As an expat in the UAE, you will be all too familiar with the unsolicited cold calls from financial services companies. If you’re not, you’re lucky. The reality is however, that we all need some form of financial service at some point in our lives, whether it be a bank account or insurance policy – the time will come. If you’re not comfortable doing it yourself or it simply isn’t possible, you can hire the services of an independent financial adviser to help. Now instead of agreeing to meet a stranger that called you out of the blue, you should do your homework and choose an adviser for yourself. Here are 7 things you should consider when picking the right professional:
There are 3 main regulators in the UAE that you need to be aware of as they all cover different areas. These are:
Insurance Authority – perhaps the more well-known regulator, the IA is responsible for regulated insurance companies, insurance brokerages and insurance-based products. This does not include health insurance – that’s a different regulator altogether.
Securities and Commodities Authority – SCA regulates the investment world, which includes fund houses, investment advisers, traders and stock brokers etc.
Dubai Financial Services Authority – the DFSA regulates financial services that are conducted in or from the DIFC. Whilst the DFSA is arguably ‘the best’ regulator in terms of organisation and consumer protection, their authority is mostly restricted to the financial free zone.
So, with multiple regulators and a lack of clarity on who is responsible for what, the most important thing is to ensure the adviser is licensed by at least one regulator. If you have a bad experienced with an unlicensed company, you won’t be able to make a formal complaint or seek redress.
Don’t be afraid of asking to see an adviser’s qualifications. A good financial adviser takes pride in their professional development and will pounce at the opportunity to show you their achievements. Financial advisers without qualifications will undoubtedly attempt to dodge the question or spin you a white lie. So that you’re prepared, these are the most recognised qualifications you should look out for:
Chartered Insurance Institute – CII is a well-known accreditation in the UK for financial planners and insurance brokers and will become a requirement for advisers in the UAE who are regulated by the IA. Whilst there is no minimum requirement in the UAE, you should look for an adviser that holds level 4 (Ofqual). Typically, you will see post-nominal letters e.g. ‘DipPFS’ or ‘DipFA’ after their names, not ‘CII’.
Chartered Institute of Securities & Investments – CISI as the name suggests puts more emphasis on investments and is commonly acquired by wealth managers and investment managers. This is a requirement for advisers regulated by the SCA as well as passing exams specifically created for the UAE market. Post-nominal letters to look out for here are ‘ACSI’ or ‘MSCI’.
CFPBoard – established in the US but recognised internationally, being a Certified Financial Planner® is a benchmark in financial planning and a good qualification to look out for. Advisers will carry CFP® after their name.
These are only a handful of examining bodies and there are many other well-respected qualifications that advisers can have. If you come across an adviser that is ‘chartered’ then you’ve found someone who has reached the top of the qualification table.
How can you know if they have a good reputation? The answer is online. Whilst this is not a full-proof method, looking at an adviser’s online presence can give you a good indication of how trustworthy they are. Places you should look:
Google – if there is information online, whether it be good or bad reviews of the adviser, Google will find it.
LinkedIn – any decent adviser will care about their personal brand and will have a professional profile. Scroll to the bottom of their profile to see if they have any testimonials from actual clients not work colleagues. Bonus points go to advisers that share their knowledge and expertise by writing articles, taking videos or even just by having an opinion.
Company website – check their company’s website to see if they have a profile and any more information you can gather before making a decision.
Profezo - this is a directory that only lists qualified advisers and collects real customer reviews or if you would rather someone choose for you, you can be matched up directly here.
There are 2 ways advisers in the UAE are remunerated:
There is an ongoing debate on which is better for the customer, but it’s fairly evident that fee-based advisers are more likely to work in your best interest.
Financial advisers that receive commissions are often accused of being nothing more than salespeople. Whilst this true much of the time, there are some ethical advisers that are paid commission and you’ll only know they’re decent if they’re upfront about how much their advice will cost. Beware: advice is never free.
Using a fee-based adviser means they’re not incentivised to sell you a product because of the commission they will receive. Instead you pay for agreed deliverables and the ongoing service. Fees will vary between companies so make sure you do your research and get all the charges disclosed upfront.
An independent financial adviser will:
1) Gather as much information about you, your family, life and goals
2) Conduct a comprehensive analysis of your current financial position
3) Research the market for suitable products
4) Presentation of a full financial report covering everything you have discussed, their recommendation and why it is suitable for you. This is an extensive document so if you are given a two-page report on an investment plan only, then you should probably steer clear.
5) If you’re happy with the recommendation and proceed then you will need to review your financial plan at least annually or as often as you agree with your adviser.
The process of giving financial advice is a consultation so you should expect to be asked lots of questions. Be wary of salespeople with an agenda that may try and use scare tactics and fancy diagrams to push you into a contractual investment or savings plan.
Financial services in the UAE is often likened to ‘The Wild West’ but it’s not only financial advisers who you need to be careful choosing. Many insurance and financial services providers are present in the UAE and actively accepting business from rogue brokers. It’s best to avoid these companies (and the adviser), no matter how good the product sounds because if anything goes wrong it is even more difficult to complain.
There are charges for giving advice, then there are charges for using a product, then there are charges on the underlying funds (which are often deliberately hidden).
Many investment plans in the UAE are in fact insurance-based contracts and most, if not all, are extremely expensive. Some of these plans charge up to 9% for the first year or more then around 4% per year after that to manage. With charges this high, it becomes very difficult to make any gains whatsoever.
The other question you should ask your financial adviser is how much you will be charged for being in a particular fund. Funds have what’s called a ‘ongoing charge’ or ‘total expense ratio’ (OCF/TER) which encompasses the cost of running the fund and is paid by you the investor. A high TER (more than 2.5%) can eat away at your returns so make sure you get a full breakdown before you commit.
This may seem like a lot of work but when you’re talking about your future and your family’s future, doing your research cannot be more important.
We built this website to make it easier for you and to help you make more informed decisions with your money. Profezo and WhichFinancialAdviser.com only list advisers that have been vetted to ensure you get fair, honest financial advice from true professionals.
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