The UAE’s under fire financial advisors (IFAs) are being made the scapegoat for problems often beyond their control, according to private equity firm Berkeley Assets.
Poor returns, high administration fees and limited access to funds are the three main reasons why IFAs are subjected to heavy criticism by clients. But Berkeley Assets says the blame often lies in the limited supply of investment products such as retirement benefit plans and education savings plans made available in the market by offshore pension providers.
“When clients become upset with their IFAs, the reasons are always the same. They complain that they are paying too much in annual fees, can’t access their money for around 20 years, and their returns are so poor compared to the stock markets. But are IFAs to blame for recommending these expensive products to clients, when this is all the offshore pension providers allow IFAs to present to their clients? If a friend recommends a product to you, and there is a better alternative that they aren’t aware of, was it their fault?” said Justin Quan, Senior Associate at Berkeley Assets in Dubai.
Quan added that IFAs are now better equipped than ever to deal with the growing demands of UAE investors based on their greater market awareness.
“Nowadays, IFAs are much more qualified than they have ever been, and they need to be. Retail clients, such as individual investors or small businesses as opposed to a major financial institution, are much more investment savvy than they were ten years ago. Retail clients now have much more access to multiple asset classes and are much harder to please. We have all heard the horror stories about investments that have gone wrong, with the financial advisors getting all the blame, but there are good stories as well. We’re working hard with the top IFAs in the region to advise and guide them towards new ways of planning where their clients are the beneficiaries of low risk, asset backed strategies with little or no need to regular reviews and changes. The top IFAs realise that the world has changed and they are adapting their business models to put their clients first and avoid the expensive, poor performing products that have previously been forced upon them, as such they are demanding new and innovative solutions from alternative sources. The reason the good stories are rarely heard is that, while people are quick to speak out when results don’t go their way, they keep things to themselves when investments are performing well,” said Quan.
Berkeley Assets sees IFAs now facing a major new challenge, with global equity markets at all-time highs and now experiencing significant levels of volatility, beating the charges on investment plans and securing above inflation growth could prove even harder for financial advisors to deliver.
“Expectations should be managed from the start. Investors need to sleep easy knowing that their hard earned money is growing, at above inflation rates, safely over short to medium terms,” said Quan.