Wealth Without Borders

"No one expected the Left to be so successful in Brazil, and one of the main reasons why the wealth management industry is developing so rapidly is because people are more comfortable with the government," del Ama says.

UBS, Bank of America Merrill Lynch, J.P. Morgan and other firms are eager to tap into the increased wealth in Brazil, and on a macro level, have been encouraged by the stable political and economic environment in the country. Brazil's capital markets have both strengthened and deepened over the years, and a greater number of people are investing in equities and other kinds of financial products, Pasquarelli says. Risk appetite is increasing and investors are showing more interest in putting their money into different areas like real estate, agribusiness, asset-backed securities and other kinds of alternative investments.

Given the cachet that names like UBS, J.P. Morgan and Bank of America Merrill Lynch carry, it's quite natural that affluent Brazilians would want their money to be managed by firms of that caliber. But because they're so financially savvy, Brazilian investors set the bar extremely high, del Ama says, and firms are going to have to really prove themselves worthy of interest to their clientele, not just through their range of offerings, but also by showing that they truly are committed to the Brazilian market. Commitment, in fact, is one of the most important criteria by which Brazilians judge financial firms.

"A lot of these banks have come in and started businesses and sold them, gone away and then come back," del Ama says, "and this creates an issue for people who are entrusting their savings to them. They want to see stability and credit quality from the firms that are managing their assets. They want these firms to devote the time, provide value add, foster relationships and understand the local culture."

In that regard, there are some like William Heuseler, chief wealth planning officer at Itau Private Bank International, who believe that local banks have a far better chance than their international counterparts of appealing to Brazilian clients looking for wealth management services. International banks are clamoring for a share of what promises to be a fabulous business opportunity going forward, but according to Heuseler, they may not achieve the success they're hoping for simply because they may not know the lay of the land the way local players do.

Succeeding in Brazil, Heuseler says, means having an in-depth knowledge of local regulation, in particular the tax code, which is extremely complex. It means being able to relate to local people on their turf and really having a keen sense of the local business culture.

Itau—which is Brazil's largest private sector bank and in its wealth management business already has about $100 billion in assets under management—already has an edge over other banks that are just getting their wealth management businesses off the ground now, Heuseler says. The bank has an extensive reach across Brazil and it is practically a household name, and this is very important since wealth creation is happening in cities beyond Rio de Janeiro and Sao Paolo.

"We obviously have a vested interest in Brazil and we feel that Brazilians would rather put their money in a bank that will stay in Brazil—a bank that knows the local culture and the local norms and whose professionals speak the local language," he says.

UBS's Pasquarelli agrees that given the nature of the wealth management business, it is extremely important for provider firms to really understand the culture and the local regulatory and tax environment. However, because of its long presence in Brazil, UBS has successfully acquired that requisite expertise. Its investment banking and research capabilities have allowed the bank to develop a deep knowledge and understanding of the local market and culture, she says, and it can leverage this with the additional benefit of being a firm that has a truly global reach.

The Brazilian market is certainly unique and global firms need to be able to adapt to that uniqueness by understanding local regulation and offering attractive and innovative product platforms. But Bank of America, for its part, is also making sure to hire the right kind of talent, says Andres de Corral, managing director at the firm, and is staffing its operation with people who both know the Brazilian market and are known in it, so as to cover it to the greatest extent possible.

"If you want to remain competitive, you also need to have a truly competitive model and the right infrastructure to make that long-term commitment," de Corral says. "You need to have the right talent, the right technology and the right level of sophistication. We have all of that plus a very strong brand name in many different businesses."

At the end of the day, though, brand name, reputation, relationships and innovation will all play a role in how successful a wealth management business can be. And firms that make an effort to hire Brazilians who have their fingers on the pulse of what investors are looking for and can ensure that business keeps pace with their expectations will do best, del Ama says. But overall, what's going to count the most will be commitment. The Brazil story still has a lot of momentum in it and right now, firms appear to be willing to invest in their respective wealth management businesses for the long haul. But those that really stand the test of time and stick with their commitment will be the ones who will ultimately succeed.    

Savita Iyer-Ahrestani is a freelance writer and regular contributor to Investment Advisor and AdvisorOne.com based in New Jersey.