Lockdown measures worldwide have helped slow the spread of coronavirus, but some of the fallout has been more acute for some Gulf countries.
The region is in recession and has been hit by a significant drop in oil prices.
According to research by Oxford Economics, employment across the Gulf could fall by around 13% – meaning losses of approximately 900,000 jobs in the UAE and 1.7 million in Saudi Arabia.
“Dependence on expat workers in vulnerable sectors means the burden of job losses will fall on the expat population,” said Scott Livermore, chief economist at Oxford Economics Middle East.
“Combined with visas depending on employment and lack of a social safety net, an expat exodus is likely as travel restrictions are eased.
“This could result in the population declining by between 4% in Saudi Arabia and Oman, and around 10% in the UAE and Qatar.”
Be there to help
But if this was to happen, what would it mean for the financial advice sector in the region?
International Adviser reached out to advisory firms in the Middle East to understand what the fallout of an ‘expat exodus’ could be.
Stuart McCulloch, market head of The Fry Group Middle East, believes that finding creative ways to stay afloat is the only way to power through the pandemic for advice companies.
This would include helping expats with the planning needed to move back to their home country.
He said: “Although certain sectors in the UAE and around the world are struggling in the current pandemic, such as retail, travel and tourism, there are others that have managed to adapt in the past few months.
“Many organisations have been creative in finding new ways of working remotely while still providing an excellent service to their customers.
“When looking at the financial sector specifically, financial firms must look at the needs of expats during this time and provide educational and supportive material to help guide them through the pandemic.
“Such examples include webinar sessions and remote meetings via Zoom or Teams. In recent months many expatriates have begun planning an unforeseen or accelerated return to the UK due to career or personal circumstances, and therefore now look to qualified financial planning firms to help them transition back or re-assess their current position.”
What about those who stay?
But financial advice is not only needed by people moving away from the Middle East. Those who can afford to stay need just as much support.
“For those expats who find themselves in industries that are surviving through the pandemic and have retained their positions, it has been a thought-provoking time where many now want to re-assess their finances and long–term goals,” McCulloch continued.
“A qualified financial planner should then assess their financial stability in the short–term, and guide them through the steps they need to take to achieve financial freedom in the long–term.”
Learn from the past
Greg Stockon, group commercial director at Finsbury Associates, thinks that looking back at the 2008 financial crisis could provide a working example of how to approach the situation.
“During this time, many expats were leaving the UAE’s 7.08 million and Qatar’s 1.43 million population due to job loss and over–leveraged debt, however financial advisory firms continued to recruit and grow.
“Why? Because many expats were staying, and they needed good quality financial advice more than ever to help them navigate through the recovery. By the end of 2010 markets were booming again and expats were flooding back in droves.
“Fast forward to 2020, after 10 years of growth and a population rise to 9.8 million for UAE and 2.88 million for Qatar and expats are leaving the region, again, however the reasons are different, and the actual fiscal fundamentals are much stronger than that of 2008/09.
“This is not a banking, credit or housing crisis. It’s a health/medical one that is undoubtedly having severe knock–on effects in the short–term but could be forgotten about quickly as countries already start to return to somewhat normality,” he added.
Compare and contrast
While the current crisis is inherently different from 2008/09, there are similar events, Stockon said.
“There will still be many, many expats that do not go back home – almost 90% of them according to the [Oxford Economics] report – who will all need sound, honest, clear and much needed advice on how to manage their insurances and wealth whilst living abroad.
“An expat still needs life insurance, critical illness insurance, tax advice, retirement planning advice and education planning advice for the kids. These things do not go away because of a crisis, and in fact, I would argue, it is more important to take stock during times like this than during the booms.”
When it come to how this could impact financial advisers, Stockon believes it will depend on the strength of their client relationships.
“For advisers that have been in the region for a good period of time, one would imagine they would have built a strong enough network not to let the current situation affect them too much.
“For new advisers to the region, then I am sure they are going to find it more difficult to keep the wheels moving during this period and, like 2008/09, some will end up moving back home to reset,” he added.
Industry-wide change
But according to Sam Instone, co-chief executive of AES International, the covid-19 pandemic may present an opportunity to uncover malpractices within the advice sector in the Middle East
“I believe this will make it more challenging for traditional salespeople who prey on poorly informed expats.
“The misappropriation of people’s life savings has been rife in the industry. With more people relocating back to their home countries, it will only become clearer which companies are guilty of hidden charges and commissions.
“Unfortunately, this realisation may come too late for some expats.”
But this change won’t be all bad, Instone added, and technology may be at the heart of it all.
“On the flip side, I imagine there’ll be an increase in demand for tech-enabled, cross-border financial planning.
“Firms that are able to help clients, regardless of where they are in the world, whether that’s in country A or country B, will be far better positioned during this time regardless of the movements and the economic impact thereof,” Instone added.
