The hoped-for flows onshore from last year’s amnesty on offshore wealth have failed to materialise, so far. Meanwhile, Citi and HSBC have sold up. So where did a 15% increase in assets under management come from?
Paulo Corchaki, head of UBS Wealth Management Brazil Paulo Corchaki, head of UBS Wealth Management Brazil, had a good 2016; his firm’s assets under management grew by 55%. And it had nothing to do with the boost to client inflows after last year’s amnesty for declaring offshore wealth. Rather, he says, it was the local market’s dynamics.
The two dominant wealth management operations, Itaú and Bradesco, bought the Brazilian banks of Citi and HSBC respectively. That, plus the run on AuM at BTG Pactual in the first quarter of 2016, saw money flow to the other banks and led to Corchaki’s above-target performance.
To give it context, the industry as a whole is estimated to have increased AuM by 14.6% in the first nine months of 2016.
“The growth came from the local banks,” says Corchaki. ” HSBC was sold to Bradesco, and Citi announced it was selling. Situations like these during the year made some money flow locally, and that’s mainly where our inflows came from.”
Rudolf Gschliffner, executive superintendent of Santander Private Banking in São Paulo, agrees that the amnesty had a limited impact: “We strongly recommended to clients that they should participate in the amnesty. But the first stage was to comply; and, if we saw inflows, they were usually just enough to pay the fine and taxes.”
There was little net new AuM from the amnesty. Bradesco’s head of private banking, João Albino Winkelmann, even argues that the amnesty was negative for onshore AuM, as some clients paid the 30% levy with onshore liquidity and left the declared assets offshore. However, most expect positive momentum in 2017 from the amnesty.
“We opened some accounts as we helped clients through the process and now we will enter into this battle for the money. [In 2017] the [money related to the] amnesty will be the focus, because now the money is clean and we can go to the next step,” says Gschliffner.
UBS’s Corchaki thinks its international franchise will be an advantage for it in the dominant theme of the year. “In 2016, clients decided to stay where they are and just solve their problems. The movement will come [this year], so that’s why 2017 will be the more important year in terms of allocating the [amnesty-related] AuM within banks in the region,” he says. “AuM inflows will be bigger.
The amnesty makes it easier for bankers sitting in Brazil to manage wealth onshore because now everything is clean. It will be easier for us to grow onshore – there is no issue about contaminating the local book with possible offshore issues – and I believe that the strategy will be, more and more, for international banks to have people sitting in Brazil to manage Brazilian and offshore portfolios together.”
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