Expats living in the UAE have revealed strong views about what financial advisers can do to revamp their businesses, in the same week it was announced that they hold the dubious honour of being among the professions with the worst reputation in the region.
Consultancy firm Insight Discovery released its ninth edition of its Middle East Investment Panorama (MEIP) report, which includes interviews with 250 expats resident in the UAE on the advice sector in the Gulf Cooperation Council region.
More transparency on fees and commissions (39%) was the key change needed for advisers, with a tougher stance by local regulators in relation to scams and unregulated firms (37%); and industry-recognised qualifications for advisers (15%) making up the key themes.
Among the expats interviewed, only 43% have actually used the services of an adviser; and, of those, 43% have positive views of advisers, while 19% have negative views.
For the expats who have not used advisers, some 36% have positive views, whereas 10% have negative views.
In a separate study, Insight Discovery also found that financial advisers are ranked among some of the professions with the worst reputations in the region, bested only by bank advisers, recruitment companies, credit card companies, loan agents, call centres and real estate agents.
Dropping out of the market
The report also assessed a number of advisory firms and found that the total number of advisers had dropped – although a couple of firms have added headcount.
One unnamed firm reported that the number of advisers it employs had fallen to just five in January 2019 from 40 in January 2018; on the other hand, one firm increased the number of advisers it is employing to 25 from 10.
Nigel Sillitoe, chief executive of Insight Discovery, said: “Conditions have been difficult for the advisers.
“The expat clients have become more informed and demanding. The geopolitical environment in this part of the world has been difficult.
“The economics of the business have deteriorated – as higher costs for compliance, regulation and much else besides have coincided with caps on commissions.”
Advisers views of the market
The firm also surveyed 125 financial advisers in the UAE and found 43% see clients’ lack of willingness to invest as a challenge.
Just over half (54%) believe that the regulatory landscape will open up opportunities, but this could be due to the survey being conducted before the UAE announced major changes, including caps on commission.
The split between initial fees & commissions versus recurring fees & commissions has shifted to 61%/39% from 72%/28%.
The number worried about the impact of commission caps and greater disclosure on their business models has fallen to 7% from 26%.
Some 66% of advisers rate improved administration by the international life companies as a top priority. Almost as many – 64% – feel similarly about detailed disclosure of all fees and charges.
Sillitoe added: “Overall, the main message from this report is very positive. The advisers have risen to the various challenges.
“Collectively, the advisers have invested heavily in being able to meet the requirements of clients and regulators. For those who remain, these efforts have borne fruit.
“Much more than in previous years, it is clear that the industry in the GCC is changing – and for the better. Across the region, quality trumps quantity in financial advice.”
Use of products
Over the last 12 months, 55% of advisers have increased their usage of discretionary fund management (DFM) services, while 42% have increased the use of exchange-traded funds (ETFs).
Fund platform use rose 56%, while multi-asset funds were up 52%.
Life insurance – protection products (76%) was surveyed as the biggest opportunity for advisers, with life insurance – savings products (59%) and DFM services (55%) making up the top three.
