets,” said the report.
Offshore providers
The BCG data shows that providers of offshore services are “changing significantly”, focusing on three key areas: reducing regulatory risk, achieving scale and growth, and focusing on the core business.
Rising costs of complying with regulation is making it “very difficult” for offshore banks to remain active in smaller markets, said the firm.
Coupled with the ongoing need to invest in IT infrastructure and the complexity of operating in too many countries has led to consolidation of the offshore industry.
The trend echoes the spate of mergers that have occurred in the international life sector in recent years.
Last month, M&A firm Life Company Consolidation Group (LCCG) announced it will acquire Axa Wealth International, one of the largest UK providers of offshore bonds across the Isle of Man and Dublin, taking over the insurer’s £9bn book of assets.
It came just months after LCCG agreed to buy Aviva Life International, a stand-alone unit set up in 2000 with £1.2bn ($1.7bn, €1.5bn) of assets under management, mostly in single premium offshore bonds. The company closed its book, of approximately 6,000 policyholders, to new customers in 2010.
