Private banking spotlight lands on Mexico
Busy market set to get more crowded; independent players step up.
Mexico has become the most attractive wealth management market in Latin America, and many regional wealth managers are looking at the best way to enter or expand the already-competitive market. With wealth creation slowing in the region, and particularly in its largest market of Brazil, the optimistic growth projections for the Mexican economy are drawing the attention of the private banking industry.
We don’t think it makes sense to make a standalone move
Independent wealth manager Advise Wealth Management is planning to open an office in Miami in 2015 to take advantage of growing opportunities in the Mexican market (as well as in neighbouring economies). BTG Pactual has opened an office in Mexico City and would consider making an acquisition to boost its presence further, while Itaú is also looking at Mexico for expansion.
Those already present understand the attraction for new entrants. “Mexico is very attractive. If you look forward 10 years, you would get a lot of agreement that it will be one of the best performing economies in the world, not just Latin America,” says Alex van Tienhoven, CEO of Citi Wealth and Investment Management in Latin America and Mexico. “We are very bullish on Mexico: it’s a very positive story, and that is translating into wealth creation and wealth will continue to be created. We are present through Banamex and it’s a good place to be.”
Advise’s CEO and senior investment adviser, Miguel Sulichin, says Mexico is a natural next step for the firm that was created from RBC’s private banking business (which it in turn had bought from the UK’s Lloyds Bank when it exited the country) in the southern cone when the Canadian bank decided to withdraw from Argentina because of onerous currency and banking regulations. The firm has grown quickly and now has around 1,000 clients – mainly based in Argentina and Uruguay, with some in Brazil and Paraguay as well.
The firm runs on an advisory model, using established private banks for custody services. Despite creating an overlay in fee structures, Sulichin says the model is working well and the business is growing quickly, largely thanks to the market’s scepticism of internal asset allocation advice from the traditional private banks. “One of the main complaints in the past, especially in the first half of 2008 with the banking crisis, was that banks were instructed to sell shit to their clients,” he says. “Being independent and impartial has an advantage.”
Sulichin also says the lack of constancy in commitment to the region from some of the global players in the aftermath of the crisis has not been forgotten. “Most of them totally gave up the region; they closed their rep[resentative] offices and sent their people back to Switzerland and the US,” he says. “Some banks even forbade their people to travel to certain Latin American countries, and so a lot of clients were left with no advisory at all – or with client visits once or twice a year.”
We are not aggressively pursuing [an acquisition] but … it would make sense for us to have higher ambitions
The growth of the Advise model in the south of Latin America has convinced Sulichin there is room for the split advisory/custody model in the north. “This model is working and there is plenty of money in Mexico, Colombia and Venezuela with no [pure] advisory at all.”
Other Latin American wealth management firms also have ambitious plans in Mexico. Rogerio Pessoa, co-head of wealth management at BTG Pactual, says: “We haven’t yet set up the legal framework in Mexico – we are doing that as we speak – to set up the wealth management companies to service our clients locally in Mexico.”
Pessoa says the bank is probably six months away from being fully operational and points out that it has the ability to service clients from its offices in Cayman and New York. He says it is following a strategy of organic growth, though it is also open to acquisitions.
“We are not aggressively pursuing [an acquisition] but, having said that, Mexico is the second-largest market and we are present in Chile and Colombia in an industrial way, so it would make sense for us to have higher ambitions.” However, Pessoa concedes the market is competitive – for both organic and acquisitive growth. “It’s an overbanked market,” he says. “All the commercial banks and American and European investment banks are there, so that is something to watch out for.”
Fellow Brazilian Itaú is also analysing expansion in Mexico, although its private bank will not be making any independent foray into the market.
“We have ambitions to grow in the north, and Peru and Mexico are the most relevant markets,” says Flávio Souza, head of Itaú Private Bank. “However, our strategy is that the private bank needs to be fully aligned with the bank’s overall strategy. We don’t think it makes sense to make a standalone move.”
Meanwhile, Advise is also looking to open a London office this year, to build inroads into the Russian and Middle Eastern wealth management markets.
Bradesco Private Bank is already opening in London and will have wealth management as one of the three main functions of its new office there.
João Albino, head of Bradesco Private Bank, says the London office will help with Brazilian clients’ growing interest in European assets as they look to diversify their portfolios away from domestic market risk. The bank will also look to capitalize on European interest in Brazilian assets.
Albino says that Europe’s wealthy individuals and companies have greater purchasing power in Brazil and, with the falling Brazilian currency and asset prices contrasting with the low yields on offer in Europe, expectations for investments between Brazil and Europe are optimistic.