The Latin American wealth industry is set for consolidation and Pershing is looking to benefit from being the engine behind the strongest broker-dealers in the region.
Pershing’s platform, which is a BNY Mellon company, currently custodies around $75 billion from Latin American clients through 105 firms registered in Chile, Panama and Uruguay as well as the US. It is the firm’s second biggest geographic region after the US domestic business.
John Ward, managing director of global client relationships for Pershing, believes that the mix of onerous regulation and rising costs that have led to massive changes in the US offshore market landscape will also happen in Latin America.
Speaking to Citywire Americas at the Pershing Insite conference, Ward (pictured) said: ‘I do think there will be consolidation of the [Latin American] marketplace like we are seeing in the US. We are focused on making sure our clients are the consolidators and not the ones being consolidated.
‘I do think we’ll see pretty significant growth [at Pershing] in that period of time.’
Ward said smaller firms found it increasingly harder to manage revenue and regulatory risk.
‘Those firms that have the scale, are professionally managed, and are growth oriented businesses will be in a position to consolidate,’ he said.
While Ward would not give specific growth targets, he said Pershing was majorly committed to the Latin American market and was focusing on organic growth rather than client acquisitions.
The shift to focus on organic growth has not been driven by capacity or scale issues, said Ward, but on making advisors more competitive.
‘It’s continued responsible growth in the business,’ he said. ‘We’re very much focused on organically growing our existing relationships, collaborating with them to how they grow those relationships and not so focused on new client acquisitions.
‘I’m very happy with the clients we have now and I think we have a tremendous opportunity with them.’
One way to spur progress is to help its clients increase their ‘wallet share’. According to EY’s latest wealth management survey, 80% of Latin American clients have more than one wealth manager and Ward believes professionalized firms will have more opportunities to acquire more client assets from others.
Another avenue of development is to help clients that are transitioning from large wirehouses.
‘There is a shift in commitment to the region. Different advisors might be displaced through their firms exiting or a change in strategic focus that might take place,’ he said. ‘I think [we are] generally taking advantage of all the changes going on in the industry. We see it as an opportunity.’
In the last year there has been a lot of movement from US-based private banks serving Latin American clients. Credit Suisse closed its US private bank, Merrill Lynch went doubled investment minimums, and Morgan Stanley also slightly increased its investment minimums.
Ward also commented that while Pershing remains committed to Latin America it was very aware of risks that are driving banks and financial services firms away from the region.
Following the release of the Panama Papers, Ward said the firm took ‘appropriate action’ in reviewing firms which used the platform but would not comment on whether any business was lost.
He said: ‘We take risk very seriously. Whether there be financial risk with credit rating, reputational risk, regulatory risk, etc. We are very active and we collaborative with our clients on the business side and those who form regulation. It’s constant.’
One area he said the firm was monitoring was the changes in Argentina since its new president Mauricio Macri has already started making strides in making the country a more business-friendly place.
‘Argentina might see a bit of a rebirth. We’ll monitor. They’ve always been a significant wealth market and the changes that are happening there [mean] we’re optimistic and we’re monitoring events.’