Attendees at the CEO Roundtable were: Nexus’ Tarun Khanna, Continental’s Ashok Sardana, deVere’s Mike Coady, AES International’s Sam Instone, Mondial’s Sean Kelleher and Globaleye’s Tim Searle.
A wide range of topics were covered during the course of the 40 minute discussion, with host, local broadcaster and journalist Richard Dean, expertly picking between points and speakers.
Trust me, I’m an IFA
The roundtable kicked off with a question about trust and whether there was a “deficit of trust” from consumers towards financial intermediaries in the United Arab Emirates. It was a controversial place to start and a quick poll of the audience, the majority of which were financial advisers, found agreement that there is indeed some mistrust from consumers towards the advice industry.
AES International’s Sam Instone was one of those who agreed, arguing the reason this mistrust exists is “predominantly because the financial services industry [in the UAE] still resembles that of 1990 in the UK”, adding that there needs to be a shift towards a much more professional standard.
Professional standards and increasing regulation were a recurring theme during the lively discussion, with the potential knock-on and relevance of the UK’s recently implemented Retail Distribution Review forming a key part of this.
Nexus’ Tarun Khanna agreed with Instone that standards, particularly qualification requirements, should be raised, although he added that this does not necessarily mean it should go as far as in Qatar where advisers now must hold a level four qualification.
While there was a clear consensus that one of the aims of the RDR, i.e. to increase the professional standard of the advice industry, was admirable and should be replicated, it was interesting to note the panel’s verdict on the RDR was not entirely positive, particularly around the removal of commission.
RDR model under fire
One of the RDR’s detractors was Globaleye’s Tim Searle who suggested one of its “failings” is that it has in some circumstances removed the adviser’s ability to make money.
Searle explained that, while it is good to encourage advisers to build a large book of business in order to earn trail commissions from assets under management, some products “like critical illness cover and life insurance” do not offer AUM growth, so in order to help promote these products “you’ve got to make sure there is an element of fee… [but] there has to be an initial commission as well”.
This thought was echoed by deVere Group’s Mike Coady who, when asked whether a move to an execution only model might suit, asked in retort: “Who walks into a financial advisory [office] and asks for something? No advice sought, no advice given.”
Another take on the possible carry-over of the RDR into the UAE advisory market was given by Continental’s Ashok Sardana who said simply: “I personally think this market is still not ready for a fee based model.”
Shifting sands
The recent collapse of a number of funds was also a hot topic. Mondial’s Sean Kelleher raised the LM Investment Management-run Managed Performance Fund which was, he said, sold by 28 UAE based advisory firms who in total contributed around AUS$100m into the fund’s coffers.
Kelleher called for advisers to join the Advisers Committee for Investors, a group established after the collapse of the LM fund to attempt to claw back some form of return for investors and which he is head of, stating there is “now a clear line in the sand between IFAs that are taking action on behalf of their clients and IFAs who’ve just got their heads in the sand thinking it will go away”.
Kelleher’s call to arms led into the Q&A session, a highlight of which was the perhaps controversial suggestion by Sardana that 25 year saving plans should be entirely scrapped, a suggestion met by applause from the audience.
The CEO Roundtable formed one part of the day’s schedule which also included presentations from each of the sponsors who were: BlackRock, Brooks Macdonald, Creechurch Advisory Services, Mashreq, Natixis Global Asset Management, Schroders, FE and Montello.
