The financial advice industry in the Middle East has grown tremendously over the last few decades thanks to the continuous arrival of expats.
In the UAE alone, the number of non-Emirati is 8.84 million, which constitutes approximately 89% of the population.
But, Insight Discovery’s recent Middle East Investment Panorama found that advisers believe that an expat exodus from Gulf Cooperation Council (GCC) countries could be on the cards.
They voted it their second biggest business challenge for 2021.
International Adviser spoke to The Fry Group, Finsbury Associates and Mondial Dubai to discuss what an expat exodus could mean for Middle East financial advice companies.
Expectations
Stuart McCulloch, market head of The Fry Group Middle East, said: “I think exodus is a very strong word, but yes we expect that some expats will be repatriating due to the ongoing impact of the covid pandemic, and the impact on local business.
“This situation is not specific to the Middle East, as we have seen a similar trend in our Singapore and Hong Kong offices for example.”
Hannah Greenwood, managing director of Finsbury Associates, said: “Whilst we had several clients leave the region early last year, the majority of these clients have since returned to the UAE and are happy to be back.
“Furthermore, during 2021, as a business we have not experienced many clients leaving the region and have actually seen a significant increase in Dubai being used as a tax-free jurisdiction in retirement.”
Sean Kelleher, chief executive of Mondial Dubai, added that it is less of a “movement of the people” exodus; and more a “revolving door” where expats leave due to falling oil reliance and some come in via the newly established golden visa schemes, which “attract a different type of demographic”.
Impact
The financial advice industry in the UAE is dependent on expats. So, what does it mean for firms in the region if they start leaving?
McCulloch said: “If there is an exodus then, in the short term, it provides a lot of business opportunity as clients come to us for repatriation tax reports, and to get their finances in order ready for a return to the UK.
“The reality we are seeing is that the work to prepare a lot of clients for the return is substantial, as many need tax help and also they have a lot of products that are sadly not UK compliant, or in line with a UK approach. In the medium-to-long term. however, I think firms will need to demonstrate a great deal of value and position themselves well for a small market to go after.
“People are really now looking for value for money, and that is good because they are looking more closely at the offering of some firms, and researching the small print and finding that some do not necessarily have the client’s best interest at heart, by that I mean high commissions, high-cost commission paying funds etc.
“This creates opportunity for fee-based UK approach businesses that have all an expat needs in house to help them achieve what financial freedom means for them.”
Keheller added: “If there is any accuracy in our in/out assumption then the outs should be replaced by new people and new money. The challenge is to adapt new needs.”
Repatriation
As mentioned by McCulloch, clients leaving the region will need to get repatriation advice before either moving back home or on to another jurisdiction, which could lead to a rise in demand.
Finsbury Associates’ Greenwood said: “We have always advised clients in line with where we believe they will repatriate when setting up financial plans, as this is important to ensure assets are structured correctly whilst offshore to allow ease of repatriation.
“There are, however, areas of consideration before repatriation, so we advise all clients to seek advice before returning home to ensure their portfolio is structured in the most tax effective manner.”
McCulloch added: “Repatriation should always be part of advice for any expat, by this I mean don’t just prepare things for going back and give tax advice at the point of leaving, advisers dealing with expats should have them in cost-effective, flexible and UK compliant product from the start, so the process is easy, and value for money.
“We are seeing a lot of people approaching us for repatriation advisory services, and sadly a lot of the time it is about tidying up a mess first.”
Keheller added: “For the likes of the UAE, Hong Kong, and other typical expats centres there has always been a revolving door. By definition, an expat is a temporary status. They stay too long and they become immigrants.
“The revolving door is normal in such centres and only the flow changes. Therefore, repatriation advice is needed anyway.”
Expat demand in Middle East
But, if an exodus does appear, could the region face a battle to attract fresh expats?
McCulloch said: “The Middle East is definitely a market we are committed too for the long term, and the tax-free status is a large draw for many still.
“If anything, I think cost of living here needs to be looked at, as many expats are being priced out, even though there is no tax to pay, the day-to-day cost of rent, groceries and school fees can be crippling for many expats on less than big expat packages, which are thin on the ground these days.”
Kelleher added: “In the UAE, there are fewer than one million Emiratis. There are still traffic jams on Hassa Street in Dubai and elsewhere. It isn’t the Emiratis holding up the traffic. Even with the pandemic, there is little sign of the UAE looking vulnerable to a tumbleweed infestation despite the apparent clemency of the weather.
“We expect expats to continue causing traffic chaos, at least in the UAE.”
