Berkeley Assets said poor returns, high administration fees and limited access to funds are the three main reasons IFAs in the UAE are subjected to heavy criticism by clients.
This blame, however, is often not the fault of IFAs, but rather lies in the limited supply of investment products made available in the market by offshore pension providers, Berkeley Assets said.
Blame misdirected
“When clients become upset with their IFAs, the reasons are always the same,” said Justin Quan, senior associate at Berkeley Assets in Dubai.
“They complain that they are paying too much in annual fees, can’t access their money for around 20 years, and their returns are so poor compared to the stock markets.
“But are IFAs to blame for recommending these expensive products to clients, when this is all the offshore pension providers allow IFAs to present to their clients? If a friend recommends a product to you, and there is a better alternative that they aren’t aware of, was it their fault?”
IFAs better than ever
Quan says IFAs are now better equipped than ever to deal with the growing demands of UAE investors based on their greater market awareness.
“We have all heard the horror stories about investments that have gone wrong, with the financial advisers getting all the blame, but there are good stories as well,” Quan said
“The top IFAs realise that the world has changed, and they are adapting their business models to put their clients first and avoid the expensive, poor performing products that have previously been forced upon them, as such they are demanding new and innovative solutions from alternative sources.
“The reason the good stories are rarely heard is that, while people are quick to speak out when results don’t go their way, they keep things to themselves when investments are performing well,” he said.
Volatile market
Quan says IFAs are now facing a major new challenge with global equity markets at an all-time high and are now experiencing significant levels of volatility.
“Beating the charges on your investment plan and securing above inflation growth could prove even harder for financial advisers to deliver,” says Quan.
“Expectations should be managed from the start. Investors need to sleep easy knowing that their hard earned money is growing, at above inflation rates, safely over short to medium terms,” he said.
Samuel Highfield says:
If a drug dealer tried to sell me crack cocaine, I am not stupid enough to buy it from them. As an IFA, if a product provider tries to get me to sell their expensive product ‘solutions’ to clients, I am not stupid enough to not see how bad it is for the client, nor am I unethical enough to see the problem and sell it anyway.
It is 100% the fault of the IFA for not doing enough research to understand their market well enough, to provide suitable advice to their clients. By selling the toxic products, they continue to create a demand for high charging structures. If an IFA can only offer something they knew was bad for their clients, why did they still sell it? There is no ethics to that. Why did they not rebate the commission as a worst case and bring product cost down? The reason why, is they knew exactly what they were doing and have no ethics, or they have a low IQ – either way they should resign from the industry.
There have been a number of suitable products for low-net worth savers in the UAE market for years, such as Nedbank, AES platform, ARIA platform, Old Mutual (100% rebate of commissions and charge clients hourly instead!!). There is no excuse!!
An interesting pro-bono article International Advisor could write about, is why do the CISI continue to sponsor unregulated advisory firms in the UAE; why do they associate themselves on the websites of unregulated firms? This would be verging on criminal in the UK. How can clients expect to receive an ethical service, when the professional bodies in the UAE that are responsible for ‘educating and quantifying’ advisors, are themselves unethical. It reminds me of Moody’s giving AAA rating to sub-prime mortgage debt, you pay to play! The problems go all the way up to the top, unfortunately.
Gordon Robertson says:
Spare me those crocodile tears. Why do so many advisors often recommend products such as structured notes, student accommodation, 15 year savings plans etc. It is just a coincidence that they all pay huge commissions.There is enough of other products out there. The providers are offering the products that many advisors want to sell. The industry never got together and tried to self regulate. It took the authorities to step in and shout STOP. There were many other low cost alternatives.
I get embarrassed here in the UAE mentioning what sort of business I am in. There are a lot of good advisors, but the majority have ruined the reputation of this industry.
Niel Pretorius says:
It’s the 95% giving the other 5% a bad name.
The only reason why these costs are so high is as a result of the commisions being paid to the advisers. Their client’s interests certainly don’t come first.
James Caldwell says:
@Samuel Highfield. Reading this article was depressing, but reading your erudite response was brilliant.
Perhaps they should just delete the laughable article and leave your comment