Never mind some current woes, a report says - the future is bright for Latin America's sector.

Political turmoil in some Latin American nations such as Venezuela and Chile creates headwinds but the continent’s wealth and asset management sector is due to grow at a compound annual rate of nearly 12 per cent in the five years until 2025, according to PwC Luxembourg and Sura Investment Management's predictions.

A compound annual growth rate of 11.8 per cent will take assets under management to $5.3 trillion, the report, issued this week, said.

The report underscores why a number of wealth management institutions have stepped up business operations in the country in recent years. However, there have been some pullbacks: HSBC (cuts in Brazil) and Royal Bank of Canada (Uruguay), for example. 

“The asset and wealth management industry in Latin America is a long-term growth story and players who are able to successfully position themselves in this market now will reap the benefits for a long time to come,” Pablo Sprenger, CEO Sura Investment Management, said. 

Demand for product and fee transparency driven by regulators, as well as the millennial generation becoming the main investor group, are shifting the power from the asset managers toward investors, the report said. These trends mean that the industry must battle against increasing fee pressure on the one hand and increasing costs on the other. 

There have been a number of wealth management moves to ramp up Latin American business in recent years. For example, East Capital, which specializes in emerging and frontier market investments, has partnered with Chilean firm Credicorp Capital Asset Management. In March this year, Julius Baer increased its stake in Mexican wealth management firm NSC Asesores, taking a 30 per cent stake. This means that it now owns 70 per cent of the firm, having made its initial deal in 2015. The head of JP Morgan’s private bank in Mexico was quoted earlier in 2019 as saying that it is expanding in Mexico and elsewhere in Latin America. It wants to boost its frontline headcount by 15 per cent. Earlier in February 2019, this publication reported that Credit Suisse added a raft of senior figures to its international wealth management business with a focus on the Latin American client market. Last September, a Mexican subsidiary of wealth structuring solutions firm Lombard International agreed to acquire a life insurance business from Principal Seguros, enabling the business to drive growth in Mexican and Latin American high net worth markets. Lombard International’s Mexican joint venture business is called Akaan Lombard International.

What to do next
Among the report’s take-away messages was that asset managers in Latin America must adapt to new technologies to enhance the client experience of a young and technology savvy generation. This could trigger faster growth in channels such as robo-advisors.

The report also said that asset managers must embrace alternative asset classes and environmental, social and governance-driven investment ideas to stay competitive.