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Punta del Este in Uruguay: a magnet for financial events targeting millionaire investors

Investment banks from the United States and Switzerland have invited current and potential clients to breakfasts, lunches, and dinners such as at the Narbonne Estancia with economists and political scientists who are paid up to USD 4,300 for lecturing one hour about finance and the economy.

They seek to find the ‘high net worth individuals which have from USD 1 million in liquids funds or family offices of ‘ultra high net worth’, which have from USD 10 million in liquid funds to invest.

As is well known, Punta del Este is not only a summer resort but also where the latest fashion trends converge and business and investment are discussed in a more relaxed atmosphere.

These are the big shots that every financial advisor wants to capture. Today, most of the larger foreign banks have a policy of seeking new investors with a minimum capital of USD 1 million which are seen as the most sophisticated clients.

To achieve this, different events are carried out year after year in Punta del Este where the existing clients are often localized being on holiday and they are encouraged to bring friends or acquaintances who also may become interested.

The condition to be accepted in this select VIP club is that they have the minimum capital available to invest.

Remember that the advisory business is based on references. The events usually take place in the first days of January, which is when potential investors are in the area and the advisers take the opportunity to take their fishing rods and go fishing so as to speak.

The banks that arrive in these places are generally American or Swiss. The events consist of talks by bank strategists, together with renowned economists who provide a glimpse of the local and international scene, together with investment recommendations for each investor.

As this is a start of an electoral year in Argentina that might cause investors sleepless nights there is an added political risk component so there will be no lack of politicians invited to give their point of view, who are paid between $USD 2,500 and USD 4,000 for a talk, plus air tickets, transfers, plus all expenses paid.

The events are usually dinners or breakfasts and the preferred places are prestigious Estancias or large farms like Narbona, which are located in La Barra or José Ignacio. There are also the most localized portfolio managers of the banks who will give their opinion of the economy and the prospects 2019 and beyond.

The ROR advisors are looking for is always 1% up, so that a client with patrimony of USD 5 million would give them USD $ 50,000 annually, regardless of how they charge it if it is markup or account maintenance.

Although investors do not pay it directly, these events are paid for with the commissions and fees that each of them generates.

There are some banks that charge only commission upon a sale of a product, or they charge a fixed fee what is called an all in fee that is an account maintenance fee that includes everything including when operations are high volume without additional cost or a combination of both.

“When we are going to acquire any security, we will find a demand price (bid) and an offer price (ask), which determine the quotation of localized security.” The bid is the highest price that the buyer is willing to pay and ask the lowest price that the seller is willing to sell it.

The difference between the two is what is called the spread, margin or price differential. As this difference widens, the return potential of the investment is reduced “, explains Daniela Wechselblatt, head of DW Global Investments.

The bonds that are quoted abroad are traded between traders, which until a firm transaction is made they are only reference prices.

Firm transactions have higher prices depending on the volume; therefore, retailers usually quote the lower amount.

The bank commission can be between 1% and 1.5% for the purchase and another commission for the sale, while the markup of the broker is between 0.3 and 0.5% for the investor, unless there is a lack of liquidity then it can be another 1.5%.

There are even some banks and family offices that charge 0.25% of account maintenance on the total portfolio they have. This would depend on their reputation.

Therefore, it is advisable to keep these bonds to the expiry date. It often happens that some investors who are not aware of these costs decide to sell the bond before the expiry date, so it is possible that their net profit is practically zero or even a loss.

There are often hidden commissions to which investors must also pay attention, because when dealing with bonds with limited liquidity, it is gold dust for the brokers because they can put up the price to what they want.

The less information the client has, the worse it is for him.

Source: La Cronista

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