In 2005 the world counted 8.7 million millionaires, using the American denomination. Together this elite league represents US$33.3trn of global wealth. The share taken up by Asian millionaires is increasing every year, and last year their wealth grew by 7%. It is expected that Asian wealth will reach US$10.6trn in 2010.

These figures come from the latest World Wealth Report 2006, published by Merrill Lynch and Gapgemini, and show that Asia is catching up with the traditional breeding grounds of millionaires - Europe and the Americas.

When it comes down to the strongest growth of wealthy individuals, Asia is clearly leading the pack. The report shows that in 2005 the top of the class was South Korea, with a growth of high net worth individuals - as they are called in the report - by 21.3%. The year before Singapore saw the strongest growth, with an increase of 22.4%.

Singapore in the spotlight
In terms of wealth management, Singapore has been the country to profit most from the Asian economic growth spurt. Although Hong Kong has historically been the destination point for those wanting to invest in Asia, Singapore's low tax burden, favourable trust laws, banking secrecy, political stability and strong legal framework have put the city state in the spotlight.

According to the Monetary Authority of Singapore, the state's central bank, total assets under management in Singapore's fund management industry grew from about S$280bn in 2000 to more than S$600bn today.

"Singapore is seen as a fresh and exciting new player," says Michael Olesnicky, partner at Baker & McKenzie in Hong Kong. "Hong Kong has a longer history as a financial centre in Asia, but it still suffers from the perception that it is part of China."

President of the Singapore Trustees Association Edmund Leow agrees: "There are also a lot of wealthy individuals from Taiwan and Hong Kong, who don't want to put their money in China because of political sensitivities," he says.

Leow also points out that the advantageous location of Singapore has contributed considerably to the city's rise. "Singapore is, for instance, close to India and has a large Indian population," he says. "Most of them feel it is easier to use Singapore [for private banking] than Hong Kong."

Globalisation of wealth management
The advantages Singapore enjoys have not remained unnoticed by the international community. More and more millionaires from outside Asia are allocating wealth to the city state. This shift is part of a larger trend in wealth management: the move towards globalisation.

The reasons behind this development are diverse. The 'pull factor' of increasing opportunities in Asia, due to the expansion of the regional economies, and especially of China and India, is an important factor. But also, the 'push factor' of the tighter regulation of countries in the Organisation for Economic Co-operation and Development (OECD) plays an important part.

For a long time, Switzerland has been - and still remains - the private banking capital of the world. But the nation's absolute dominance is starting to crack. The European Savings Directive (EDS), which came into force a little over a year ago, added a 15% tax on many assets held in European offshore centres, including Switzerland. This might rise to 35% in 2011.

The directive resulted in the movement of a substantial amount of financial assets to Asia, and in particular to Singapore. The state provides tax exemption for all non-residents on their income earned abroad, as well as on investment income from financial instruments held in the country. This has made Singapore attractive for investing as well as for establishing holding vehicles.

The European guideline can be seen as a part of the effort on behalf of OECD-countries to put pressure on offshore centres like Bermuda and the Cayman Islands in order to crack down on money laundering.

"Investors are looking for a place with similar tax rules as the offshore centres but with a better reputation," says Leow. "Singapore has various tax incentives and is always looking at how to be tax efficient."

He has seen a change in the customer base in the last five to 10 years. "The customer base for Singapore has traditionally been Southeast Asia, but now it is attracting clients from all over the world," Leow says. "India and China are especially very important."

Another reason behind the globalisation of wealth management is that an increasing part of the second generation is living in countries other than those of their millionaire parents. According to the World Wealth Report, 19% of wealthy individuals have children living abroad. This has created a demand for global wealth management solutions.

Diversification of assets
Globalisation and the transfer of wealth to Asia are changing the face of wealth management services. Clients have become more demanding and are willing to shop around. In this generally conservative industry, there is a growing willingness to cross borders to get the best service and highest returns.

"Investors are geographically diversifying their assets," says the Wealth Report. "Consolidation and international products are changing the way clients do business."

The report also recognises that worldwide, millionaires are directing more attention towards Asia. "One area where high net worth individuals found significant opportunity was in the Asia-Pacific region, where the twin drivers of market capitalisation and GDP continued to deliver high rates of growth," the study says.

It has even resulted in Asia-Pacific surpassing Europe last year as the second most popular destination for investments by wealthy individuals (North America remains the number one destination). And the report's researchers are not under the impression that this will change any time soon.

"A number of emerging economies with large growth prospects, combined with strong performance in the region's more mature markets, is likely to keep international interest focused on this part of the world for some time," the report says. "Our research suggests that high net worth individuals' investments in North America and Europe will continue to decline over the next few years as they reallocate funds to Asia-Pacific and other emerging markets."

Local players
One of Singapore's key players in the area of private banking is the Development Bank of Singapore (DBS). It has the largest private banking business among the local financial institutions, and in 2005 saw an increase in fees and commissions from wealth management by 8% to S$129m, even though overall sales were down.

"Wealth management is a growing market, especially here," says managing director, private banking, for DBS, Kwong Kin Mun. "Singapore is becoming the centre for Southeast Asia and Asia as a whole."

Kwong sees several advantages of Singapore as a wealth management centre over other countries: political stability, a growing economy and the stability of the Singapore dollar are the main ones.

"Asia is talked about as having the highest growth figures in the world," he says, adding that this is the major reason for international interest in Singapore. "Foreign investors come here not so much because regulations are getting tighter in other areas, but because Asian wealth is growing."

He expects the private banking arm of DBS, which accounts for more than 100 employees, to continue growing. "There will be a tremendous growth in wealth in Asia and so our private banking business will continue to expand," he predicts.

Nicholas Tan, head of wealth management at OCBC Bank, agrees. "The wealth management industry will keep on growing in the coming years. At OCBC Bank we have seen a growth of 10-15% in the last few years and we expect this level to be maintained."

Consolidation in a competitive market
Swiss private banks, like UBS and Credit-Suisse, have worked hard to secure a spot in the wealth management industry, and the fierce competition has sparked consolidation.

"The major global players have been in Singapore for a while," says Kwong. "You see that in the last few years' consolidation, especially amongst the Swiss banks, has taken place." But newcomers are still arriving. "Last year we saw some new players coming to Singapore, like [the Swiss private bank] Julius Bear."

Nicholas Tan notes that the competition for skilled personnel is especially fierce: "It has been a roller coaster ride, in terms of human resources," Tan says. "It is difficult to find properly trained people and it takes a long time to bring someone up the curve. Often you see people who have been trained for two years at one bank, leaving for another to earn more money."

Opportunities in the legal field
The Singapore wealth management industry is a moving market, to say the least. This provides law firms with a number of opportunities - M&A is an obvious one, but firms will also find work in the structuring of trusts and in consultation on new laws and regulations.

At the beginning of 2006, Singapore introduced a law requiring licenses for trusts. "The Trust Companies Act is likely to provide more work for the law firms," says head of group, legal, compliance and secretariat at DBS, Sharon Craggs. "As far as regulations are concerned, law firms are only consulted on new regulations. Existing regulations are dealt with by the in-house team."

DBS has an official legal panel, says Craggs, but prefers to keep the names to herself. "I can tell you that most of the top-tier firms are on our panel. We consult the firms predominantly on large projects that involve sizeable amounts of legal manpower and documentation. For example, if you look at our website you can see that DBS Bank has launched a number of funds. We typically use outside counsel for this."

Reflection
Although the metamorphosis Singapore has undergone is remarkable and the future for the wealth management industry looks promising, there is a need for some reflection. Reports that Singapore will overtake Switzerland as the world's most important offshore centre for private bankers should be taken with more than just a grain of salt.

"It's true that Singapore has grown a lot, but it will be a long time before it can catch up with Switzerland," says Leow. "I doubt it will ever be the main economic activity".

OCBC's Tan: "I would like to see Singapore catching up, but I'm not sure if this is realistic in the next few years. It remains to be seen if the wall of money from Europe will come and where it will be parked."