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Wealth Management for Expats in Brazil

Submitted: May 2014

If you are an expat in Brazil with some investable wealth, the first thing to know is if you should go for onshore or offshore private banking services. There is no set answer to this, as this will depend on your personal circumstances.

Expats tend to be better off investing offshore if their stay in Brazil is just temporary, but onshore investing may provide better exposure to the Brazilian market. It is likely to be more tax-efficient as well.

In Brazil, financial institutions generally charge a lot. Investments should thus be made with absolute care. Heavy charges would normally mean you are investing for the long-term.

Private banking in Brazil

The private banking industry in Brazil is a fast-growing one, and most of Brazilian banks have a private banking department. Private banking services may range from traditional lending or investment management to inheritance tax planning or asset protection

If your investable wealth isn’t big enough, Brazilian banks may offer investment funds or structured products.

Generally speaking, you should look for a wealth manager if you think you need help with financial planning. Your wealth manager will take fees for that, but this may be offset by the higher returns you can get for your money.

Private banking – practical tips

There are various ways you can be charged for private banking services. Typically, a financial institution is prone to offer you more sophisticated services when you are or get wealthier. There is a hidden charge for this though, because it may lead to conflicts of interest. In such circumstances, the financial institution would expect you to hold investments in products of its own. The problem is, these investments are not necessarily the best you can find on the market.

Apart from the conflicts of interest issue, commission-based pricing structures are frequently offered for fund investments. Flat fee pricing structures can be considered as well. Such an option would typically be justified if you need to ensure high-quality, independent financial advice. Your investable wealth must be high enough, however.

As in any country, caution is required prior to sign up for a financial product. In all circumstances, you must check:

  • Product transparency, especially with regard to the underlying risk
  • Fee structure – this should be clear enough from the beginning
  • If you understand the product at all – if not, you had better walk away.

Issues for expatriates

Financial planning complexity increases dramatically when you become an expatriate, as additional cross-border issues must be taken into account. These include, but are not limited to:

  • International availability of liquid assets
  • If your stay in Brazil affects your ability to invest in some jurisdictions
  • Social security arrangements in the countries you have previously been to
  • Your residency status for income tax purposes
  • Asset protection
  • Foreign exchange exposure
  • Inheritance law considerations, and
  • Inheritance tax planning.

It is essential to check if your wealth manager is qualified enough to deal with your specific cross-border issues. In all cases, be wary of:

  • Language issues
  • Cultural differences, and
  • How contactable your wealth manager is.

US taxpayers

It may be harder for US citizens to find a relevant wealth manager outside the US. This is because US citizens remain subject to US tax rules, even when they are resident outside the US. The Foreign Account Tax Compliance Act (FACTA) adds fuel to the fire, as it makes it quite expensive for financial institutions to have US clients.

If you are a US taxpayer, you are likely to need a specialist wealth manager, i.e. with the appropriate qualifications and licences for taking on US clients resident in Brazil.

 

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