This key finding was revealed in the latest Middle East Investment Panorama (MEIP) survey produced by market research firm Insight Discovery and released on Tuesday.
The survey of investment advisers across the Middle East found many IFAs reporting a new and previously little noticed threat: the reluctance of clients to invest. Around 63% of respondents to the survey identified this lack of willingness to commit as being a challenge.
“It can no longer be taken for granted that clients, who have previously felt obliged to use the services of the advisers, will continue to do so,” the report said.
“Some clients may elect to take a ‘Do It Yourself’ approach to investment. Others may deal directly with asset management companies and international life companies,” it said.
Nigel Sillitoe, chief executive of Insight Discovery, said: “This marks a major change. In the past, advisers have mainly been concerned by changes to the regulatory environment or competitive pressures. What we see today is that advisers are worried about their whole business model at a more fundamental level.”
Threats abound
On the investment front the survey found events such as Brexit, the election of Donald Trump, and the increasing turbulence in many Middle Eastern states had increased investor uncertainty and risk-aversion.
It also found technological change was a growing concern among advisers. Roughly one fifth of advisers saw robo-advice – the use of online tools to make recommendations to clients – as likely to be a serious threat to their business in the coming months.
In addition, IFAs in the UAE in particular, where many of the survey respondents were based, also face regulatory challenges in the near future which are even greater than in the past.
Recently the Insurance Authority (IA) has revealed it is planning a ban on paying indemnity commissions in response to a rise in complaints from savers. While the Securities and Commodities Authority (SCA) has plans to implement new mutual fund registration system which could sharply reduce the number of funds available to investors.
Change coming
“In short 2017 will likely be a ‘Year of Reckoning’ for all parties,” said Sillitoe.
“Advisers collectively need to move quickly to improve the image of the industry. Particular advisory groups may suffer catastrophic losses of business as a result of the departure of key advisers or the desertion of clients.
Asset managers will have to examine whether they are offering products that the surviving advisers are likely to want. The asset managers will also have to consider whether they will be better served by focusing on bank gatekeepers.
International life companies, too, will have to contemplate how to best serve end clients in the event of advisory group turmoil,” he said.
