It’s a good time to be a banker serving rich Brazilians. UBS Group AG and Credit Suisse Group AG both increased their Brazil wealth management staffs by more than 10% over the past year, and are hunting for more additions as demand surges for financial advice and new types of investments in the South American nation.
Pictet Group, the two-century-old Swiss money manager, hired 10 people to cover Latin America from Zurich, including executives from Julius Baer Group Ltd, which in turn poached five bankers from Credit Suisse.
“It’s a real tsunami,” Sylvia Coutinho, head of Latin America private banking for Zurich-based UBS, said in an interview. “You see many investors leaving the comfort zone of short-term, fixed income and going into equities, hedge funds – in Brazil and globally.”
Interest in serving wealthy Brazilians was already surging before last week’s approval of pension reforms that advocates say will help balance the budget. Record-low interest rates have spurred many investors to switch out of traditional Treasury bonds and savings accounts in favour of more exotic offerings.
Brazil’s fund industry had net inflows of 205.7bn reais ($51bn) this year through September, almost three times the amount for the same period in 2018, according to Anbima, the capital markets association.
To meet the growing demand, Swiss banks are raiding each other’s ranks. Among the new hires at Pictet in Zurich was Julius Baer’s former Brazil chief, Marc Braendlin. Jorge Torea, who was in charge of Credit Suisse’s international wealth management business for Brazil, will take Braendlin’s old job at Julius Baer, bringing along his team. Alexandre Sampedro, who worked closely with Torea at Credit Suisse, took his former job on October 1.
“To add growth, go to Brazil,” said Cynthia Tobiano, deputy chief executive officer at Edmond de Rothschild SA. “It makes sense given the size of the country, the political and macro background, the depth of the market and the wealth,” she said, adding that it makes sense for firms to first recruit bankers in Switzerland and after that set up an office in Brazil.
“Clients today want proximity, so having a local presence is very important,” said UBS’s Coutinho, who’s also the firm’s CEO for Brazil.
UBS in 2017 acquired Brazil’s biggest independent multifamily office, Consenso Investimentos, which has 60 employees. At the time, the combined operation had about 30bn reais in wealth under management locally. The bank declined to give a current figure.
Last year, UBS combined its two Latin America wealth management businesses into a single unit under Coutinho, with employees in locations including Switzerland, Uruguay, Mexico, Chile, Colombia, Panama and the US cities of Houston, San Diego, New York and Miami.
Credit Suisse revamped its international wealth management division in August 2018, creating seven divisions, including one for Latin America and one focused solely on Brazil. The bank expects the number of millionaires in Brazil to increase 23% by 2024, to 319,000.
Coutinho attributed some of the surging demand to tax-amnesty programmes in Latin America.
About $200bn of wealth was brought into play in the past decade after governments in Argentina, Brazil, Colombia, Mexico and Chile allowed citizens to report undeclared assets held outside their home countries, imposing only minimal fines and adding new tax incentives. Most of the wealth declared – about $120bn – was from Argentines, followed by Brazilians, at roughly $50bn.
Unlike the Argentines, rich Brazilians tend to invest most of their liquid assets locally. The private banking business in Brazil accounts for about 1.2tn reais in assets, an 11% increase since the end of 2018, according to Anbima.
Credit Suisse says it’s the biggest foreign lender serving Brazilian private banking clients, including both local and international assets, after acquiring the wealth and asset manager Hedging-Griffo in 2006. It now has about 180bn reais in wealth under management, according to the bank. Credit Suisse is also considering a return to US wealth management after a four-year absence, with talks focused on adding $15bn of assets at a new base in Miami that would cater mostly to wealthy Latin Americans, people familiar with the matter have said.
Julius Baer, Switzerland’s third-largest wealth manager, has also been expanding in Brazil through acquisitions. After taking control of GPS Investimentos Financeiros & Participacoes SA in March 2014, it purchased Sao Paulo-based Reliance Group in January 2018. Now the bank has 200 employees in Brazil and about 50bn reais in assets under management locally.
In May, Julius Baer bought a minority stake in the Sao Paulo-based digital asset manager Magnetis Gestora de Recursos. Beatriz Sanchez, head of Latin America and an executive board member at Julius Baer, said the acquisition was part of a strategy “to connect with the growing market of upcoming younger, tech-conscious investors in Brazil.”
Other Swiss banks are getting in on the action as well. In January, Mirabaud Asset Management, a unit of Geneva-based Mirabaud Group, acquired Galloway Gestora De Recursos Ltda, a Sao Paulo-based firm specializing in emerging-market debt. Banque Lombard Odier & Cie SA, also based in Geneva, is considering opening a wealth management office in Brazil, according to people familiar with the matter. Discussions are at an early stage and no decision has been made, the people said. A bank spokesman declined to comment.
Demand for wealth management services is increasing even though Brazil’s economy continues to grow at a sluggish pace. Gross domestic product is expected to expand just 0.9% this year, according to estimates compiled by Bloomberg, less than the 1.1% rate in 2018.
“There are many positive factors, such as the approval of social security reform and economic growth, with less interference from the state and the private sector taking more initiative,” Coutinho said.
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