The financial advisory community in the UAE is embarking on a new course in 2019 in line with the fast-changing market dynamics, customer perceptions on trust and tougher financial regulations.
This is in the wake of a recent CFA Institute survey on the trustworthiness of financial advisers in the UAE that identified a significant gap between the expectation of investors and their satisfaction level with the advisers.
The survey revealed that more than half of the 3,000 retail investor expats surveyed in the UAE used the services of a financial adviser, while less than one-third believed that advisers are trustworthy and just over a third assumed they are reliable.
“Regain and retain the trust of clients should be the first priority for advisers in the New Year rather than increasing their client list and business at a time when the number of trustworthy advisers is reducing,” said M Hanumantha Kumar, managing director of Dubai-based MCA Management Consultants.
Testing times
It is testing time for the financial advisory industry which is subject to a host of government reforms, with the UAE Central Bank and the UAE Insurance Authority expected to issue further guidelines on the way investments and savings products are sold.
There are plans to cap the total payable commissions on insurance-linked products and also ban charges such as fees for advice and trailing commissions on products sold.
The central bank had earlier issued an ultimatum through a circular to finance companies and banks to resolve all outstanding disputes about mis-selling of products by unqualified persons following a number of customer complaints involving expensive fixed-term savings and investment plans.
The circular had indicated that the central bank was planning to issue a new governance structure on how to market these products, covering issues such as customer profiling and product suitability and transparency.
It was also planning to introduce a mechanism to redress grievances with non-compliance charges for violating guidelines. The ‘mis-selling’ complaints said customers were sold policies that are “complex in nature and are not well understood”. Banks, finance companies and advisers were criticised for using inadequately trained staff to sell products.
Many challenges
Lack of adequately qualified persons is one of the challenges faced by the industry. Four top NRI advisers listed several other challenges and business goals in the New Year at the Future Advisory Forum organised by International Adviser in Dubai recently. Regulatory changes, tackling of disruptive technology, talent shortage and changing customer preferences are among them.
“Advisory is dead in its traditional form but it will live in a new avatar where advisory firms will help advisers evolve and grow. Today we generate leads for them and we go out on social media, have a dedicated digital marketing team tasked for getting the customers in.
“The biggest challenge, as always, will remain the challenge for attracting the right talent. We end up attracting the right talent from competition, and that will take us ahead,” said Dhruba Jyoti Sengupta, managing partner, Capstone Insurance.
Some firms, such as Compass Insurance Brokers, are betting on organic growth as well as acquisitions.
“Over the last year we started acquiring other businesses and brokers and we are in talks with a few entities about merging and looking at picking a better, cleaner and long term broker business. We are getting to digital disruption, launching own portals and getting our advisers certified. We should be ready for the change,” said Navin Nihalani, founder and chief executive, Compass Insurance Brokers.
For Krishnan Ramachandran, chief executive, Barjeel Geojit Securities, technology is going to be a key enabler. “We are working a lot in creating technology which will be understandable by the client and easy for them to use. The information flow in the market is quite high.
“We need to filter that and give information that is appropriate and required by the client. We are looking at creating portfolio models using technology which will enable clients to take quick decisions so that our investment advisers are able to move forward from clients to clients quickly,” he said.
Ashok Sardana, managing director of Continental Insurance Brokers, wants to use technology to enhance customer experience.
“We are in the process of hiring new advisers every month. We are using technology in our system to improve the customer experience and to provide better education to our consultants so that we can move them to the next level of production,” he said.
