2020 was a watershed year for the adviser market: with the covid-19 pandemic, long lockdowns, volatility, adverse impact on economies, investments and people’s perception of investments.
The new year, however, dawned with the optimism of taming the pandemic and a positive outlook on growth.
International Adviser asked a cross-section of advisers in the UAE to take stock of last year and crystal-gaze the prospects for the new year.
Vaccinate to victory?
Advisers in unison said the 2021 outlook is positive and promising in view of the prospects of containing the pandemic and regaining investor confidence.
Ashok Sardana, managing director, Continental Insurance Brokers, said: “Now that vaccines have come and are being used widely, the fear of the virus spread has somewhat subsided and growth prospects are becoming rosy.
“The attitude depends more on us than on our surroundings. The outlook for 2021 is of course positive.”
Krishnan Ramachandran, chief executive of Barjeel Geojit Financial Services, is of the view that 2020 has been a year of consolidation and opportunities for advisory business on the whole.
“There were periods of uncertainly especially; during March, April and May. But after this period of lull the investment horizon showed signs of improvement month-on-month.
“This period also witnessed the rise of the retail and mass affluent investors who actively participated in the markets and have reaped good returns and offered prospects to rebalance their portfolios.”
Navin Nihalani, founder and chief executive of Compass Insurance Brokers, believes 2020 was one of those years where Wall Street became a fantasyland that was unaffected by events in the real world.
“It’s been a bull market like never before and almost everyone has made money in the markets even with passive instruments like ETFs and index trackers. There is a massive difference between valuations and earnings of most companies which has created the perfect platform for markets to crash.”
Turnaround and after
How will the new year play out for advisers and investors?
Ramachandran says most macro-economic indicators, globally, have turned around and there are expectations of the growth momentum getting back on track in 2021 and beyond.
“The focus for advisors in 20201 will be on identifying value creating propositions and risk mitigating investment opportunities for their clients.”
Nihalani advises that investors should exercise caution soon as the rally is held up by some serious quantitative easing programmes and stimulus packages.
“The next tumble for the markets, which might still be far away as there’s yet steam left in certain sectors, will be devastating if people don’t exercise caution.
“I strongly believe the need for active investment advisory will be highlighted heavily in this new decade as people will realise that passive investments can be very expensive when markets collapse.”
Regulatory measures
Last year saw some significant regulatory measures after a long gap.
The implementation of the BOD49 regulations by the UAE Insurance Authority has been perceived as a game-changing exercise, which forced the advice market to change track.
Sardana said businesses should adapt to the new environment. “We have to work smarter. Add new solutions to what we offer to our clients. Collaborate with different advisers who offer other specialised solutions.
“Sometimes a big jolt is required to get out of our comfort zone,” he said.
The market kept guessing about the prospects of big ticket consolidation and the exit of small players following the implementation of BOD49 regulations.
“Many brokers will consolidate which is the regular way to go with new regulations,” said Sardana
Ramachandran agrees with Sardana. The prospects of consolidation will continue to happen in a much faster pace. Advisory firms need to re-invent their business models & processes and create an environment of mutual trust.
He said the new regulations are bound to create more transparency and establish best practices in the insurance sector.
“This will benefit both the customers and brokers alike in the long term.”
Was it really game-changing?
But Nihalani does not see any big ticket consolation.
“Consolidation is a complex subject and even though the Insurance Authority allows for mergers I don’t see a lot of those happening at the moment.
“It has already triggered the exit of smaller players who are getting acquired by the bigger ones.
“Mostly it’s book and advisor acquisition than an actual license acquisition at this stage as the IA license isn’t as affordable as in other more regulated jurisdictions around the world.”
When others call it game-changing, Nihalani says the recent regulations as yet to earn a game-changing qualification. “BOD49 isn’t final yet as we are yet to see some slight amendments.
“As a lot of advisers leave the industry due to the same and a lot of clients are orphaned, it’s going to be difficult if markets actually collapse and a lot of clients are left without the right advice at the right time.
“These changes definitely favour the clients more than the adviser in terms of product charges but in effect don’t favour either as the cost of good advice is ‘immeasurable’.”
