XP-Itaú feud exposes need for investment regulations in Brazil

Back in 2017, Itaú Unibanco paid BRL 6 billion for a 49-percent stake in XP Investimentos. This marriage between Brazil’s biggest private bank and the country’s leading independent brokerage firm was dubbed as one of the smartest in the history of the Brazilian financial market. Not only did the bank hedge its franchise, but it also multiplied its investment by 11 in just three years. Plus, it will have an option to purchase an additional 12.5-percent stake in 2022.

However, despite being highly profitable for both parties, the relationship between XP and Itaú has soured quickly. To the point in which the bank ran a commercial laden with sarcasm casting doubt over the commitment of XP’s autonomous investment agents — the Brazilian equivalent to registered investment advisors — to their fiduciary responsibility. XP chief executive officer Guilherme Benchimol hit back in kind, saying the attack comes from a player that simply cannot compete with his firm.

As we explained in a January 21 story, the relationship between XP — associated with nearly 80 percent of Brazil’s autonomous investment agents — and banks has never been an easy one, as the latter accuses XP of being monopolistic and wanting a share in the agents’ market. The debate has prompted the Brazilian Securities Commission (CVM) to promote hearings...