The international advice market is currently going through a period of change.
There are pioneer firms in the industry looking to step away from the good old days of commission towards fee-based practices. It is a slow change – but any movement is progress.
Another area of focus for the offshore market is the growth of outsourcing.
Mark Sanderson, managing director of Morningstar Wealth, spoke with International Adviser about the rise of outsourcing in the offshore advice world.
He said: “It’s a good thing and it’s great for best practice, which we’ve been heavily involved in with International Adviser over the last couple of years. Advisers realising what the customers and investors want, which is advisers to spend time with them and understand their goals.
“The more time advisers can spend doing that, and not worrying about investments, or technology, the better outcome it is for a customer. We have been pushing really hard to get advisers to modernise, and they’ve done that they’ve done that really well. I think they’ll continue. I think regulation always helps.
“I think people thinking about the value of their business, and when their business is organised on a single platform and a small cohort of DFMs, and you don’t have a wide array of products and investment managers – there’s more value in your business. It’s easier to sell and it’s easy to value. I’m really optimistic about the international market.
“I think the expat cross-border advice market has really matured in the 15 years I’ve been there. If it follows the UK, US and Australia in terms of regulation, the international advice market can be a leader in the next five-to-10 years. Because of the complexity of advice, I think the international advisers can really start to lead and that would be the next step.”
Regulatory changes
As Sanderson says, many markets in the international advice space still need to catch up to the likes of the UK, Australia and the US in terms of regulation.
So, what do places like the UAE, Hong Kong and Singapore need to do to bolster their regulatory frameworks?
Sanderson said that he wants to see client value for money as a “primary focus” in these markets.
“This is because I don’t think there’s much maliciousness out there,” he said. “I think what’s actually happened over the years is that poor quality product has found its way into the market.
“I think having a more prescriptive outcome on where advisers really need to focus advice and having a clear outcome of how an adviser measures the success of advice would be really good.
“I spend a lot of time with regulators in the UAE, and I think they are making good progress. One thing I will say about Dubai, and it’s true of a lot of markets, is that the regulators aren’t anchored to one way of working. They are open to engage with the industry and really driving things forward. As long as that’s happening there will be good outcomes.”
Unregulated investments in the UAE?
One area that the Securities and Commodities Authority (Sca) has been looking to stamp out is unregulated investments.
In January 2023, the UAE’s SCA launched a campaign to crackdown on unlicensed financial services offerings.
Sanderson added: “SCA had a go at this before and it didn’t quite land as they wanted it to, so they have pushed harder this time. I think the regulator is looking to force some accountability for the products that advisers are choosing.
“There’s a lot of great firms now in the UAE that have been more selective about the types of things they choose, have got their own due diligence processes, and make decisions about central investment propositions.
“It’s not just about it all being left to the advisers to choose. I don’t think it is maliciousness. I think due diligence on funds, investment managers and products is hard. If you are left your own devices, you’re not going to get it right all the time. We saw that with Sipp operators in the UK.
“I think it is a forcing function for the regulator to say we care about this, and you should care about it too. I think if the industry demonstrates that it cares about it as much as the regulator, it doesn’t have to be a big dramatic thing.”
Power grab
Aside from the UAE, Asia is also a big focus for Morningstar Wealth.
The region is reportedly undergoing a power struggle between Hong Kong and Singapore in the fight to be the strongest financial centre.
Sanderson said: “There’s a strong, long standing expat community in Hong Kong. They’re going nowhere. There’s a lot of great work for people there and advisers know that.
“I don’t think this is obvious to say that as China and Hong Kong have deeper ties, people will pick up and leave and go to the next place which is Singapore. I don’t think that follows.
“In terms of expat advice, there are still plenty of expats in Hong Kong and they probably now more than ever need good advice.
“Maybe there are people who are considering the tax efficient return home. I think people’s next step when they are expats is to go back home rather than to another hub.
“If people are becoming less certain about a place as a long-term home for their family, the need for advice increases – it doesn’t decrease.”
South Africa
Another region suffering a turbulent period is South Africa. In February 2023, South Africa was placed on the greylist of the Financial Action Task Force (FATF).
The country is a “jurisdiction under increased monitoring” and it has to actively work with the FATF to address strategic deficiencies to counter money laundering, terrorist financing and proliferation financing. South Africa was the second G20 country to be on the greylist after Turkey was added in 2021.
But Sanderson says that South Africa is a “good market for growth” for Morningstar Wealth.
“By large, local service providers down in South Africa are good,” he said. “The global and offshore capability can improve and that’s how we think we can help, either directly or in partnership with firms that are on the ground there.
“The critical issue advisers are trying to solve was how do we connect all our systems and data together?
“South Africa’s a great market. When greylistings happen, so far everyone that’s coming out the other side of that has been a better place for consumers as a result. It is a great market for us and one that interests us.”
