15/04/2016

How To Avoid Poor Financial Decisions

I remember coming to Dubai for the first time in 1999 from the UK. In the UK, even all that time ago, the financial services industry was highly regulated. Advisers were required to be qualified, have a certain amount of experience and there were restrictions on what products and services could be offered to the general public. None of these safeguards existed in the UAE at that time and they still don’t.

Unfortunately, expats often make the assumption that regulation operates just the same as it does back home. It does not. Unregulated advisers still exist in Dubai; many retail investors are sold funds designed for professional investors and many advisers have no qualifications or experience.

Ask Questions

In order to provide you with advice tailored to your needs, an adviser will need to ask you questions. Therefore it only seems fair that you should ask questions too. Recently I was sent a questionnaire by a prospective client. He asked all of the right questions but this is extremely rare. It was the first time I had been asked in over 20 years of practice. If anyone would like to know what questions they should ask an adviser I can send you some. Whilst there are no guarantees in this life: using unlicensed, inexperienced advisers can seriously damage your wealth. So, do your homework.

Advice In Writing

The second point is to make sure you receive a written recommendation. This report should be in plain English and should include: a summary of your current circumstances; your objectives; what the potential solutions are and a recommended solution. There should also be an explanation as to why that option was chosen and how it helps you meet your objectives.

This is important as financial services are generally very long term products requiring regular reviews. This report acts as the cornerstone for the financial planning you intend to achieve using this product. It should also be followed up with annual reviews identifying how this product is achieving the goals you have set and what adjustments need to be made to keep it on track.

Match Adviser Remuneration with Plan Term

Third, recognise that Financial Advisers are human beings, we have the same failings as everyone else. Consider the way they are remunerated (commission). Make sure that their pay structure is such that they have an incentive to provide you with service for the whole of the term of the plan. Not just the first year or two. Also if the person who sold you the plan moves on, make sure there is something for the person who takes over.

Finally, it is your money. You may be asking for someone’s advice but ultimately you are responsible for the decision to invest or not and only invest in what you understand.

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