Wealth Management: As Private Banks exit Latin America, what’s the impact on HNW clients in the region?

Wealth Management: As Private Banks exit Latin America, what’s the impact on HNW clients in the region?

In the exodus of global Private Banks from Latin America, High Net Worth clients are being badly treated. There will be long term consequences for some global private banks and opportunities for local players.

Reporting from the Private Wealth Andean Forum held recently in Bogota, Colombia, James Edsberg of the Client & Customer Strategy consultancy Gulland Padfield, looks at the damage done to client relationships as many leading global Private Banks leave the region. Will they come to regret their exodus? And how should regional Private Client advisors take advantage of the gap left behind?

December´s Private Wealth Andean Forum was an example of what a good conference should be. Distinguished headline speakers, genuinely interesting panel discussions and plenty of opportunities to share perspectives with other participants in the breaks – all skillfully brought together by the team at Markets Group.

But away from the conference stage, there was one story on the minds of many delegates; the treatment Latin American HNW and UHNW clients are getting from many of the global private banks that are leaving the region.


Are you a Latin American bank wishing to develop a stronger offering to HNW and UHNW clients?

Are you an international bank who wants to develop a better way to transfer clients away from your business without damaging your firm’s reputation?

Are you a boutique or a regional Private Bank in Latin America considering how to take advantage of the change in strategy by global competitors in the region?

If so, we invite you to get in touch to continue the discussion and for a free consultation. Email or call James Edsberg at Gulland Padfield on jedsberg@gullandpadfield.com


It’s not what you do, it’s the way that you do it.

Over the last 3 years, Barclays, HSBC, Citi, RBC and many other leading international banks have either sold, closed or substantially de-emphasised the strategic priority of their Latin American businesses providing on-shore banking, broking services and wealth management advice to private clients.

Credit Suisse is the latest to change direction. Following the appointment of a new global CEO in 2015, it announced a strategic review last October which shifted the bank’s focus unambiguously towards Asia. Changes to the team leading its Latin American business and the sale of part of its LatAm capabilities, signaled a de-emphasis in the region’s long term importance to the Swiss bank.

The strategic reasons for exiting the region are various (see below) but it’s the way in which private clients in the region have experienced the consequences of these choices by some of the largest private banks, that has raised eyebrows in Latin America’s private client community.

The tactics, communications and exit strategies used to terminate relationships with Latin clients have been controversial at best. At worst, they have shown a neglect for the core principles of good client relationship management – and a disregard for damage to their bank’s brand and long term reputation in the region.

Significant damage to perceptions has been done

Some LatAm private clients report that they have been left in the dark about the reasons why they have been asked to move, other than that ‘the bank has changed its priorities’. Other clients have said that raising minimum investment levels without warning was interpreted as a thinly-disguised hint that they should transfer to other advisers. Where whole businesses have been sold to another bank, the implications for clients has been often poorly-explained.

The damage to client relationships has been made worse with the short deadlines given to client-facing teams managing private clients. One leading bank gave its relationship managers just 6 weeks to move their Latin America clients to other banks or for the RM to leave the firm completely. In an industry where maintaining positive word of mouth to clients among RMs is a crucial marketing tactic, most RMs see this as short-sighted.

It’s an opportunity for the competition staying in the region. The Director of International Wealth at one major North American bank which recently bought a Latin American banking group confirms, “We are seeing a steady stream of Latin American private clients and families transferring to us from the big banks which are exiting the region – and the stories we’re hearing about how clients have been moved on have often been very negative. We’re committed to this region for the long term and that’s never been more appreciated by clients than right now.”

While there are no publically-available perceptions studies yet, the Latin American HNWs which Gulland Padfield regularly speaks to as part of our consulting projects in the region, suggests a deep unease among what is a very interconnected community.

One of the things that has surprised many HNWs and UHNWs is the speed and extent of the reversal. Within a 3 year period between 2012 and 2015, many leading banks which had previously made strong public statements about their commitment to the LatAm region, have swung 180 degrees to dash for the exit.

So what has changed?

Why are so many US and European Private Banks leaving Latin America?

The cause is a double dose of Regulation.

Firstly, global and US regulators have changed their minds about how geographically spread a bank should be. Prior to 2008, geographic diversity was seen to de-risk an individual bank and the banking system as a whole. Not anymore. These days, the leading banks, particularly those which are designated as being ‘systemically significant’ by the Financial Standards Board are being required to narrow the international reach of their business and hold even higher proportions of capital to improve their loss-absorbing capacity.

As if that wasn’t enough, a handful of particularly international banks, have been singled out for additional capital requirement surcharge for having complex, cross-jurisdictional businesses. Suddenly, banking groups with Latin American operations were being heavily disadvantaged.
Second, money laundering measures and other client-focused legislation in the US and other jurisdictions have been behind a series of substantial fines and penalties which have had financial and reputational consequences. And Latin American clients have been the subject of regulators’ attentions.

Will the major Private Banks come to regret retreating from the region?

There are several factors which suggest that those international banks who have stepped back from Latin America, may come to regret their decision.

  1. Latin America, over the medium term, is a good bet. The recent political changes in some major economies combined with economic stability and growth in many countries and macroeconomic reform in others is a good base. The region has a growing middle class and a younger demographic than exists in other parts of the world. And a greater proportion of entrepreneurial wealth among its wealthy than in other regions.
  2. Compared with the difficulty of breaking into the Asian market, the US Private Banks may find it easier to win and service Latin American clients than Asian HNWs and their families. Latin client culture values long-term relationships which tend to be more stable once made, than the characteristics of the Asian HNW who is much more price-sensitive with a transactional mindset and is usually multi-banked. With UBS and HSBC formidable history and presence in the region, any bank wanting to build in Asia, faces entrenched and trusted competitors.
  3. Recent legislative and regulatory changes mean that it is getting easier to bank and serve Latin American clients. A series of tax amnesties in Chile, Colombia, Brazil and Mexico for example, has encouraged greater disclosure and transparency of HNW wealth. This in turn means that there are opportunities to advise newly tax-compliant HNWs. And while there is still a long way to go, the moves are unmistakably in a direction which global compliance teams and international regulators approve.
  4. More of the money earned in Latin American is staying in Latin America and that is boosting the need for local relationship managers and advisors. In the past, wealth earned in the LatAm continent was transferred out largely for security and other reasons. Slowly that mentality is changing. This combined with a better and stricter regulation means there is a need for higher quality local advice and investment management closer to the sources of wealth.
  5. The LatAM diaspora is influential, very wealthy and will observe how the brands that advise them in NY, London or Geneva are developing or retreating in their home countries. LatAm clients currently being advised in Switzerland are consolidating their wealth and many are moving it to U.S. and Canadian banks as the privacy formerly offered by Switzerland finally evaporates. Those banks which have left the LatAm region are less well placed to manage the client relationship locally even though the client’s needs are usually booked off-shore from the region.
Is there an opportunity for local players and those big brands still committed to the region?

Given these changes, can local players fill the gap left behind? Undoubtedly, yes. But there are a couple of important conditions that will need to be address to do so successfully.

  1. While a few U.S. and European banks continue to maintain and even grow their regional presence in some parts of the region – JPMorgan and UBS for example - the established large local banking groups will need to substantially accelerate the develop the breadth of a fully-rounded Private Client offering which currently most do not have (i.e. providing not just private banking services, but also world-class wealth and investment advisory teams, as well as access to a full platform of investment classes).
  2. Boutique players, Multi-Family Offices and ‘pure play’ wealth advisors have an opportunity to provide the quality of client service experience and build high quality personal relationships which so many international banks have cut off in the last 18 months. The founding partner of one such multi-family office based in Colombia says, “There’s a big difference between the perceptions of wealth clients to leading US banks that have made a long term commitment to the region and those that have dropped out. It will take years of hard work for the latter to rebuild their appeal in Latin markets. In the meantime, private clients recognize the importance of maintaining strong relationships with local well connected but independent advisers like us. We have been a consistent presence in good times and bad.   And the regional representative for one of the smaller Swiss advisory firms echoes that perspective, “Firms like us, which are 100% wealth management firms, have a real opportunity to occupy ground which the large banks have left behind. It will take time and commitment but the upside will be substantial.”

The last 3 years have seen a transformation in the players advising HWN and UHWN clients in the Latin American region. The damage to the perception of many international brands has been substantial. For those making a longer term commitment, the rewards will be significant. And for those local and regional banking groups who have wanted to build a substantial Private Client business, there has never been a better time to offer a welcome to wealthy clients across the region.



Are you a Latin American bank wishing to develop a stronger offering to HNW and UHNW clients?

Are you an international bank who wants to develop a better way to transfer clients away from your business without damaging your firm’s reputation?

Are you a boutique or a regional Private Bank in Latin America considering how to take advantage of the change in strategy by global competitors in the region?

If so, we invite you to get in touch to continue the discussion and for a free consultation. Email or call James Edsberg at Gulland Padfield on jedsberg@gullandpadfield.com

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