Turn for the ECB: The Focus is on the Pace of Cuts and Not on Their First Announcement

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Finally, June has arrived, bringing with it the European Central Bank (ECB) meeting, which will take place tomorrow. All attention is focused on what the monetary institution will say and do, as the forecast is that it will announce a first rate cut of 0.25%. According to analyses by international managers, inflation continues to show some resistance to decline—the core inflation surprised on the upside again—but this should not justify the ECB not lowering rates on June 6th.

Moreover, investment firms warn that any different scenario would be a major surprise and provoke a strong reaction in the markets.

The latest report from Bank of America states that tomorrow’s rate cut should be the first 25 basis point reduction out of 200 for monetary easing between June 2024 and 2025. “We expect few changes in the ECB’s guidance in the press release, basically acknowledging the first move, data dependency, and the need to proceed with caution. Small upward revisions to short-term inflation (no changes in the medium-term) will likely also feed this caution, and the press conference will likely indicate that there is no preset path and that decisions will be made meeting by meeting,” says Rubén Segura-Cayuela, chief European economist at Bank of America.

Segura-Cayuela, who maintains his conviction that eurozone interest rates will be at 2% next year, predicts 75 basis points of cuts for 2024 and 125 basis points for 2025. “We also expect Lagarde to signal once again that there will be a bit more information in July to decide on the next move and much more in September, a clear indication that the next move is more likely in September than in July. Finally, similar to recent comments by Lane this week or Lagarde in the last press conference, we would expect a clear distinction between a phase of reducing the level of monetary policy restriction and a phase of rate normalization, a clear signal that, for now, they are not in a hurry to lower rates,” he adds.

The Issue is the Pace

According to Franck Dixmier, global CIO of Fixed Income at Allianz Global Investors, after a long phase of unchanged rates, the start of a cycle of cuts raises several questions about the next steps: What is the target for the ECB’s terminal rate? How quickly will the central bank reach it? Investors will be very attentive to any hint of answers to these questions, as well as announcements of new macroeconomic forecasts. “While there is consensus on this first rate cut, the pace of future cuts is a lively debate among members of the institution. Inflation expectations are anchored at levels close to the ECB’s target (five-year inflation swaps were at 2.3%), which is a good indicator of investor confidence in the ECB’s ability to meet its mandate. The Council will focus more on the inflation trajectory towards the ECB’s price stability target and its degree of confidence that inflation will remain at that level,” he notes.

Ulrike Kastens, economist for Europe at DWS, recalls that almost all members of the ECB Council have spoken in favor of a possible interest rate cut in June. “On June 6th should officially confirm that the ECB will cut its official interest rate by 25 basis points to 3.75%. However, what matters even more is the path forward. The ECB is willing to eliminate the maximum level of restriction, as Philip Lane said,” Kastens explains.

This view is also shared by Cristina Gavín, head of Fixed Income and fund manager at Ibercaja Gestión: “The key is not in this week’s rate cut, but in what the ECB’s course of action will be in the upcoming meetings, so we should pay attention to Lagarde’s press conference after the Council. The fact that the Fed is also delaying its rate cuts due to price pressures, although not a determining factor, can also influence the mood of ECB members regarding additional cuts.”

In the opinion of Germán García Mellado, fixed income manager at A&G, since the focus will be on trying to glimpse the pace of cuts from June and on the evolution of the data, it is likely that the ECB will be very cautious about giving hints about its next steps. “In any case, it seems unlikely that, with the latest published data, they will anticipate a rise for the next meeting in July, so they will likely leave everything open for September when they will update the macroeconomic projections again. It will also be relevant to see the new macroeconomic projections for the coming years, where both growth and inflation expectations will probably be slightly revised upwards, which will not provide certainty about future rate cuts,” García Mellado points out.

Regarding the ECB’s speech, Daniel Loughney, head of Fixed Income at Mediolanum International Funds (MIFL), adds: “We expect the ECB’s speech to be moderate in relation to market expectations, as we believe inflationary pressures are decreasing more than expected. The ECB will likely highlight the irregular nature of upcoming CPI releases. There are a series of idiosyncratic statistical influences on inflation at the moment that are difficult to quantify precisely: like the launch of a cheap national transport ticket in Germany a year ago. Comments on service price inflation will draw the most attention, as it has remained quite elevated lately.”

One of the conclusions put forth by Kevin Thozet, member of the Investment Committee at Carmignac, is that the market expectations of less than one rate cut per quarter for the rest of the year seem prudent. “We wouldn’t be surprised to see the ECB proceed with three or four cuts, and potentially more, in the case of an unforeseen slowdown,” he indicates. In Thozet’s opinion, “markets seem to agree on the prospect of three ECB cuts in 2024, with the official interest rate at the 3% threshold, or above, within 12 months. This scenario seems optimistic, as it doesn’t account for what the ECB might do if the economy slows down. While we are constructive regarding the short end of the yield curve, we can’t rule out underperformance of long rates due to better economic prospects and a smaller ECB balance sheet.”

Looking at the Data

In this regard, the data once again becomes the argument and reason that makes the ECB’s indications on the pace of cuts more important than the first rate cut itself. “There is no doubt that some central bankers have in mind rapid further interest rate cuts and may already favor another reduction in July, while others prefer a more cautious approach. Faced with uncertainty about inflation trends, a hawkish tone is likely to prevail, emphasizing data dependency and a meeting-by-meeting approach. President Lagarde’s central message is expected to avoid explicitly committing to another rate cut in July. Overall, we maintain our forecast of three more rate cuts until the end of March 2025,” adds Kastens.

Orla Garvey, senior fixed income portfolio manager at Federated Hermes Limited, reminds that the market already expects the ECB to cut rates tomorrow, although “what comes after the next rate cut will be more difficult for the central bank to communicate and for the markets to assess.” In her opinion, significant progress has been made towards the inflation target, but “the future path is likely to be more turbulent.” Combined “with an improvement in the growth outlook in the eurozone, markets might have less confidence in the future trajectory of the ECB’s key interest rates,” she points out.

For Felix Feather, economist at abrdn, since they consider that service inflation and wage growth remain too high for consecutive cuts in June and July, it could be a “hard line cut.” Moreover, he warns that this Friday’s year-on-year inflation will be key. “A rebound in headline inflation is expected, but it would have to be very large for the ECB to deviate from its goal of cutting in June. However, what happens with core service inflation will be key to setting expectations on the ECB’s path beyond June. The recent strength in labor cost growth could mean that service inflation strengthens, leaving the ECB on hold for a while after the initial cut,” adds Feather.

According to Martin Wolburg, senior economist at Generali AM (part of the Generali Investments ecosystem), the latest data on official German wages for the first quarter (+6.2% year-on-year) and, at the eurozone level, negotiated wage growth in the first quarter strengthened to 4.7% year-on-year, pointing to an upside risk for inflation. “The ECB’s own indicators suggest that negotiated wage growth will be around 4% in 2024 compared to 4.5% in 2023,” he notes.

Wolburg believes that while the labor market remains healthy, it is exaggerated to worry about wage growth. “But given the concerns of Governing Council members, we now consider it more likely that the ECB will cut only once a quarter starting in June. Even so, we believe the market has gone too far in reducing cumulative ECB rate cuts for 2024 to only about 60 basis points,” he says

The ECB Before the Fed: Impact on the Bond Market

According to investment firms, we are about to witness an uncommon situation in monetary policy: the ECB might reduce its reference interest rate before the Federal Reserve, for the first time since the early 2000s. The reason, according to Raphael Olszyna-Marzys, international economist at J. Safra Sarasin Sustainable AM, is that the European economy is in a very different situation compared to the United States. “The output gap is probably negative in the eurozone, and the economy has not grown for most of the past two years (the opposite of the U.S.). Credit growth is extremely weak, suggesting that the ECB’s policy is restraining activity. Eurozone inflation is clearly trending downward (much of the inflation was due to the energy crisis), despite relatively stable service inflation. Consequently, we believe the ECB has room to cut rates four times this year, starting in June,” says Olszyna-Marzys.

For Catherine Reichlin, head of analysis at Mirabaud Group, one of the keys to this difference between the ECB and the Fed lies in inflation and the perception of its evolution. While the ECB says it is truly confident that inflation is under control, the situation is different for the Fed. Since the April inflation figures, published in mid-May, were slightly below expectations, the Fed has been moderating market expectations about the timing and magnitude of future rate cuts. A multitude of central bankers are talking about the issue, with a common thread: it will take more than one data point to ensure that inflation is under control and that the monetary easing cycle can begin at the end of this year or early next year,” explains Reichlin.

In other words, volatility is the order of the day, and bond yields are fluctuating regularly, like the 10-year U.S. bond, which started the year at **3.89%**, rose to **4.70%** at the end of April, and is currently at **4.43%**. “Although expectations are different, the performance of government bond markets is similar: **-1.56%** in the United States and **-1.39%** in Europe. In Europe, the disparities are considerable: **-2.57%** in Germany versus **+0.58%** in Italy, which has benefited from a narrowing of its risk premium,” she adds.

The Mirabaud expert believes that in Switzerland, the bond market is “less bad” but still in negative territory this year with **-0.91%**. “Among the central banks that have already cut rates (Switzerland), those preparing to do so (Europe), and those delaying (United States), it is interesting to observe that their bond markets are following their course without fully incorporating the expectations of rate cuts. Additionally, bond yields, which are near their highs of recent years, still offer good entry opportunities for investors who have not yet decided to buy bonds,” concludes Reichlin.

 

Peru: The New Key Player in the Lithium Triangle

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Litio (Wikipedia)
Wikimedia Commons

When talking about lithium, attention often goes to countries like Australia, Chile, Argentina, or China. However, a recent discovery brings prominence to Peru in this market, making it one of the main key players, according to an analysis by ActivTrades.

According to analyst Ion Jauregui, the discovery of an extensive lithium deposit by American Lithium Corp in 2018 at the Falchani project, in the Puno region, near the so-called Lithium Triangle (drawn between Chile, Argentina, and Bolivia) has “significant” implications for Peru.

“The findings from November 2023 revealed that lithium resources are four times greater than initially estimated, an increase of 476% since 2019. Falchani is now among the world’s leading large-scale hard rock lithium projects and also includes uranium deposits discovered by Macusani Yellowcake, a subsidiary of Canadian Plateau Energy,” explains the analyst.

The development of this project requires an investment of nearly $800 million and has garnered international attention, representing a “transformative milestone for the Peruvian economy,” comments Jauregui.

The discovery, first observed near the border with Bolivia, 150 kilometers from Lake Titicaca, promises economic benefits for the Andean country, such as job creation in mining and infrastructure development. This, according to ActivTrade, can stimulate economic growth and diversification.

“The government could obtain significant revenues from mining royalties and taxes, which would improve public services and infrastructure,” writes Jauregui, adding that companies like Tesla could secure agreements to guarantee a steady supply of lithium for battery production.

Additionally, the uranium found could be vital for local energy production.

“On the international front, Peru will enhance its economic relations and strengthen ties with other lithium-rich Latin American countries, leading to strategic collaborations and reinforcing the region’s influence in the lithium market,” notes the analyst.

Political Factors

However, amid the enthusiasm, ActivTrades calls for consideration of the political variables at play.

While they expect that global demand for electric vehicles and renewable energy storage will drive the lithium market, which is set to grow in the long term, investors must be aware of the country and region’s developments.

“Investors should be aware of risks such as political instability and regulatory changes in Peru and South America,” warns Jauregui.

Additionally, in a context of global competition for resources—especially between heavyweights China and the United States—there is an additional layer of complexity to the matter.

 

 

iCapital Appointed Investment Fund Manager for Prime Quadrant

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iCapital announced that iCapital Network Canada (“iCapital Canada”) has been appointed Investment Fund Manager in Canada for Prime Quadrant Alternative Investment Access Funds, where iCapital will provide all administrative functions associated with managing these funds, the firm said in a press release.

Prime Quadrant is a leading trusted advisor and consulting firm for ultra-high-net-worth families in both Canada and the U.S.

This partnership, in addition to iCapital Canada’s 40+ Canadian funds and a previously announced partnership with Sterling Global, firmly positions iCapital Canada as a trusted technology partner to deliver a comprehensive digital investing experience for Canada’s leading wealth advisors and asset managers.

This is the first time iCapital has established a strategic partnership with a family office advisory firm to manage the administration of an existing platform. This partnership represents the type of opportunities iCapital can provide for firms in the independent wealth space to more efficiently scale their alternative investing businesses, the release added.

“Prime Quadrant is an innovative industry leader within the high-net-worth community, and iCapital is honored to be entrusted with the investment fund management responsibilities of their Access funds,” said Lawrence Calcano, Chairman and CEO of iCapital. “We believe that the multi-family office, independent RIAs, and the dealer wealth channel represent an outstanding opportunity for us to create industry-leading solutions. Our goal is to provide a single platform that utilizes our market-leading technology and operating system, offering advisors the tools they need to achieve better scale and efficiency for their alternatives business.”

iCapital Canada assumes the administrative functions associated with the running of alternative funds for Prime Quadrant’s clients, while Prime Quadrant remains the portfolio manager handling the selection of the underlying investment managers and strategies. Prime Quadrant has built a world-class platform, which includes top-tier private equity, real estate, private debt, venture capital, and hedge fund Access funds.

iCapital’s technology will be leveraged to streamline and automate the onboarding, subscription processing, and lifecycle operations for Prime Quadrant Access funds while providing support to the firm and its ultra-high-net-worth clients. In addition to managing Prime Quadrant’s existing alternatives Access funds, iCapital Canada will provide administrative support to the firm when launching new alternatives products in the future.

“Our relationship with iCapital will ensure Prime Quadrant can scale its ability to meet and exceed our clients’ expectations by leveraging iCapital’s technology and resources to continue developing creative solutions for our families,” said Mo Lidsky, Chief Executive Officer of Prime Quadrant. “We are excited to benefit from iCapital’s complete end-to-end solution and operating system to help simplify the many post-trade management activities for our families.”

Terms of the agreement were not disclosed.

Ideas to Prepare U.S. Workers for the Age of AI

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The Committee for Economic Development (CED) offers solutions for business and policy leaders to proactively respond to the AI transformation by equipping workers with the knowledge and tools to adapt and thrive, according to its latest report Future-Proofing the Workforce for the AI Era.

AI is increasingly and rapidly transforming the U.S. economy, with the potential to have a tremendous impact on “how we work, live and innovate,” the paper posits.

The AI revolution can help mitigate lackluster productivity growth and one of the most severe labor shortages in the nation’s history by driving efficiency throughout the economy.

Navigating the transition to an AI-integrated economy will require a comprehensive and collaborative strategy from public policy, business and education leaders, add experts from The. Conference Board.

As the solutions report emphasizes, maximizing AI’s potential while mitigating its risks requires a collaborative and proactive approach from policymakers, business leaders, educators and all those who have a stake in determining how this technology will transform society.

The impact of AI on workers and the economy is simply too large and far-reaching to ignore. The public and private sector must work together to build a future-ready workforce poised for success in the AI era, with the skills and adaptability needed to thrive in a rapidly changing economic landscape.

CED’s solutions report offers key recommendations for preparing the workforce for the future and thriving in the AI era:

  • Expand future-oriented education and workforce development opportunities.
  • Streamline the approval process to expand the Registered Apprenticeship Program.
  • Enhance educational offerings related to science, technology, engineering and mathematics (STEM) and computer science
  • Foster a growing pool of well-trained technology and STEM educators
  • Increasing the use and recognition of credentials that can be accumulated
  • Provide targeted federal and state support for workers displaced by AI disruptions
  • Allocate federal funding for AI research
  • Enhance government AI expertise and capabilities.

Business leaders’ role in overhauling organizational structure and workflows.

The article was prepared with information pertaining to The Conference Board report available at the following link.

Mexican Markets Plummet After Election

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Mexican markets have reacted negatively to the result of the presidential election held last Sunday in Mexico, which reflected a landslide victory for the ruling party. The main local indicators have their worst day since March 2020, when the pandemic began.

The peso depreciated 3.5%, becoming the weakest currency of the global session, trading at 17.64 pesos after reaching a high of 17.75 units; meanwhile, the main index of the Mexican Stock Exchange plummeted 5.26%.

Likewise, in the face of risk aversion, the 10-year M-bond rate rose 11 basis points to 9.89%, a level not seen since mid-2022.

The markets fear that the overwhelming victory of the ruling party could lead to changes in the Constitution contrary to the free market.

For example, in economic terms, there are concerns about the autonomy of the Banco de Mexico (with a unique mandate to keep inflation low and stable), and the credit rating of Mexico’s sovereign debt due to the large fiscal deficit of 5.8% expected for this year, with a necessary adjustment for 2025 that will reduce the expectation of economic growth.

According to the quick count (PREP) after yesterday’s election in Mexico, and with 75.6% of the votes recorded, the official candidate Claudia Sheinbaum was the winner with 58.66% of the votes, far behind was the opposition candidate Xochitl Gálvez with just over 28% of the total vote.

In the Chamber of Deputies, it is expected that the official party, Morena, and allied parties, will obtain a qualified majority (at least two thirds of the seats).

Likewise, in the Senate, it is expected that the official party, Morena and allied parties, will obtain a qualified majority (at least two thirds of the seats), while in the Senate, a simple majority is projected for Morena and its allies (over 50% of the seats, but below the qualified majority).

This opens the door for the new president to make changes to the Constitution, and even to approve the changes proposed by the current president next September when the new legislature takes office.

In economic terms, the autonomy of the Banco de Mexico and the credit rating of Mexico’s sovereign debt are of concern.

It is worth remembering that almost 80% of peso transactions are speculative in nature, so the change in the balance of risks on Mexico affects the exchange rate by making it less attractive as an investment.

Challenges for Sheinbaum

After her victory yesterday, economic analysts have warned that the new president Claudia Sheinbaum will have an adverse scenario at least at the beginning of her term, and will have to face long-term challenges that are structural in the Mexican economy, among them stand out:

Reducing the fiscal deficit, improving water and electric power infrastructure, modifying the business model of the oil company Pemex, increasing GDP per capita, boosting fixed investment of private origin, taking better advantage of the nearshoring opportunity, reducing labor informality and improving the quality of education and health services.

However, given the current government’s proclivity to spend on social programs without worrying about generating investment, economists wonder what room for maneuver the new president will have in the economy to face these challenges.

The Bahnsen Group Opens West Palm Beach, Florida Office

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The Bahnsen Group, a national wealth management firm with $5.5 billion in assets under management, announced plans to open a new office in West Palm Beach, Florida.

The office will open in July 2024 and is located at the One Clearlake Centre at 250 S. Australian Avenue in West Palm Beach.

Jeremy Polon, The Bahnsen Group’s Associate Private Wealth Advisor, will relocate to the West Palm Beach office, from Newport Beach, California, and serve clients in the Palm Beach region. The Bahnsen Group manages upwards of $250 million in client assets based in Florida, with clients throughout the state in a dozen different cities.

Brian Szytel, Co-Chief Investment Officer and Partner, will drive The Bahnsen Group’s expansion in Florida and lead the search for additional financial advisors and operations staff for the new West Palm Beach office.

“The Florida market is already a substantial part of our business, and it has been a priority for us to establish a beachhead in Florida for several years. There are few states in the country governed as well as Florida, and we intend to live up to that high bar in what we bring to the market,” said David Bahnsen, Managing Partner of The Bahnsen Group. “Having a senior leader like Brian drive this expansion and moving next-gen talent like Jeremy to the market is a sign of our seriousness in the endeavor.”

West Palm Beach represents the 8th office location for The Bahnsen Group, with other offices in Newport Beach, California; New York City; Minneapolis, Minnesota; Nashville, Tennessee; Austin, Texas; Phoenix, Arizona; and Bend, Oregon.

“This is going to be a significant undertaking for The Bahnsen Group and provide us the capacity we desire to properly serve clients in Florida,” said Szytel. “We believe the Palm Beach region will over time become one of our largest offices in terms of client and asset stewardship.”

All 63 employees of The Bahnsen Group are in-office five days a week at all office locations.

White Bridge Capital Expands to Texas with Nat Parsons’ Leadership

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White Bridge Capital, a cross-border real estate investment firm, is extending its reach to Texas to cater to global family offices, high-net-worth individuals, and overseas entities seeking to benefit from the state’s robust economic expansion and the resulting impact on its flourishing real estate market. The portfolio encompasses multi-family residences, build-to-suit properties, industrial facilities, and commercial developments across the state.

In Texas, White Bridge Capital will be spearheaded by newly appointed Partner Nat Parsons, a third-generation developer by training and leading real estate and construction veteran with nearly two decades of experience, including the banking sector.

Co-founded by Tommy Campbell and Regina Garcia Handal, with headquarters in Miami, Florida and operations in Mexico City, White Bridge Capital sources real estate deals, structures investments, secures financing for underlying assets, and manages client investments throughout the real estate development cycle.

“The expansion to Texas marks a significant step in the firm’s growth and its intent to have a strategic physical presence to look after our clients’ overall interests,” said Campbell who added that “investors are focused on long-term appreciation and greater control, and White Bridge Capital, with our ‘boots on the ground’ approach, stands ready to source real estate investments in Texas that offer clients active management.”

Cross-border family office real-estate investments across the Americas are on the rise, propelled by macroeconomic and geopolitical drivers. White Bridge Capital is bridging this investment opportunity with its unique customized investment platform underpinned by high-touch, local intelligence, and a robust network of experts across the Americas.

“Nat is an outstanding business leader. His extensive experience and strategic vision in managing complex real estate deals, leading construction projects and teams, will be invaluable to our firm and clients,” said Garcia Handal. “In partnership with Nat, we look forward to our Texas office thriving into the future,” she added.

A graduate of Texas A&M University, Nat holds a master’s in business administration and a bachelor’s in construction science, focusing on business, project planning, and construction management of high-quality facilities. A proud and devoted father, Parsons is a U.S. rugby player, the son of architects and grandson of Nathaniel E. Parsons, president of N. E. Parsons Sheet Metal and Roofing Company 1924.

“White Bridge Capital’s leadership, client base, and market reach are unparalleled,” said Parsons. “Together with Tommy, Regina, and Texas’ pro-business and investor-friendly policies, I look forward to serving new and existing clients. The opportunities to grow in Texas are endless.”

Texas is an appealing destination for investors, particularly those from Latin America, given its overall business-friendly environment, infrastructure development, technological advancements, and strong economic growth – accelerated by trade with Mexico – attracting diverse industries to the state, resulting in population growth and an attractive real estate market.

The SEC Issues Alert on Common Frauds in Crypto Assets

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The SEC’s Office of Investor Education and Advocacy has issued an alert to investors, warning about the increasing use of crypto assets in scams targeting retail investors. Crypto assets, which include cryptocurrencies, coins, and tokens, are being exploited by fraudsters looking to capitalize on their popularity, according to the regulatory body.

Fraudsters often resort to technological innovations to perpetrate their scams, and investments related to crypto asset securities are no exception. “Despite ongoing efforts by federal and state regulators to combat these frauds, recovering stolen money remains a challenge,” the statement says.

Fraudsters use advanced technologies to hide their identity and the trail of funds, often sending them overseas, which makes recovery difficult, the statement adds.

The most common strategies used by fraudsters are (i) contacting through social media and text messages, (ii) exploiting emerging technologies, (iii) impersonating trusted sources, (iv) “pump and dump” schemes, and (v) demanding additional costs. The SEC explains in more detail how they operate in each case.

Contacts on Social Media and Text Messages: Scammers often initiate contact with potential victims on social media platforms, dating sites, and messaging apps, or through unsolicited text messages. They pretend to be friends of the victim or claim to have contacted them by accident, gaining their trust before disappearing with the invested funds. This type of scam, known as “pig butchering,” involves creating a fake friendship or romantic relationship to convince the victim to invest.

Exploitation of Emerging Technologies: The growing popularity of artificial intelligence (AI) is used as a lure to attract investments in crypto assets. Scammers use AI-related terms and claim to use bots to find the best investments, but their real goal is to steal investors’ money. Additionally, they use AI to create realistic websites and marketing materials, as well as deepfakes of celebrities or government officials to deceive investors.

Impersonation of Trusted Sources: Communications that appear to come from government agencies, including the SEC, can be forged by scammers. Using AI technology, scammers can impersonate friends or family members, posting messages from hacked accounts to promote fraudulent investments. It is vital to verify any investment offer, even if it appears to come from a reliable source.

Pump-and-Dump Schemes: In these schemes, scammers promote crypto assets, including “memecoins,” on social media to artificially inflate their price. Once the price rises, the promoters sell their assets for a profit, leaving other investors with significant losses when the price drops abruptly.

Demand for Additional Costs: Scammers may demand the payment of additional costs, fees, or taxes to allow the withdrawal of funds from an investment account. This advance fee fraud tricks investors into paying more money with the false promise of recovering their investment. They may also request refunds of money supposedly deposited by mistake, or deceive investors who have already lost money by promising to help them recover their funds, only to scam them again.

Precautions for Investors

To protect themselves from these frauds, the SEC recommends not making investment decisions based on advice from people known only online or through apps. Do not share financial or personal information, and verify the legitimacy of any investment offer, especially those that require the use of crypto assets to make payments. Staying informed and cautious is key to avoiding falling into the complex strategies of scammers.

 

Bolton Global Capital partners with Wealth Management GPT

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Bolton Global Capital, has announced a strategic partnership with Wealth Management GPT, a pioneer in artificial intelligence, to provide Bolton’s advisor network with innovative generative AI tools for highly effective and personalized messaging as well as financial education.

This collaboration combines the expertise of both companies to offer a state-of-the-art AI solutions platform tailored for financial advisors, the release said.

The tool equips advisors with multi-language marketing capabilities, enhanced personalized communications, streamlined workflows, and efficient content generation. The platform enables advisors to generate content in 20 seconds or less, offering features such as case templates and the ability to create 500-word blogs instantly.

Additionally, it can analyze the context and purpose of advisor messaging to deliver a differentiated client value proposition. Bolton’s implementation of Wealth Management GPT has multi-language capabilities, with the ability to create AI-generated content in English, Spanish, and Portuguese – a feature that is exclusive to Bolton, to suit the needs of its international clientele.

“Our partnership with Wealth Management GPT provides financial advisors with unprecedented potential to better serve their clients and achieve a superior outcome. With its advanced capabilities and intuitive interface, this tool is set to be a game-changer” said Matt Beals, Bolton’s Chief Operating Officer.

Wealth Management GPT Founder Marc Butler added “We are ecstatic to be partnering with the Bolton team to deliver the power of Wealth Management GPT to their advisors and help them continue to enhance their industry leadership.”

This partnership marks a significant step forward in leveraging AI to enhance the efficiency and effectiveness of financial advisory services.

BBVA Returns to Miami Due to “Strong Demand” in the Growing Offshore Business, Says Murat Kalkan

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Photo courtesyMurat Kalkan, Head of BBVA Global Wealth Advisors

BBVA Group has returned to the US Offshore business by establishing a new entity called BBVA Global Wealth Advisors, and locating an office in Miami due to the high demand from Latin American clients seeking the service, said Murat Kalkan, head of the new office located in the city’s financial center, to Funds Society.

In the office at 501 Brickell Key, which still smells new, Kalkan turns his back on the sun’s reflection through the windows to receive Funds Society and talk about the firm’s new objectives in South Florida.

“The main objective is to serve BBVA group clients in Latin America for their international wealth management needs,” the executive responded, clarifying that this was a short and simple answer.

However, Kalkan elaborated to provide context regarding BBVA’s “strong presence” in Latin America. In this regard, the Spanish bank projected that the US has been the main and largest offshore wealth management center for these clients for a long time.

According to estimates from consulting firms such as McKinsey and Boston Consulting Group (BCG), offshore share of LATAM individuals’ financial wealth ranges between ~30% and ~45%,and the largest booking center for those funds offshore is the US.

In 2021, BBVA Group sold its US banking entity to PNC Bank, and that sale included the US private banking unit, including the investment advisory business in the United States for international clients. However, “strong demand” led BBVA to conclude that “its own investment advisory service in the United States for the group’s high-net-worth clients was a fundamental component of its aspirations.”

Regarding the client profile, Kalkan insisted that the institution is “primarily focused on serving Latin American clients” and currently does not plan to target Spanish clients.

“We project that the US market has been a less prominent offshore option for BBVA Group clients in Spain, and those outside of Latin America. For those clients, other international wealth management service centers like BBVA Switzerland or BBVA Spain play a key role,” he explained.

The executive is an industrial engineer with an MBA from The Wharton School and has been with the firm for five years, having worked in New York and Houston offices.

US Offshore Business

Kalkan analyzed the business from various angles. Firstly, from a market perspective, US Offshore has been “generally attractive, driven by economic stability, the strength of the legal system, the solidity of financial infrastructure, access to opportunities, as well as the strength of the currency, which has recently had more weight,” he commented.

Given that Latin America is believed to be the leading source of US Offshore reserves, and that LATAM clients are believed to maintain a larger percentage of their wealth offshore than clients in all other regions, the US is “a bit different” from other offshore booking centers in the world. In other words, clients who have their wealth in US Offshore accounts allocate a much larger portion of their wealth to these accounts compared to clients from other regions who have their money in other international centers.

In Kalkan’s opinion, “this increases the importance of trust, the importance of stability, the importance of the relationship with the wealth management provider and its professionals.” Additionally, the head of BBVA GWA mentioned a Deloitte study showing that the US Offshore business has been one of the fastest-growing booking centers among offshore centers in the world.

“In my opinion, with the relative risk of geopolitical and economic instability in the LATAM region vs. other parts of the world, it is likely that this growth will continue in the near future,” Kalkan estimated, recalling that historically the offshore business was “highly competitive.” However, he noted that some global players have exited the business or significantly increased the minimum asset thresholds for their accounts.

“Moreover, from a wealth management service standpoint, we see that fee-based advisory share in US offshore is growing fast, but remains well behind US domestic market levels. Hence, I expect that this catch-up game is likely to continue.

Lastly, from an investment perspective, the point to highlight is the increase in client preferences for ETFs and alternative products.

Difference Between Domestic and Offshore Clients

Kalkan, based on his conversations with both U.S. residents investing domestically and Latin American residents investing in US Offshore, highlighted his personal views on the most important differences.

In his opinion, international clients and American clients have similarities but also some fundamental differences in their objectives, their decision-making criteria in selecting their advisors, or even the types of products they seek to have in their portfolios.

Firstly, from the objective of getting wealth management services in the US standpoint, American clients primarily seek to “maximize returns or optimize their life after retirement,” and while international clients also care about these they mainly seek to protect and preserve their wealth: both from political or currency risks they may face in their home countries.

“Therefore, their objectives are similar but also different,” he summarized.

Secondly, if he had to talk about the key factors in their decisions to go with a specific private bank or wealth management provider, American clients seek more product capabilities or institutionalization, professional service, or the track record of the advisors. On the other hand, offshore clients also care a lot about the availability of products and professional service, but “above all, they seek a strong relationship with their financial advisor or cultural synergy, which includes simply speaking their own language and understanding their customs and traditions, as well as attentive service,” he explained.

“In my opinion, there are obviously many similarities but also some significant differences between American clients and LATAM clients; and understanding the intricacies of LATAM clients’ needs and behaviors is critical to serve those clients well. At BBVA, we are proud of how well we understand the complexities of LATAM clients, which is something I believe is a differentiator for us,” Kalkan concluded.

BBVA announced the opening of its Miami office on March 14 to serve high-net-worth Latin American clients. According to the information provided by the company, in this initial stage, it will primarily serve Latin American clients interested in having an international investment advisory solution in the United States. It will mainly be offered to non-resident clients ready to invest more than $500,000.