The wealth market in Latin America is growing. According to recent World Bank studies, Uruguay, Chile and Brazil hold the region’s highest per capita wealth rates. Uruguay’s, Chile’s and Brazil’s per capita wealth at $254,601 USD, $237,713 USD and $188,880 USD respectively illustrate Latin America’s increasing wealth market. Venezuela and Colombia hold the region’s fourth and fifth wealthiest rankings. The heightened focus on the region by more leading global fund houses and now also the smaller asset managers is further evidence. For wealth managers targeting the region, it is not, however, business as usual. Those in the know recognize that Latin America’s high net worth individuals (HNWIs) have specific investment needs which they expect their advisors to know. Therefore, succeeding in the region requires an understanding of key strategies and nuances that help generate and sustain new client relationships.
Think Niche Market
One strategy to adopt in Latin America is to treat the region like a niche market. Don’t assume what works in Europe or Asia necessarily works in Latin America. Keep in mind that, for a long time, this region’s investors were largely ignored by many asset managers. As the region’s wealth has grown, that has changed. Still for investors, particularly the non-institutional investors, it is important that a focused approach be used. Recognize that presenting yourself as a specialist will be more appealing to these investors than a generalist.
Know What Investments They Want
Be knowledgeable regarding the investment opportunities wealthy Latin Americans want. The past several years have seen their interest grow in new foreign-domiciled mutual funds largely due to their own country’s recessions. Recently, though, there has been an influx of alternative investments. This all plays well for Latin American investors who appreciate choice and are especially seeking advice from wealth managers with proven track records in specific investments, rather than those who simply bring a huge product suite, but are unconvincing in their product knowledge.
Another choice many Latin American investors want are nation-specific equities. Brazil and Mexico, for example, have promising equity markets. This is attributed to relatively stable political environments and popular leaders; both held as positive influences on the financial markets. Additionally, based on favorable outlooks by Standard & Poor’s on all but Brazil and Argentina, the region’s HNWIs are gravitating toward many Latin American nations’ financial sector bonds and stocks. Outside of the region, Latin American investors are finding emerging market funds such as Indian equity funds attractive.
Understand Their Asset Allocation
Another consideration is that Latin Americans may have very different ideas about asset allocation than, for example, an American or European investor. While each investor has his/her own specific financial goals which ultimately dictate their portfolios, many Latin American HNWIs lean toward wealth managers who subscribe to a more steady asset allocation and passive investment strategy.
In the end, being the right wealth manager for any client, whether in Latin America, Europe, Asia, Australia or Africa, depends on taking the time to conduct the proper discovery, understanding your client’s personal situation, financial goals, and tolerance for risk. That is always the right way to approach any prospective new client.