Battle of the UAE advice sectors – Abu Dhabi vs Dubai

‘The CII is in discussions with the ADGM currently and hopes to work with them closely going forward in 2022’

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The UAE celebrated its golden jubilee last week – having come a long way in a very short time, from its humble beginnings in 1971.

Financial services is just one of many different sectors the Emirates is known for.

Over the 50 years, Dubai has been the main hub for the advice industry, but it is going through a wave of significant regulatory change. This has opened the door for Abu Dhabi to make its move.

Capital adequacy rules, changes to the Securities and Commodities Authority (SCA) handbook and the Central Bank of the UAE and Insurance Authority merger are all regulatory ‘do-or-die’ moments for firms – leading the way for more business to look towards Abu Dhabi.

International Adviser spoke with DeVere Group, GSB Capital and the Chartered Insurance Institute (CII) about whether Dubai will be overtaken by Abu Dhabi as UAE’s advice hub.

Appealing

IA carried out a Linkedin poll about whether Abu Dhabi will overtake Dubai as the UAE’s advice hub – and it was a very tight result. Most (53%) respondents said no, but 47% believe that Abu Dhabi is set to challenge Dubai.

Dubai has mostly had its own way in the advice industry – so, what is Abu Dhabi offering?

Nigel Green, chief executive of DeVere Group, said: “Abu Dhabi is continually seeking to become more appealing to life insurers and advisers as it knows it has to compete with its Emirate neighbour, amongst others, in what is not only a regionally but a globally competitive marketplace.

“This is a good thing for both the industry and the public as it makes the sector more robust in both jurisdictions, giving more choice and protections, greater innovation development, plus enhanced levels of expertise and service to the client.”

Gaenor Jones, regional director of CII Middle East, said: “With virtual meetings becoming more of a norm in business day life, having a base in Abu Dhabi rather than some of the other emirates, becomes a very feasible option.

“In addition, some firms believe Abu Dhabi offers more of an untapped market than Dubai, offering the sector more business development potential.”

Structural changes

It is not just financial services which is seeing transformational changes in the UAE. In a bid to improve connectivity within the country, the UAE government has launched a AED23bn (£4.7bn, $6.3bn, €5.5bn) railway programme.

The project will allow passengers to travel from Abu Dhabi to Dubai in 50 minutes and to Fujairah in 100 minutes. The government said that will create economic opportunities of around AED200bn.

This is one transformation that can completely alter the mood around Abu Dhabi as a hub for the advice sector, but financial services regulatory frameworks are not as established as Dubai – which needs to change.

Green said: “The Abu Dhabi regulatory authorities should perhaps generally foster even greater commitments to work more closely with their Dubai counterparts. This would strengthen both and further shore-up the market’s integrity. It would also best-position them to comply with international standards.”

Jones said: “From a professionalism standpoint, Dubai’s stance in increasing regulations is seen as a very positive development. With regulators across the region collaborating more than ever, it is likely that many of these changes will positively affect Abu Dhabi too.

“As Abu Dhabi and Dubai are neighbours, this should be regarded as very healthy competition which will boost the sector’s reputation in the UAE.”

Free zones

Both jurisdictions have international free zones – Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) – which offer appealing qualities for firms to carry out business in the UAE.

The DIFC was established in 2002, while the ADGM was set up in 2013.

But age doesn’t necessarily mean superiority and the ADGM can give the DIFC a run for its money.

Dean Kemble, managing partner at GSB Capital, said: “With nearly 20 years of experience, DIFC has a lengthy and proven track record. Whilst ADGM is in comparison relatively new, the business environment and learning has evolved much over those 20 years.

“With similar regulatory regimes, excellent business and common law frameworks, ADGM is in a strong position to benefit from an increase in financial services activity in the UAE.

“Fees to set up in ADGM are typically lower than DIFC and more cost effective for new businesses. That said, as more activities are added to the licence, these costs can escalate.”

DeVere Group’s Green added: “Still a relatively new jurisdiction, ADGM is, arguably, an easier and most cost-effective location for start-ups, due to the lower average costs, faster processing and opening systems. That said, the SCA, which is a UAE licence, has upgraded the capital requirement to operate.

“DIFC, is well-established, a proven entity, and has enjoyed a fantastic reputation. Moving forward, we see the DIFC expanding, but limiting the number of brokers. Yet another important factor to consider is that the DIFC does not directly incorporate English common law, whereas the ADGM will often assume the direct application of English law.”

Stunted?

Abu Dhabi is trying to make itself attractive to expats, as well as financial services firms.

In February 2021, the Emirate rolled out visas for expat professionals, students and investors in a bid to develop its culture, healthcare, research and development, and real estate sectors.

The ‘Thrive in Abu Dhabi’ programme offers long-term visas and paths to citizenship to people who contribute to the emirate’s sustainable development.

But, despite this, both Jones and Green admit there are areas for improvement.

CII’s Jones said: “Some people consider Abu Dhabi more traditional in its approach, and culturally more conservative, so attracting and retaining non-indigenous talent in Abu Dhabi may be slightly more challenging.”

Green said: “Abu Dhabi is ambitious and proactive. I believe it will enhance its already impressive efforts to become even more competitive over the next few years.

“The factors that could hold it back – including stifling innovation, out of date visa and immigration systems, and unfriendly business policies – are not unique to this jurisdiction. But these are not generally an issue. As such, I’m confident that Abu Dhabi’s ascent will be strong and sustainable.”

Future

The UAE government is clear in its objectives – make the country attractive. Its origins are firmly rooted in expats, and it sees them as the future.

This means there are a lot of clients that need to be serviced – and financial advice markets in Dubai and Abu Dhabi need to be ready – and at this moment in time Dubai is likely better prepared to deal with the incoming demand.

Jones said that there will hopefully be “higher standards of professionalism and minimum qualifications”.

“Markets, regulators and firms are generally moving in the right direction, but there is still some distance to be covered in order to reach the levels of regulation seen in more mature markets like the UK and US,” she added. “Abu Dhabi clearly recognises the importance of professional qualifications and helping to raise trust/confidence levels.

“The CII is in discussions with the ADGM currently and hopes to work with them closely going forward in 2022. There is a clear and intended objective to boost professional development for the good of the sector, instilling public confidence being a key outcome of this effort.”