Survey Shows Most UAE Expats Don’t Trust IFAs

A recent survey revealed more than half of expat respondents use financial advisors, but over two-thirds don’t trust them.

The survey, carried out by the CFA Institute, was based on the trustworthiness of expat financial advisers working in the UAE’s retail sector, and brought no surprises to a retail audience now used to reports of yet another financial scandal. Some 3,000 expatriates living and working in the emirates took part in the study, with over half using IFAs in spite of their diminishing reputation as ‘honest brokers’. Less than 33 per cent of respondents believed their advisers were trustworthy and just over the same percentage said they were reliable.

As a result, the UAE’s IFA community is being advised to take notice of the current trend as well as following tougher financial regulations aimed at reducing the financial risks for inexperienced expat investors. One Dubai-based financial advice firm told reporters regaining and retaining the trust of potential as well as established clients in now a number-one priority for the sector, adding they should concentrate on their diminishing reputation rather than on increasing their client list and doing more business. The firm’s spokesperson admitted the number of trustworthy IFA in the region is falling fast.

The UAE’s government is set on reforming the way savings and investment products are sold, with plans to cap the amount of commissions paid as well as banning trailing commissions and charges for advice, two areas where abuse of the system is widespread. An earlier notification by the UAE central bank told all banks and financial firms to quickly resolve all ongoing disputes over mis-selling by unqualified IFAs pushing expensive investment plans and fixed term savings products. The central bank itself is planning to limit marketing of such products to those who are able to prove their suitability and transparency.

As with many other expat professional destinations, the UAE regulators as well as the sector in general’s major challenge is the lack of qualified expat financial advisers. Due to massive financial scandals over the past decade, the industry is struggling to survive in its traditional format, and technology hasn’t yet proved that internet marketing brings in the customers. Several of the more innovative IFA firms in the UAE believe technology is one way to continue educating their client bases as well as instructing their advisors in cleaner methods of gaining new clients by offering them the best solutions for their needs rather than persuading them into unsuitable investments simply to gain the most commission.