While over half of UAE investors use a financial adviser, less than a third consider them trustworthy, according to a new study from the CFA Institute on trust in the country’s financial services sector.
Fifty-four per cent of UAE investors polled by the global association of investment professionals said they employ the services of an adviser, yet only 32 per cent assume they are reliable.
This compares to 29 per cent of UAE investors that said trust must be proven at least once before they will give their adviser the benefit of the doubt.
"Trust is essential in the world of finance, where well-functioning markets are necessary to create value, and in investment services, where experts work to safeguard and grow the financial wealth of their clients," the CFA Institute said in its report, The Next Generation of Trust: A Global Survey on the State of Investor Trust, which polled 3,000 retail investors.
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The study, which found a significant gap between what investors expect from their financial advisers and how satisfied they are with the relationship, comes as the UAE’s financial advisory industry faces a raft of new regulations.
The UAE Insurance Authority and the Central Bank of the UAE both issued circulars last year outlining changes to the way savings and investment schemes are sold in the UAE.
The IA’s second draft circular, released in May as a follow up to a 2016 release, reinforced plans to cap total commission payable to entities involved in the sale and distribution of insurance products, such as financial advisers. It also proposed banning the use of charges such as advice fees and trailing commission fees on the products sold.
The Central Bank issued a circular in May advising banks and finance companies to resolve all outstanding mis-selling complaints “amicably” and within a deadline of just 90 days.
Both entities were responding to a high number of complaints from customers over expensive fixed-term investment plans.
With trust an issue for UAE investors, the report found many turn to other sources for financial advice with 31 per cent choosing friends and family and 15 per cent online research.
Despite this, when selecting an adviser, global investors place more emphasis on personal trustworthiness and ethical conduct, while investors in the UAE are more concerned with returns. UAE investors are also less concerned with the credentials and track record of their advisers than their global counterparts.
"The survey shows that people rely on their friends and family here for advice, and the bad reputation of many financial firms and advisers tarnishes the entire industry," said Steve Cronin, the founder of DeadSimpleSaving.com, which helps residents invest their money sensibly. "I wish people would be even less trusting though, as plenty are still getting suckered into buying long-term savings plans that are expensive, badly invested and hard to escape from."
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When it comes to fees, a hot topic of discussion in the UAE due to the high prevalence of expensive investment products, 57 per cent of UAE investors said it is important that fees reflect the value they receive from the adviser. One in five also said they had switched investment firms due to an increase in fees.
The CFA Institute has called for universal disclosure of fees across the globe to raise levels of investor trust. Globally, 84 per cent of investors say their trust in the system is mostly driven by full disclosure with less than half satisfied.
“Higher trust comes with higher expectations, and we are not there yet until we can consistently prove our value to clients by providing solutions, not simply products," said Paul Smith, president and chief executive of the CFA Institute.
"We need universal disclosure of fees and performance to drive home this message."
For the industry to rebuild trust with its customers, Mr Cronin said it needs to only hire those with advanced and reputable financial qualifications.
"It needs to be fully transparent about all costs, fees and commission, ideally moving away from commission towards platform fees or hourly rates for advice," he said. "It needs to transform the remuneration of advisors, away from upfront commission and towards rewarding sustained service and out-performance. Finally, it needs to move away from selling complex insurance products disguised as savings plans."
Trust in advisory firms will be tested even further in the coming months as economists warn of a US recession in 2020, tying in with the presidential campaign, due to fading fiscal stimulus and rising interest rates.
"The [US] economy is poised for a bumpy ride in 2020, and if enough policy mistakes pile up - overly restrictive fiscal policy and excessively tight monetary policy - this could certainly create sufficient downdrafts to create a recession, or at the very least, a growth recession," warned Bloomberg Economics analysts Carl Riccadonna and Yelena Shulyatyeva.
Despite this outlook, 70 per cent of investors in the UAE believe their advisory firm is “well or very well prepared” to handle the next crisis, compared with just 55 per cent of investors globally.
NYBL PROFILE
Company name: Nybl
Date started: November 2018
Founder: Noor Alnahhas, Michael LeTan, Hafsa Yazdni, Sufyaan Abdul Haseeb, Waleed Rifaat, Mohammed Shono
Based: Dubai, UAE
Sector: Software Technology / Artificial Intelligence
Initial investment: $500,000
Funding round: Series B (raising $5m)
Partners/Incubators: Dubai Future Accelerators Cohort 4, Dubai Future Accelerators Cohort 6, AI Venture Labs Cohort 1, Microsoft Scale-up
Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Nancy 9 (Hassa Beek)
Nancy Ajram
(In2Musica)
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Revibe%20%0D%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Hamza%20Iraqui%20and%20Abdessamad%20Ben%20Zakour%20%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20UAE%20%0D%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Refurbished%20electronics%20%0D%3Cbr%3E%3Cstrong%3EFunds%20raised%20so%20far%3A%3C%2Fstrong%3E%20%2410m%20%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFlat6Labs%2C%20Resonance%20and%20various%20others%0D%3C%2Fp%3E%0A
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
'Gold'
Director:Anthony Hayes
Stars:Zaf Efron, Anthony Hayes
Rating:3/5
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
The BIO
Favourite piece of music: Verdi’s Requiem. It’s awe-inspiring.
Biggest inspiration: My father, as I grew up in a house where music was constantly played on a wind-up gramophone. I had amazing music teachers in primary and secondary school who inspired me to take my music further. They encouraged me to take up music as a profession and I follow in their footsteps, encouraging others to do the same.
Favourite book: Ian McEwan’s Atonement – the ending alone knocked me for six.
Favourite holiday destination: Italy - music and opera is so much part of the life there. I love it.
Killing of Qassem Suleimani
The bio
His favourite book - 1984 by George Orwell
His favourite quote - 'If you think education is expensive, try ignorance' by Derek Bok, Former President of Harvard
Favourite place to travel to - Peloponnese, Southern Greece
Favourite movie - The Last Emperor
Favourite personality from history - Alexander the Great
Role Model - My father, Yiannis Davos
AS IT STANDS IN POOL A
1. Japan - Played 3, Won 3, Points 14
2. Ireland - Played 3, Won 2, Lost 1, Points 11
3. Scotland - Played 2, Won 1, Lost 1, Points 5
Remaining fixtures
Scotland v Russia – Wednesday, 11.15am
Ireland v Samoa – Saturday, 2.45pm
Japan v Scotland – Sunday, 2.45pm
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Killing of Qassem Suleimani
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
Abu Dhabi Grand Slam Jiu-Jitsu World Tour Calendar 2018/19
July 29: OTA Gymnasium in Tokyo, Japan
Sep 22-23: LA Convention Centre in Los Angeles, US
Nov 16-18: Carioca Arena Centre in Rio de Janeiro, Brazil
Feb 7-9: Mubadala Arena in Abu Dhabi, UAE
Mar 9-10: Copper Box Arena in London, UK
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
Where to apply
Applicants should send their completed applications - CV, covering letter, sample(s) of your work, letter of recommendation - to Nick March, Assistant Editor in Chief at The National and UAE programme administrator for the Rosalynn Carter Fellowships for Mental Health Journalism, by 5pm on April 30, 2020.
Please send applications to nmarch@thenational.ae and please mark the subject line as “Rosalynn Carter Fellowship for Mental Health Journalism (UAE programme application)”.
The local advisory board will consider all applications and will interview a short list of candidates in Abu Dhabi in June 2020. Successful candidates will be informed before July 30, 2020.
