WealthInsight predicts positive future outlook of Latin American wealth management market

2015 has been an unsettling year for the Latin American wealth management market. Currency depreciation, recession in Brazil, the recent closing of regional branches by international banks (including HSBC and Deutsche Bank this year), a slump in commodity prices and the Chinese economic slowdown have all influenced investors’ confidence, wealth and the future projection of Latin American’s wealth management market.

Despite macro-economic uncertainties, the market potential for wealth management in Latin America is significant. The combined HNWI population in Brazil, Mexico, Chile, Colombia and Argentina is more than double that of the GCC countries (UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain). In 2014, there were around 186,000 HNWIs in the GCC countries, while the Latin American countries listed recorded 463,000 HNWIs. This represents significant market opportunities for private banks and wealth managers to offer both onshore and offshore investment services.

WealthInsight forecasts that the number of Latin American HNWIs is expected to exceed 530,000 by 2019. In particular, Chile’s HNWI population is one of the fastest growing in the region, recording a forecast compound annual growth rate of 4.8% between 2015 and 2019. Brazil had the highest number of HNWIs with 198,000 in 2014, followed by Mexico with 148,000 individuals in the same year.

Higher proportion of foreign investments aids the market

WealthInsight’s study reveals that Latin American HNWIs held a higher proportion of their wealth outside of their home countries than the global average between 2010 and 2014:

• Millionaires from Chile, Peru, Colombia and Argentina all held more than 33% of their wealth outside their home country in 2014, while the global average was 20-30%. Key destinations for foreign investments include North America and Europe

• Chilean HNWIs held the highest proportion of their investments outside their country at 38.4% or US$100.5 billion in 2014

• Latin America accounted for 56.4% of Chilean HNWIs’ foreign assets in 2014. It was followed by North America with 19.3%, Asia-Pacific with 12.8%, Europe with 7.9%, Africa with 2.5% and the Middle East with 1.1%

• Mexican HNWIs held a lower proportion of their wealth outside their country at 22.3% or US$167.7 billion in 2014

According to Dr Roselyn Lekdee, Economist at WealthInsight: “Diversification is one of the key investment strategies among Latin American HNWIs in a time of weak regional economic conditions and growth in foreign investments are expected to continue. Given currency depreciation, a slump in commodity prices and recent international bank exits, Latin American millionaires have indeed become more strategic towards their investment portfolio”