Wealth management: UBS seeks Brazilian growth through family offices
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Wealth management: UBS seeks Brazilian growth through family offices

Firm seen as ‘catalyst for consolidation’; Fierce competition driving down fees

As competition in a fast-growing Brazilian private banking market intensifies between established players, Edinardo Figueiredo, new head of wealth management at UBS Brasil, sees potential for growth in consolidating the fragmented family offices that provide wealth-management services to groups of wealthy individuals.

"We are looking at the family offices segment as an opportunity for growth," says Figueiredo. "We think that UBS can act as a catalyst for consolidation in this sector since the global content [that UBS provides] is a differentiator and we are particularly looking at acquisition opportunities in São Paulo, Rio de Janeiro and Curitiba."

Having completed the long-awaited acquisition of Link, one of the biggest brokerage firms in the country, in February, UBS is now focused exclusively on acquisitive growth in the wealth management.


As well as assets under management, clients and personnel, UBS is looking at IT systems as a critical component of possible deals. "We are developing our IT platform at the moment, but acquiring IT systems could be attractive," says Figueiredo. "There are no global IT players here in Brazil because the regulations are so specific to Brazil that none of the international firms has been able to produce an offering that fits Brazilian financial institutions’ requirements."

Figueiredo will be aided in this strategy by the bank’s new CEO, Sylvia Brasil Coutinho, who joins the bank from HSBC where she was most recently head of its wealth management and retail banking operations in Latin America. Coutinho replaces Lywal Salles, who has retired from the position of CEO and acting head of the wealth management division.

Competitors say it won’t be easy for UBS to build its operations from the family office network. Valuations are notoriously volatile, with recent acquisitions ranging from 0.9 times AUM to 4.5 times. Also, migration of clients following acquisitions can be difficult. This risk of losing clients is heightened as the established banks target these clients as they migrate, trying to build AUM without paying acquisition costs.

BTG’s Rogério Pessoa, co-head of BTG Pactual’s wealth management business, says the bank is focusing on building its network of offices in the country and growing those organically, rather than buying family offices. The bank has stepped up its expansion as market participants in general switch their attention from the maturing southeastern market towards faster-growing regions in the north and the interior.

"BTG is turning its focus a lot on the regional offices that we have opened since 2007," says Pessoa. "We have Porto Alegre, Recife and Belo Horizonte. Late last year we opened Brasilia and this year alone we have opened in Curitiba, and are in the process of launching Ribereio Preto and Salvador. We are going to have seven different regional offices that will have wealth management employees – trying to grow in this region – that’s the strategy that’s been paying off since 2007 and we have decided to accelerate the expansion this year."

BTG Pactual expects to grow AUM 25% through purely organic growth. Pessoa declined to comment on market rumours that BNP was trying to sell it its wealth management business and the French bank refused to comment or confirm what assets its wealth management division has in the country.

Goldman Sachs is also looking to grow in Brazil. Fernando Vallada, the bank’s head of private wealth management in Brazil, says: "We are not interested in an acquisition, but there is always an opportunity to work with single family offices and many of our ultra-high-net-worth clients operate as single family offices, but Goldman Sachs in Brazil will grow organically."

Beaten by locals

Vallada declines to give details on the size of Goldman Sachs operations in Brazil or its expected growth rate. Increasingly fierce competition is taking the fees for pure wealth management divisions to the point where it is difficult to sustain profitability. One international wealth management bank says he pitched for a $25 million client at 30 basis points, but was beaten by a local bank offering a fee of exactly half that. Local banks with universal business models set their fees at these levels to buy market share and in the expectation that there will be cross-selling opportunities with their corporate and insurance divisions – and even from their credit card businesses.

It makes differentiation of the international players all the more important. Julius Baer entered the market when it acquired a 30% minority participation in GPS Investimentos Financeiros e Partipaçoes in 2011 (Julius Baer’s acquisition of Bank of America Merrill Lynch’s wealth management division included no onshore Brazilian clients – the bank having closed its São Paulo office six months before the deal closed). Like Julius Baer, GPS – which has AUM of about R$15 billion ($7.3 billion) and 100 full-time employees in São Paulo and Rio de Janeiro– is a pure wealth manager. Marc Braendlin, head of Brazil and strategic initiatives Latin America at Julius Baer, sees more M&A coming in the Brazilian market.

"There is a lot of consolidation going on. On the one hand you have new, small players emerging offering wealth management advisory services to Brazil’s high-net-worth individuals," says Braendlin. "On the other end of the spectrum there is considerable consolidation. In our own case, last year GPS acquired BAWM, a small independent wealth management company with about R$1 billion of AUM. There are frequent M&A transactions at this segment of the market and we have seen strong interest of other players talking to us and others, so there is clearly interest in this market for further consolidation. A lot of the smaller players are trying to get larger to achieve critical scale."

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