The race for Latin America and the Caribbean’s ultra-rich assets continues as global giants compete with local giants.
Multinational banks and large private banks increasingly see Latin America as a keystone of their growth strategies.
Recently, leading global companies such as Citi, UBS, BBVA and Santander have revamped their teams and created this We have opened a new department in the region. Meanwhile, local companies such as BTG Pactual and Bradesco are freeing up capital to expand their range of services across asset classes and geographies.
The ultimate prize is an evolving market that is expected to reach $1.3 trillion in assets by 2029, according to a recent report from Research and Markets. “Banks need to grow, and markets like China and Europe currently have little room for that,” said William Trout, director of securities and investments at Datos Insights.
But as the investment tastes of Latin America’s ultra-rich become more sophisticated, the pot of gold at the end of this special rainbow may become harder to reach.
“As individuals become wealthier, their needs become increasingly global,” said Alfonso Castillo, global head of Santander Private Banking. “They tend to invest more in hard currencies while seeking a more sophisticated and comprehensive value proposition.”
complexity of wealth
These evolving demands, Trout argues, are increasing rather than replacing the “complexity of Latin America’s wealth.” “The way businesses and families interact and structure their relationships makes the situation particularly complex, and proper planning is essential.”
Antonio Gonzalez, head of Latin America at Citi Private Bank, says the region is also facing structural changes in both demographics and asset composition. “Women already control more than half of the financial decisions in business ecosystems in several countries, contributing to more diverse and deep decision-making processes in preparing the next generation of asset owners. ”
Additionally, as customer needs become more complex and global, traditional family offices increasingly look to large banks for support in fulfilling some of their functions.
“Family offices have many advantages, but they don’t always have the scale and resources of a private bank,” Santander’s Castillo said. Citibank’s own research last year found that just 30% of investments from Latin American family offices were in their own region, while 80% of investments came from US peers and 54% from Europe and the Middle East. , it turned out to be from Asia. They remained within their respective geographical boundaries.
However, despite banks’ increasing ability to offer more customized services, there is no sign that the family office model will be abandoned. “I don’t think banks will be cannibalizing family offices any time soon,” says Datos Insights’ Trout. In fact, according to a recent study by Capgemini, the number of single-family offices in Latin America has increased by an astonishing 200% over the past decade.
The stakes are getting higher
Banks are pouring significant investments into the region to meet the many evolving needs.
Under Mr. Gonzalez’s leadership, Citi Private Bank recently launched an ambitious plan to double its presence in Latin America.
“Given the estimated forecasts for wealth creation in the region, we believe it is possible to double our business in Latin America in the medium to long term, focusing on UHNW (Ultra High Net Worth) individuals and their families. ” he says. At least $25 million.”
Boosted by its acquisition of Credit Suisse early last year, Swiss giant UBS recently made its Latin America unit an independent unit “in recognition of its significantly increased scale and potential,” the bank said in a note. .
Similarly, Santander added 90 new private bankers in its Latin America-focused Miami office and Mexico. The Spanish financial services giant expects assets under management (AUM) to reach 500 billion euros ($556 billion) by 2025, with Latin America expected to account for most of that growth. .
Laham, Bradesco Global Private Bank: Our strategy of offering a global portfolio within local market investments has been very successful.
Brazilian giant BTG Pactual is making acquisitions as it looks to boost already high customer demand for global investment products. Recently, the bank acquired New York-based MY Safra Bank and completed the acquisition of Luxembourg’s FIS Privatbank. BTG also opened offices in Miami, Portugal, and Spain.
The bank is firmly focused on its offshore business and expects total assets under management to reach $30 billion by next year, said head of wealth management Rogelio Pessoa.
Another local giant, Bradesco Private, followed a similar path. The Brazilian bank has focused on improving its offshore operations, increasing its investment in Luxembourg and acquiring BAC Bank in Miami, Florida, now renamed Banco Bradesco.
Also making offshore a central part of its growth strategy, BBVA Private opened a new advisory office in Miami in March focused entirely on Latin America. The Spanish powerhouse also revealed plans to expand its private banking teams in Brazil and Chile, which have lagged behind competitors.
“Offshore assets are highly favored due to the heightened policy uncertainty in Latin American economies,” Citi’s Gonzalez said.
But Juliana Laham, chief investment officer at Bradesco Global Private Bank, said many clients are still seeking geographic protection without going offshore. “The strategy of offering a global portfolio while investing in local markets has been very successful,” she says. “In such cases, choosing between dollar-based strategies remains an interesting option.”
caribbean delay
As Latin America grows into a key battleground for the super-rich, the same cannot be said for the Caribbean. Due to increased banking regulations in the United States and the region, several major companies are finding it difficult to continue operating.
According to the Economist Intelligence Unit, a trend of “risk aversion” has seen around 40% of compatible banks leave the region over the past 15 years, reducing access to global financial services.
“The offshore island market is becoming increasingly fragmented globally as the United States becomes increasingly interested in closing the financial loop,” Trout said. “This does not bode well for the region, given that most of its asset growth is for Latin American wealth, which is not natural to the region.”
Improving reach may not be enough
One side effect of increased demand is that customers are relying on more banks at the same time. A 2023 paper from the Capgemini Institute found that ultra-high net worth individuals maintain relationships with an average of seven asset management companies, an increase from just three before the pandemic. There is.
Santander, Castillo Private Banking: As individuals become wealthier, their needs become more global.
Against this backdrop, banks are stepping up their efforts regarding customer retention.
“It’s not just about footprint and scale,” argues Alfonso Castillo, global head of Santander Private Banking. “Its value proposition includes innovative global investment products and goes beyond private banking services such as corporate banking, real estate advisory and day-to-day banking for our clients.”
“Banks that don’t provide the necessary expertise in trusts, philanthropy, and even very specific asset classes such as alternatives risk becoming dysfunctional,” Trout warns.
Against this backdrop, the industry is increasingly prioritizing service and comprehensive planning as core elements of service, with the aim of strengthening customer loyalty in the long term.
But understanding staffing models may be the biggest challenge for banks that want to “meet very specific needs without being competitive with costs,” Trout said.
The solution to this problem may lie in technology, Gonzalez says. “Artificial intelligence creates models based on a customer’s investment preferences and past behavior, makes recommendations based on new information and changing market conditions, and dynamically rebalances the portfolio to correct for portfolio fluctuations. ” core strategy. As a result, advisors can focus on the people-dependent aspects of the client relationship: making big decisions, building trust, and understanding the client’s needs and goals. ”
