At the International Adviser Gulf Expert Investor Forum in Dubai last month, the chief executives of the UAE’s largest financial intermediary firms discussed a range of topics including regulation, consumer trust, the knock-on impact of the UK’s Retail Distribution Review and commission.
Click here to read a summary of the full roundtable
One of the most contentious issues discussed was commission and whether adopting a fee-only system, such as that implemented by the Financial Conduct Authority in the UK as a result of the RDR, would work in the UAE.
The attendees, Nexus’s Tarun Khanna, Continental’s Ashok Sardana, deVere’s Mike Coady, AES International’s Sam Instone, Mondial’s Sean Kelleher and Globaleye’s Tim Searle, were split on the merits of introducing a fee only system.
Sardana, who also called for a ban on 25 year savings policies during the event, said the UAE market is “not ready for a fee based model… but that if the fee based model is introduced… I think the professional companies and the professional advisers will survive and do much better”.
Meanwhile, Nexus’s CEO Khanna was more downbeat, arguing it would be “undesirable” and that “it is going to hurt the whole industry [in the UK] and will take many years for it to be implemented [in the UAE], if it does get implemented at all”.
Two of the other CEOs approached the subject from a different angle, with AES International’s Instone arguing that it is not about “fees versus commission” but actually about treating customers fairly.
“By treating clients fairly, being clear and transparent, businesses are likely to do more, they’re likely to create by referral – really the only way that financial services can grow,” said Instone.
“The trust deficit is likely to be less and I think, slowly, you’ll get much more professionalism.”
This view was echoed by Kelleher, who said advisers should learn to build assets under management (AUM), not to concentrate on raking in up-front commissions and that, once they have built up a substantial AUM, whether or not they take 0.5% trail commission will be a moot point.
“The problem with this area of the world is that not many IFAs have enough of an asset base, therefore, they need to hunt what they kill still,” said Kelleher.
“As someone said… commission is like a line of cocaine. The front end of commission, it’s very difficult to get off the stuff if you haven’t got anything else to go to.”
