Acquisitions and internal investments have been the drivers for business expansion in the financial advice space in the Middle East over the past year, research by Insight Discovery found.
The 12th edition of the Middle East Investment Panorama report shows insights from chief executives of leading advice firms in the region all of whom have taken steps to counter volatile markets, more demanding clients and the regulatory burden.
Specifically, more than half (57%) believe that the changes to regulatory requirements will boost M&A activity in the region, which may lead to a less crowded sector. By contrast, just a quarter of respondents do not foresee a spike in acquisitions, with the remainder unsure of whether acquisitions will be sparked by regulation.
David Kneeshaw, chief executive of IFGL, said: “This may well be because these respondents see that the introduction of BOD49 and other regulatory changes will bring around a wave of M&A activity and that their firms will be among the winners.”
What clients want
The senior managers also highlighted that clients are changing, along with their demands and ways they wish to interact with financial advisers.
The report found the top five shifts include:
- Clients being more knowledgeable of their finances and investments;
- Higher expectations on disclosure and transparency;
- Greater focus on more product options;
- Increased preference for online and mobile access; and
- Seeking more value from the services they receive.
As a result, 88% of respondents expect greater focus and investment on technology and data analysis tools to improve their offerings to clients.
In terms of value and transparency, advisers are increasingly relying on outsourcing to manage their clients’ money.
The vast majority (71%) regularly recommends discretionary fund management (DFM) services to their customers, with an additional 6% currently considering it.
Insight Discovery’s report says it has become widely accepted that financial advisers may not be the best placed to make and execute investment decisions on behalf of their clients, leading to a rise in outsourcing DFM capabilities to wealth or asset managers in the region.
When selecting a provider, however, the most important factor for advisers seems to be the ability to smooth returns in a volatile environment (46%), followed by their charging structure and research capabilities (both 17%).
Nigel Sillitoe, chief executive and founder of Insight Discovery, said: “Over the years, the advisory market of the Gulf Cooperation Council (GCC) region has grown to the extent that it represents a significant opportunity for asset management companies, wealth managers, international life insurance companies and other groups. This year’s research further reinforces this.”
