The way the coronacrisis is evolving suggests that Latin America is going to be extremely hard hit by the pandemic. This isn’t easy for Swiss wealth management and the banking industry as a whole, because the region has always been a growth market, says Bernardo Brunschwiler in an essay for finews.first.

This article is published on finews.first, a forum for authors specialized in economic and financial topics.

There’s no doubt that there will be less new wealth created in the region over the coming one to three years – or put differently, wealth creation will decline.

The very wealthy clients, the ultra-high-net-worth-individuals (UHNWI) with 30 million francs an more, will likely be less affected. Generally speaking, wealthy clients who traditionally invest their assets with Swiss firms will face enormous financial difficulties and will struggle with business problems locally.

«It is very likely that the informal sector will flourish»

Furthermore, the positive trend toward taxed income and assets will slow down. It is very likely that the informal sector will flourish. Not least because of mistaken and volatile economic, currency and fiscal measures. Coupled with policies that do little to support the rule of law and an investor-friendly climate.

The Swiss financial industry is managing only taxed money in Latin America. All else would be a big mistake – not least for their reputation.

It is obvious that the acquisition of new clients and assets will become harder in the future – primarily because the automatic exchange of information (AIA) doesn’t apply between the U.S. and Latin America. This gives the U.S. a significant comparative advantage, not least because a lot of Latin Americans don’t like the AIA for reasons of security and discretion.

«The cake won't get any bigger»

On this basis, Swiss banks and wealth managers will have to target client assets that are already in Switzerland, if they want to grow. As such, the «cake» won’t get any bigger.

To be successful, you must provide an excellent, personalized service with a good, tax-efficient investment performance. This will lead to a renewed price war. In short: the efforts will, while margins will fall. The complex regulatory cross-border regulation will also play a role. In the era of corona, it will get even tougher.

«Private banking will remain a fascinating business»

The trend among big Swiss banks for a while has led to onshore banking, with local representations in countries such as Mexico and Brazil. To keep within the rules and provisions, financial market players will have to get local licenses (such as for representative or advisory offices). Or enter into a pact with a local financial services provider or wealth manager to remain able to act.

On this background, they will in the future have to make major efforts to secure a constant and encompassing due diligence and control. This in turn requires a lot of know-how.

Private banking will remain a fascinating business in Latin America. The «Swiss» brand is still a pull factor, but the challenges have clearly become more diverse.

Bernardo P. Brunschwiler, lic. oec. HSG, grew up in Argentina. Starting in 1982, he got involved in Swiss banking with Latin American clients – first at Credit Suisse and BSI (1983-1991), based in Zurich, Lugano, Buenos Aires and New York. Between 1994 and 2004, Brunschwiler worked for Swiss Bank Corporation (later UBS) and was responsible for its wealth management in Latin America. Starting in 2006, he became an independent consultant. In 2010/11 he worked for Clariden Leu and from 2014 for PKB Privatbank. He founded Bernardo Brunschwiler Consulting in 2012 in Zug.

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