CEO (Deltec)

For 80 years, the Bahamas has been one of the world’s foremost financial services jurisdictions, thanks to its low- or no-tax regime and high quality of service, however the country’s compliance with tougher international regulations such as FATCA has recently impacted its financial services model. How would you describe this sector today in the Bahamas, and within it the country’s private banking and wealth management industries?

I don’t think FATCA has really impacted The Bahamas quite as much as people believe it has. The Bahamas entered into a compliant exchange of information with the US over a decade ago, and any non-compliant US business in The Bahamas before that was pretty much cleaned up. The most recent changes are those that come from the OECD and the multilateral exchange of information from tax assistance. That has had some impact and frankly it is a fantastic development for the stability of the business. The Bahamas has a tremendous offering in the world that has nothing to do with tax avoidance. It is a jurisdiction that offers a stable regulatory regime, a stable regulatory framework and very creative and thoughtful policies that have been put in place to offer asset protection, tax mitigation structures or diversification opportunities for clients that are coming from around the world. Therefore while there is some impact coming from the OECD developments, and we will see that over the next few years, ultimately the strength of the country’s financial system will come back. It’s really a matter of re-positioning the industry to take advantage of key opportunities.

In your opinion, what needs to be done to better position the Bahamas as the region’s financial services hub?

I think that like any other country in the world, it has to become more proactive. Today the amount of information that most of our clients have is tremendous. They have very good advice and access to information so you have to be very thoughtful and very focused on providing a solution to their problems. If you are just providing a very generic solution set, then you are not going to be a winner. If you really want to differentiate yourself you have to come up with very thoughtful, differentiated and personalized solutions. That is the first thing from a service model perspective.

From a business model perspective, we need to diversify. Private banking and trust are really not enough for one jurisdiction to be focused on so I think we have to diversify into other areas within financial services that are adjacent to private banking. That’s an area in which The Bahamas is moving in and Deltec is moving in, and frankly today with the amount of crossover between different services within financial services, you have to have that flexibility and breadth in your offering.

So where do you see the biggest opportunities?

There are two primary areas, the first one is insurance and the second one is institutional and corporate banking. There are real opportunities in insurance more broadly than just the crossover between private banking and insurance. The crossover between insurance and markets-based financial services globally is very incipient. You are going to see a real change in the next 15-20 years in the integration between these two areas. Both banking and insurance are disciplines within finance that have existed for hundreds of years, almost never intersecting and now we are starting to see that intersection coming in. It’s very nascent right now, but it’s going to be a real tangible area of growth and synergy for financial institutions that know how to harness the crossover areas within their client set, and so we are starting to do that. We are developing solutions for clients within insurance that are very much consistent and considerate of the banking, trust and structuring needs that they have.

The second one is institutional and corporate banking. The Bahamas is a strategically located country for the Americas. When we look at the advent of particular multinational Latin-American companies, which we have seen the growth of in the last 15 years, Mexican companies have traditionally had more multinational exposure than other countries but you are starting to see that in Colombia, Peru and more in Brazil. I think those are companies that really will benefit from having a neutral jurisdiction where they have headquarters or headquarter their financial services or strategy area that can operate more efficiently with each of the countries they are involved in. This is a tremendous area for growth and it’s only going to increase because the multi-Latina phenomenon is going to grow substantially over the next few decades.

Attracted to the safety and security offered by The Bahamas, Brazil-based Deltec established a banking presence in Nassau in 1959. Despite the changing competitive landscape in the country’s financial services sector, Deltec’s local team has grown from 24 employees to 75 in three years and last month it was awarded Best Private Bank in the Bahamas by Global Finance. What would you say are key behind the company’s success?

It goes back to the point that I made earlier about being very thoughtful about personalized solutions for clients. The last 20 years in this industry have been characterized by banks that have dominated because of the size of their balance sheet or because of their brand. A lot of clients flocked to them because they thought that those two assets gave them safety and protection. What they realized is that those things can give you protection so long as the management teams are willing to protect you; however, we’ve seen that in many cases the large firms are just not always focused on the client. This is a partnership and relationship business that lasts through decades and generations so if you are not there for clients when they need you the most then they are not going to be there to grow with you. That is a very important attribute and the spirit we’ve rekindled in our business, and that has set us apart from the bigger institutions against whom we compete.

A second point is that we listen. Every person in the world has problems whether they have money or they don’t. We just happen to work with clients that have a lot of money and they have problems too but you have to listen to their problems, you can’t just force them into a solution that fits your bank or your own interests, you really have to focus on their interests. Every time that we are put in a position where we are sitting there talking to a client, if we do open our ears and listen and are thoughtful about what we can do for them, you end up winning more often. It’s that simple and that’s the beginning of a fruitful relationship.

Lacy Roosevelt (Head of Marketing & Communications): Having a clear strategy, and vision sets Deltec aside from a lot of our competitors. And, the caliber of the team here is unparalleled, allowing us to execute on that strategy and vision. HBR focuses on leadership, and this has definitely been key to Deltec’s ability to grow and innovate over the years.

David: The way that we actually deliver those solutions is by bringing people who are excellent and top of their fields, no matter where they are. For us it’s about bringing the right team together and that was a real strategy for us when we started to renew the business, bringing people who could offer a caliber of solutions that is on par with any jurisdiction in the world.

Deltec is an independent full-service financial services group, which includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, Deltec Investment Advisers Limited, Deltec Securities Ltd. And Long Cay Captive Management and offers a wealth of services such as private banking, family office services, trust and brokerage services, insurance, wealth planning & investment management. In which of these areas are you seeing major growth?

We are very fortunate that we are seeing growth everywhere. We are seeing a little bit of growth in all the areas, not a major growth in any particular one. For us growth is a by-product of good service, we don’t want to grow for its own sake. We want to make sure that every client we bring on board we know and understand what they can contribute to the institution because in a business like this every client you bring in is an opportunity and a risk, and so we don’t want to grow in such a way that we are introducing risk to existing clients.

How is DELTEC positioned within the sector?

We hire the best, not just the best in The Bahamas, I mean the best worldwide. The people who are in key product and intellectual capital positions are tremendous. They are so good it makes you proud to work with them so I think that is how we differentiate ourselves everyday. If in the next 10 years we sit back and realize we only grew by $3 billion more in assets but the services that we provided to our clients were so unique and helpful to them, then that’s success.

According to your website, Deltec forged its reputation as an innovator in structuring solutions and investment opportunities. How do you incorporate innovation into your operations to remain relevant and ahead of the game?

You can’t teach innovation. You have to start with hiring people who rethink the way we do things all the time. Critically thinking about your own and the company’s delivery to clients and always questioning whether we can do better. To be an innovator first you need to be humble and know you can’t be the best all the time. Secondly you need to have critical thinking and thirdly, also a decent amount of intellectual capital that actually can bring to bare what you are doing. If you draw together people that have those attributes then innovation is a by-product of it but you can’t force innovation.

Lacy Roosevelt (Head of Marketing & Communications): Innovation is definitely a part of the heritage and culture of Deltec. In fact today, our Chairman and largest shareholder is an entrepreneur from outside of financial services, which helps to bring outside the box thinking to everything we do.

David: We are not afraid to re think and innovate.

Your company prides itself on being an independent private bank & trust group owned by a group of client shareholders. How does this independence benefit both the company and the clients?

That is one of the keys for third party clients. All of our shareholders were clients first and over time just grew an affinity for the business in such a way that they started taking a small shareholding, directorship and eventually just grew their ownership to be a meaningful percentage of the company’s shareholding. These are people who have assets and structures with the institution, they have families and multiple generations that they are taking care of, they have more assets with us as clients than they do as shareholders. So when you think about it that way you can imagine their incentive is to ensure that the business is managed to protect their own personal assets outside of just their assets in the business itself. Clearly if you are protecting your own assets in that way and ensuring you have the right team, policies and vision for the business then you can imagine that third party clients are also beneficiaries of the same philosophy. We would rather forsake profits today to ensure a stable history and future for the business.

Deltec is positioning its business for 2020 to take advantage of “tremendous” opportunities emerging in, for example, the southern hemisphere as growing, jurisdictions there and around the world seek trust planning and other financial services. Can you tell us a bit more about your current strategy to achieve this?

Right now you are going through a period of transition in the private banking and financial services sector that really hasn’t occurred before. You haven’t seen this upheaval in financial services for 80 years and we won’t see another one for 60-100 years. This is a period where there is so much change happening that it’s important not to look in the rear view mirror because if you look at what happened yesterday, you are going to miss what will be happening five years from now. If you focus your business on what is happening today, you’re going to miss what’s happening five years from now because they don’t have anything to do with each other. There has been a lot of wealth creation in the last 13 years in the southern hemisphere and their countries are getting much more stable and those people are getting older and they are thinking about philanthropy, asset protection, creating wealth from wealth which is very different from what they had been doing. So this is a period over the next five to 15 years where they are going to need a tremendous amount of advice to ensure all of these goals are met. But that’s not just in the southern hemisphere; in the US you are going to have a tremendous amount of opportunities as well. We are going through a generational change right now where baby boomers are retiring. They were the last generation in the US who had a very broad career mindset so there are a lot of small and medium sized businesses that are not being transitioned to the next generation. So there is a real change in the landscape of the productive capacity of the US that is going to impact the whole makeup of the US economy in terms of employment, cash flow, the velocity of money and so many different factors that are going to require new thinking. Europe is an area that has benefited tremendously from tax neutrality. That’s going to change. In the 2020 period, I think you’re going to see a number of Europeans banking outside of Europe; in Bahamas, probably in the US to a large extent, as a diversification to their own banking in their own country. We’re talking about people who have excess of excess wealth, and will bring it outside of their own country. So I think there will be some real opportunities there, but right now Europe is going through a reshaping, new thinking, there are changes in the political landscape, social and demographic issues, so there’s going to have to be some settling of some of these issues before you see that willingness to move again.

So are you creating other offices in other countries? Or how are you planning to maximize on those opportunities?

We love The Bahamas. We love the regulatory framework here, we love the legislative process, we like the policy and the interaction with the different industries in trying to build and rebuild. That’s the first point, the second point is: we’re 75 people. If we start to break this business into multiple offices, it becomes very difficult to manage.

The third point is, we already offer some assistance to clients in 35 countries, so we’re already doing a decent job of diversifying without having to be present in these countries and I think we can continue to. We have a very deliberate strategy on which countries we’re going to go after, right now, so it’s not as though we’re just choosing them randomly. Even though I talk about the southern hemisphere, not each country is equal to the next. So we have our priorities and we’re trying to go after those priorities first and move forward little by little.

One point I would like to make, you asked about maximizing opportunity; we don’t need to maximize opportunities. We need to do the right thing at the right place for the right client. If we do that, we’re successful. We don’t have to grow to be one of these titans, in fact, if we did, we’d probably lose the appeal of what made us an attractive partner in the first place.

Corporate social responsibility is an invaluable way for companies to give back to the communities in which they operate. As a member of the Bahamian community since the 1950s, Deltec has undertaken projects large and small to support the community. Most recently, in 2013, the company launched the Deltec Initiative for the Arts, a foundation designed to support young Bahamian Artists and Artisans. What CSR initiative are you most proud of and why?

I think giving back to the country is a really important part of operating here and we try to do that in the best way we can. If you’re an artist growing up in New York, it’s much easier to have someone support you in your interests and art. If you do that in The Bahamas, you’re never going to get the support you need. So somebody has to take on that mantle. We’re not the only ones to do it but it’s certainly an important part of who we are and various shareholders and board members of ours have a real passion for the arts. So, for us, that’s one way to give back and I think our view is that it’s better to give back in a very focused way than to try to be too spread out because you don’t make an impact. We have tried to focus on that aspect.

Lacy Roosevelt (Head of Marketing & Communications): In the wake of Hurricane Joaquin, we’re also helping with hurricane restoration. We have created The Bahamas Hurricane Restoration Fund, a U.S. 501c3, to fundraise both in the United States and locally with the Americans living here. We were asked by the government to step in and help and are trying to do our part to restore hope and empower the affected communities to flourish and stand strong against future storms.

You seem to have a very close relationship with the government…

I’m not sure it’s any closer than others. I think what that tells you more than about us is that this industry has a close industry with the government. It’s such an important sector for the country. Frankly, the only way to succeed is to succeed together, so pitting ourselves against them in some way is just not productive. That happens in most other countries in the world where private sector and government are really at odds, it just doesn’t happen here.

As you know, every company needs to have a clear set of goals, but it is the vision of its leaders that enables it to reach these objectives. Given this report will be published early next year, as CEO of the company, what is your six-month vision for Deltec?

I want to answer your question, but it’s not going to be very different from where we are today. The steps that we’re taking are tectonic steps. They’re big changes that we’re focusing on for the next five to 10 years. In any six months, you really won’t feel it or see it. But we’re trying to take those steps in a very deliberate way. That means hiring individuals who are going to be impactful in some of those areas I said we’re focusing on, ensuring we’ve invested in all parts of our business to support that growth. It’s also engaging with major financial sectors, ensuring that we don’t benchmark ourselves only to the local market, which means you have to engage and participate globally. But I’m not sure the conversation would be that different if you were sitting here in six months. We would know we’re a little bit more advanced but you probably wouldn’t be able to perceive it.

Mr. Muñoz, you joined Deltec in 2012 but before that were a Board Member of GCSA, Co-founder and Chairman of Access Personal Finance and Managing Director of BlackRock. On a more personal note, what is the most valuable lesson or experience you have gained over the years that you still incorporate into your work today?

Your best plans are always going to change. Don’t be afraid to change. I think one of the downfalls of a lot of people in positions like this is they get set on a plan and just don’t deviate from it. The plan is the plan, we just keep moving forward with it, and the reality is we just can’t anticipate all of the variables and changes that are going to be introduced in that process, so you have to be thoughtful and nimble and willing to change. You need to realize that if you spend time doing something that’s not really going anywhere, just stop and focus on the next opportunities.

To conclude the interview, the readers of HBR include some of the most influential leaders in terms of politics and business. What message would you like to send them regarding the Bahamas and Deltec?

I think The Bahamas is a dynamic country, and one that has very capable, well-educated, working employees in the financial services. I think it’s an area not only for investment as a client, but also if you’re going to invest in a company that is in exports, finance or trading. The structure of the industry, the structure of the partnership between government and private industry, and, again, the education and training of the employees in this area is tremendous. I worked in New York for almost 20 years, where you’re basically seeing some of the best in the world, and it’s very, very good here.

When I first joined Deltec, we called ourselves a Bahamian financial services firm with global clients. Now we are a global financial services firm based in The Bahamas. Two similar messages, but very different in the approach. I think that’s really who we are today. We’re operating on a global level and at a global caliber. This means we’re competing with all of these other firms, globally, in their own backyard. In selective instances, we will win. That’s really a testament to the team we have here.