Do financial planners add value to expats in Dubai?

Expats in the UAE have different experiences with financial advisers/planners/consultants/wealth managers or whatever the title is. Before I will discuss experiences in the UAE from my own observation and stories that have been shared with me by clients and peers, I will look at what studies and surveys have to say on this matter.

A three year study performed by 15,000 Canadians, has concluded that clients feel a significant higher level of financial and emotional well-being after establishing a financial plan. 81% feel they are on track with their financial goals for the future and 62% has improved their ability to save money in the past 5 years.

Research conducted on behalf of the financial planning coalition shows that consumers could not identify certified financial planners from other advisers. They were sometimes given inadequate guidance. Around 33% received two services. Less than 10% got advice on taxes, estate planning, education planning, debt management or personal budgeting. 30% said they weren’t given the help they requested and 27% never received a financial plan after requesting for it.

In 2013 HSBC conducted a survey under UAE residents regarding their retirement planning. 46% of the UAE residents are unable to save due to high cost of living. 57% expect cash savings to be their main source for retirement. UAE residents expect that their retirement will last 15 years, but their savings will only last for 9 years. One of the main reasons UAE expats don’t save money is because it’s “too far away to worry about”. 51% of the UAE expats expect to start a business in the future. A lack of understanding about retirement plans is given as an important reason for not saving for their retirement.

Almost all UAE expats have received calls from financial companies, insurance companies, brokers and banks that request them to invest for their future. A lot of times I hear clients saying that they have been “harassed” and that they are “sick of being approached 10 times a day” for financial investments/savings. It’s not easy to be a potential target as an expat in the UAE, however HSBC shows that there is a need for financial planners.
Which need is that? If you save cash money and leave it on the bank you will get on average 0.187% interest. It will take you 256 years to double your money. A competent adviser can add value by providing expats financial tools which can make expats double them money in 14.4 years (5% growth) or 9 years (8% growth).
Banks are considered safe in the UAE, but if they collapse you have no capital guaranteed. I’m from the Netherlands and in my home country the capital guarantee is up to EUR 100,000 on saving accounts. In 2008-2009 a couple of the biggest banks went bankrupt and needed to be bailed out by the government. The government bonds are Triple AAA rated, almost as strong as Germany and nobody saw it coming before it happened.

Another problem which is underestimated in the UAE is the inflation growth (see charts below). Inflation has been going up the past years and now it’s at 4%, which means that in 18 years things will be double the price. As an example if an expat puts $100,000 on the bank right now, that amount will have the same value as $50,000 right now.

According to the research conducted on behalf of the financial planning coalition there is a need for more advices on taxes and comprehensive financial solutions. Now in the UAE we don’t have taxes, but all expats have taxes in their home country and if they want to leave UAE, it’s important to safe guard them from losing capital in the process. Do note that financial planners are not tax advisers and can’t be trusted on their advice without proper backing of sources. Always ask for the source, as an expat you don’t want to follow an advice and end up in problems, just because somebody sounded smart and you followed their advice blindly.

Adding value to UAE expats is possible by financial planners, however you need to have the right person in front of you. This counts from both ways as a financial planner I also need to have a qualified person in front of me in order to add value to their situation. When both parties meet make sure as an UAE expat that you are being advised something that will improve your life and not just an idea of something which will never happen. 51% of the UAE expats want to start a company one day, which is a good drive in people.

Ideally, I would want to see everybody successful around me, however I am aware of many expats that were not successful in setting up their company and have lost all their money doing it. In case you make it and create your own company, how can the market be big enough for 51% of their residents to have their own company? The fact is that competition is tough in UAE. When financial planning is done probably it will not be exciting and very few people will become millionaires because of it. On the other hand it will most likely create a higher possibility that an UAE expat will be financially taken care of and put on a path which will lead to financial independence.

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