Switzerland may be falling out of favour with the wealthy as the Swiss wealth management model comes under pressure, while Singapore is attracting more of the new wealth from Asia.
As Western countries tighten their tax codes, Singapore is tipped to overtake Switzerland to become the largest global offshore wealth centre in terms of assets by 2020, according to London private banking research group, WealthInsight.
For the moment, Switzerland retains its offshore banking status with $2.8 trillion in assets under management, or 34% of the global private banking industry, but the report reveals that Singapore is now the world’s fastest growing wealth centre with $550 billion under management by 2011, from $50 billion in 2000.
With $450 billion belonging to offshore clients, Singapore has grown to become the fourth largest offshore banking centre globally. The UK and Channel Islands is second with $1.8 trillion under management in 2011, followed by the Caribbean and Panama with $800 million.
There are a number of factors working in Singapore’s favour, according to analysts, including a loss of confidence in Swiss bank secrecy laws and independence in traditional banking hubs combined with increasingly stringent banking regulations. In its own recommendation, Singapore has a stable government, transparent legal system, a history of investment management, and English as the first language.
European currency movements have also contributed to the shift, with the Swiss Franc rising more than 20% against the U.S. dollar last year due to ongoing concerns over Europe’s debt crisis.
While the Swiss wealth management model is coming under difficulties, increasing numbers of wealthy Chinese, Indians and Indonesians are also helping this shift to Singapore – as well as to Hong Kong – with the added benefit that these low-tax Asian centres are closer to home.
WealthInsight predicts that assets under management in Singapore could quadruple by 2016 while offshore assets in Swiss bank accounts are predicted fall by nearly a third to below $2 trillion in the next three years.