Paraphrasing Monty Python, purely to get your attention, but it’s a valid question. I am in an industry that is frequently criticised in the UAE, often for good reason, but let me explain why using a qualified adviser (rather than a salesperson pretending to be an adviser) is a good thing and how you can benefit.
What is a financial adviser?
The clue is in the name – we advise. I have been an Independent Financial Adviser for over 25 years and the independent part simply means not linked to any one product provider, insurance company or investment manager.
We offer a wide range of financial and life planning services from budgeting, to protection, to retirement planning, plus a range of investments, estate planning and wills, helping to buy a house, and looking at your goals and needs and giving you the solutions to meet them. There are also specialist services such as tax planning and advice and cashflow modelling where we really plan for the future.
Not everyone advises on all areas, or has the knowledge or qualifications to do so, and some specialise in certain areas. I am what is known as a holistic adviser, and that is nothing to do with any thing new age or crystals, but simply means that I look at all your financial issues together as they are inter-connected. Taking a proper overview as action in one area affects others. For expats, that also means taking into account issues like future tax liabilities and how laws in your home country relate to your life in the UAE or wider GCC.
What does a financial adviser do?
Let me start by saying what an adviser does not do is instantly try and sell you a savings plan. Instead, proper financial planning is a process. It starts with reviewing where you are currently, your goals, needs and wishes and working with you, over time, to meet them.
First and foremost, a good adviser listens. We need to know as much about you as possible, all in confidence, and then, and only then, can we start suggesting action and solutions. We work with you to achieve your goals and if this involves investments we will manage and advise over a time frame of years. Chances are that we will raise relevant points and issues that you hadn’t thought of too.
You benefit from years of experience, technical knowledge and a true of understanding of financial planning so you get the peace of mind of knowing you are doing the right things for yourself and your family.
Can I do it all myself?
In theory, you might be able to do some things by yourself, but in practice it’s a bit more complicated. Do you have the time to study and understand all the issues? Do you know where to start and what you need to consider? Are you really aware of the legal and tax issues that affect expats? And of how they keep changing? Can you access the products and plans you may need to achieve your goals? (Answer – no as not all are available to the public.) Can you honestly separate emotion from your decisions and take a truly objective view?
In much the same way as most of us outsource various functions, whether that is fixing the plumbing, servicing the car, or visiting a hairdresser or barber, you can probably do some of it yourself but will you do it as well as you want, or need? Are you sure that you have the knowledge after reading a book and some websites? Do you really want to be spending hours and hours every week keeping abreast of markets and legislation? I’d suggest not.
I also have a variety of, frankly very geeky, investment review and research tools that allow me to properly review investment funds. These are expensive subscription-only tools that provide a great deal of detailed information, far more than just returns and charges as there is more to investment portfolio management than chasing the latest returns. I get to be the geek, so you can do more interesting things with your time. And remember, I am doing this daily, so am always aware of markets, options, changes and so forth.
At what point in my life do I need to speak to a professional?
The reality is that many people seek advice at specific times in their lives. These unclude when they first think about long-term savings and investments, when they want to buy a house, when having their first child, when relocating, heading towards retirement, and at retirement. At any life-changing event, whether that’s marriage or divorce, upon receiving an inheritance, moving country, and really at any point when you feel you need some guidance and want to take control of your financial situation.
The role of an adviser is to be impartial. To ensure you are on the right financial path.
What a good financial adviser does.
A good financial planner will give advice on the following:
- What you need to do differently
- How much you need to save
- What types of investments suit you and your own situation
- What type of mortgage you should have, if you should pay it off, or refinance
- What type and how much insurance you need. This includes life cover and critical illness cover and not all plans are the same.
- Whether your life insurance needs to be in trust.
- Advise on education planning
- How much to keep in your emergency fund
- Tax considerations, whether on leaving or returning to home country, or in respect of investments
- What rate of return you will need to earn to achieve your goals over a given time frame and what you need to save to achieve this (cashflow modelling)
- What level of investment risk is right for you and structuring suitable portfolios
- Ongoing investment management and reporting
- Issues that relate to being an expat in the UAE
And that’s not even all of it.
Can’t I just put my money in ETFs?
In theory yes, but have you considered the tax issues, the lack of diversification? Charges, although important are not everything. If you only invest in tracker funds you can track markets up but you will track them down again as has been proven this year. ETFs (Exchange Traded Funds) and trackers have their place but there is more to real portfolio management, especially if you want to have exposure to specific sectors, the best funds, manage your risk, or look at socially responsible investment.
There have been numerous studies that show that taking professional advice will increase your investment returns. In 2019, Vanguard (yes, the same Vanguard of ETF fame) released a survey called Advisor’s Alpha that concluded that clients who work with a good financial advisor will receive on average a 3% increase in the value of their portfolios each year. This isn’t a linear return, nothing is that simple, but a steady hand reduces volatility and protects investments in falling markets, as much as increasing them. This is borne out in other studies including ones by Morningstar and Aon Hewitt.
Investment is just one of the things an adviser does and even if you do feel able to manage some it yourself, there will be other areas where you can benefit from professional advice.
What about payment?
Everyone needs to make a living and that includes advisers. I am self-employed so my time needs to be paid for and it is only right to pay for professional advice, but that doesn’t need to be to the client’s detriment.
There are times when paying a commission is fine if you are aware of this, especially when it comes to simple protection plans where the premiums would be the same if you were able to go direct. In this case you pay no extra but get proper advice on what is best for you.
For investments, a reasonable commission is also fine provided you are made aware of it. There has been a change in UAE financial services regulation which has reduced the level of hidden commissions available but a true adviser should never be afraid to explain how they make a living. I charge to properly manage investments on an ongoing basis, my clients sign an agreement to this effect and this is fair to everyone. Much of the advice I give is fee-based these days so fully transparent. This is a professional and unbiased service, closer to how advisers work in the UK, and is proving to be more and more popular in the UAE.
What I want you to take away from this article is the value of genuine advice. To understand that advising people on their life and money management is a skill that just about everyone can benefit from. You don’t need to have loads of money to benefit from professional advice and that’s partly why I dislike the term wealth manager as it sounds rather elitist. You may not have much money right now but chances are you need to look at other areas, whether that is a simple offshore bank account, a will or life cover to protect your family – it is all important.
A true adviser is someone to help you, to work with you, guide and even dissuade you from action in some cases. We have studied, are professionally qualified, accountable for our advice, and some of us have been doing this a long time so we really do know what works. And also what doesn’t. Essentially, we are on your side.
Some of us are doing the right things and fighting the good fight. And we do it with genuine interest in getting you on the right track, with common sense, warmth and some humour as money things don’t have to be dull, I promise!
To arrange a discussion on any aspect of your personal financial planning, please email me at firstname.lastname@example.org
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, on radio, and on the Facebook group British Expats Dubai.
Please take a look at the other useful articles on this website.