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Thu 18 Aug 2011 12:00 PM

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UAE set to tighten rules for financial advisors

New laws likely to involve AED1m licences for both insurance and investment firms

UAE set to tighten rules for financial advisors
Data shows there is a backdrop of distrust on the part of local expats against the financial advisor industry

New rules currently being considered by UAE authorities are
likely to result in tougher rules for the Gulf state’s financial advisor

Advisors currently hold one or more of a raft of licences
issued by various authorities in the UAE, including the Central Bank, the
Ministry of Economy and in the Insurance Authority.

However, sources suggest that regulation will now be
divested down from the Central Bank to the Insurance Authority and the
Securities and Commodities Authority (SCA), which will also issue licences for,
and monitor, all brokerages operating in the financial sector as well.

While details of the new scheme aren’t yet available,
members of the advisor community have suggested that firms involved with
insurance will need to pay AED1m for a licence, with another AED1m required for
a licence to sell investments.

“What the central bank here is doing is effectively growing
up and looking at matters from a macro point of view, while the micro
operational issues will be ceded down to the Insurance Authority and the SCA,”
said Brendan Moloney, business development officer at Dubai-based Mondial.

“So that will allow these people to take a hands-on
approach, as compared to the laissez fair manner of the past.”

The move comes against a backdrop of distrust on the part of
local expatriates against the financial advisor industry.

A 2007 survey carried out by Zurich International Life
revealed that only 12 percent of Western expats would consider listening to an
independent financial advisor’s plans, a number that sank to just two percent
for Arab expatriates. 

As a result, local players say they have been working harder
to put in tighter internal controls.

“We insist on advisors being qualified to the highest
levels, insist on ethical advice being given and perhaps of most interest to
many, we have a company policy of never making cold calls, as our recent radio
advertisements in which we have a tongue in cheek poke at those companies that
employ such underhanded methods have highlighted,” said Simon Parker, a
director at the Holborn Group.

“We do not believe it is necessary to pressure people into
seeing our consultants and instead prefer to advertise our services so clients
find us, although much of our business is on the basis of personal

Other local firms, such as PIC, have begun offering new
employees salaries as well as commission in a bid to combat allegations that
the industry had previously pushed high-risk plans on consumers in a bid to
increase upfront commissions.

“PIC offers advisor starting for the company since 2010 a
salary and bonus structure based on clients’ investment performance,” said
Spencer Lodge, regional director of PIC.

“Some consultants remain on a commission, plus bonus,
structured remuneration, which is again based on clients’ performance.”  

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Daniel van Niekerk 8 years ago

I like that.
Cold calling is for those stuck in the 90's when most expats were perhaps a bit more gullible. It can only be good for everyone at the end of the day !

Daniel van Niekerk - CII
Wealth Manager Thailand