Miami: A Latin capital

The international influence on Miami’s wealth management market is profound, pervasive and diverse.

Wealth managers at leading banks in the market estimate that approximately 20% of their business comes from foreign nationals and another 50% from U.S. citizens with close ties to other countries.

Most of the money from abroad, of course, comes from Latin America, and Miami’s large Cuban-American population accounts for the market’s extremely close ties to that Caribbean island, still ruled by Fidel Castro’s Communist dictatorship.

But market observers note that political instability in the region, exemplified by Hugo Chavez’ controversial socialist regime in Venezuela, is a perennial catalyst for wealthy individuals from a wide range of Latin American countries to steer money to Miami.

“This market is mainly Hispanic and it continues to attract a flight of capital from Central and South America and the Caribbean,” said Ken Thomas, an independent bank analyst based in Miami.

Wealth managers are also seeing more interest in the Miami market from Europeans attracted by the warm climate and the cheap dollar.

A burgeoning art scene, epitomized by Art Basel Miami Beach, the high-profile annual art show, also has helped make Miami an increasingly international destination, noted Sheldon Anderson, president and regional managing director for Chicago-based Northern Trust Corp. in Miami.

The unusual concentration of foreign capital in Miami may help explain why large banks are so successful in the local wealth market, say industry observers.

For one thing, “it’s easier to follow a bigger institution from abroad” than a smaller local one, noted investment banker Liz Nesvold, managing partner for Silver Lane Advisors LLC of New York.

“In addition to their financial stability, large U.S. financial institutions also provide a psychological comfort level for foreigners with money here,” said Richard Sanz, a Miami-based senior vice president and regional managing director for wealth management at Wachovia Corp. of Charlotte, N.C.

What’s more, Mr. Anderson noted, foreign nationals also rely on U.S. banks “to be their eyes and ears for what is going on here in their absence.”

Not surprisingly, many leading domestic wealth managers in the market, including Northern Trust, Wachovia, New York-based Bessemer Trust Co., and Bank of New York Mellon, have established groups that pursue and specialize in international business.

Bessemer’s designated Latin American team, for example, is staffed with international tax and estate-planning attorneys, said Kerry Rapport, managing director and senior resident officer for the firm in Miami. “The investments are the same,” she said, referring to how Bessemer works with international clients, “but the strategies are different, depending on the tax ramifications.”

“It’s importance to do due diligence and when you go to the countries, you are also introduced to friends and relatives,” said Mr. Sanz.

While confidentiality is critically important for foreign clients, compliance in the post-9/11 regulatory environment can be daunting, local wealth managers say.

“It’s more difficult than ever,” said one wealth manager who asked not to be identified, explaining why his firm had decided not to compete for foreign business.

Banks from outside the U.S. have been more than happy to fill the void.

Indeed, Brickell Avenue, the heart of Miami’s financial district, is lined with foreign banks. A sign reading “international private banking” is conspicuous outside the headquarters of Total Bank, acquired last year for $300 million by Madrid-based Banco Popular Espanol.

Transatlantic Bank, formerly locally owned, was acquired last year by Barcelona-based Banco Sabadell for $175 million. Other major international banks in the market include Zurich-based UBS AG and Madrid-based Banco Santander.

Any adviser doing business with foreign nationals or American citizens with close foreign ties must be culturally sensitive, Miami wealth management executives said.

“Every country is different,” said Orlando Roche, the Cuban-born head of Palm Beach-based Lydian Bank & Trust’s Miami office. “In some cultures, for example, instead of getting down to business right away, it’s important to sit down and have dinner first.”

The widespread Latin influence and the fragmented nature of the market makes the need for cultural affinities and personal contacts especially vital, said market veteran Harold Evensky, chairman of Evensky & Katz Wealth Management in Coral Gables.

BNY Mellon’s Mr. Porter agrees.

Cuban-American clients are no different from Italian-American clients, he said. But in Miami, he added, being able to speak Spanish is less important than having “some sensitivity to the politics of Cuba and understanding its history.”

And because wealth in the market is so widely dispersed, “networking, referrals and community involvement are essential,” he said. “You have to work hard here.”

Charles Paikert can be reached at [email protected].

Related Topics: Wealth Management Market Report