Although gaining more prominence now, the existence of independent investment advisors is not new in Chile. At Principal AGF, the local asset management branch of the financial group of the same name, they have been working with this market segment for over 20 years. Moreover, after a structural change that left the Wealth Management business in Latin America operating as a unit, the Chilean branch is leading the regional wealth management strategy.
“We have always sought to continue positioning this type of advisors,” says Rocío Silva, Manager of Business Development and Digital Services for Asset Management at Principal Chile, in an interview with Funds Society. In addition to their network of proprietary advisors, the firm has a network of independent advisors.
This unit, explains Silva, is part of Principal AGF, which encompasses the asset management business in the Andean country. This firm includes a commercial team dedicated to investment advisors, led by Ariel Teplizky, Commercial Manager for Santiago, and Felipe Prieto, Commercial Manager in charge of other regions of the country.
Four years ago, they named the network of independent advisors Principal Global Advisors, but this month saw significant changes. A few weeks ago, the company revamped the platform, adding commercial standard and ethics pillars aligned with regulatory requirements. This comes at a time when the Financial Market Commission (CMF) is beginning to oversee the industry, establishing new rules to operate as a financial services provider.
But the change goes beyond that, according to Silva. They also consolidated it with the entire Latin American platform of the U.S.-based firm.
“Principal changed its operating structure,” narrates Silva. Although the firm remains a global platform, it formalized that the unit would operate at a Latin American level. “Not as Brazil, Mexico, and Chile, but as a regional unit with a local presence in different countries,” she explains.
Although Brazil is more advanced in this business than the Andean country, its way of interacting with advisors is different, mediated through a platform. For this reason, Silva points out that the firm decided to lead the entire Wealth Management strategy and the “wealth management concept through our investment advisors, with local market knowledge” from Santiago.
The Firm’s Strategy
“Of these countries, Chile is the one with the most knowledge of the Wealth Management segment and the independent advisor industry,” notes the professional.
Principal AGF’s strategy in this market is to provide a variety of tools to their advisors and a support team dedicated exclusively to serving this segment.
“For us, independent advisors or service providers are crucial for the growth of our market share and capturing clients,” explains Silva, adding that this is part of the firm’s “diversified business strategy” for asset management.
It’s a market that “will grow,” according to Silva, and they already have a share of around 25%, based on the 1,200 accredited advisors registered at the time of this interview.
A significant part of the firm’s value proposition in this segment is technology. The digital platform Averta is aimed exclusively at advisors and concentrates the technological tools offered to independent advisors.
This need, adds Silva, became even more prevalent in the post-pandemic world, which boosted the use of digital solutions.
Additionally, the firm is also using technology for the strategic support aspect of advisors. Together with its specialized team focused on the segment, Principal AGF is preparing to launch its first AI-powered chatbot next month. This tool—exclusive for advisors—will be able to resolve queries about the platform and certain product topics.
Regulatory Burden
One of the leading topics in the independent advisor industry in Chile currently is the new regulation governing the industry, which imposes new requirements to operate as financial service providers under CMF supervision.
In this context, the Manager of Business Development and Digital Services for Asset Management at Principal Chile highlights the importance of providing resources to independent advisors to navigate regulatory demands.
“Service providers working with us have found it quite easy to gather the information,” notes Silva, thanks to the tools grouped in Averta. These include all the advisory services they have provided, legal notices for end clients—for example, warnings about investments outside their risk profile—cybersecurity, compliance, data handling, and accreditation education, among others.
“The support they have with us will enable them to comply with the regulation,” says Silva, adding that “this facilitates their connection with the regulator” for independent advisors.
In any case, Principal has a positive view of the industry’s formalization. “It’s a very good thing for the industry,” Silva comments, as it raises standards on the requirements to be a financial service provider and allows them to form a group capable of participating more formally in the industry.
An example of this, she adds, is the formation of the first trade association of advisors, the Chilean Association of Investment Advisors (ACHAI), recently established.
“For them, formalizing is very powerful because they will have a voice in the financial asset industry. Previously, they didn’t have it because they were ungrouped,” she indicates.
For Funds Society, Madrid