The UAE Insurance Authority has published draft regulations consolidating rules on insurance broking, online broking transactions, appointment criteria and qualifications for top positions in insurance broking companies and investment advisers.

It prescribed criteria for filling positions including chief executive, operations manager, compliance officer, specialist or professional staff, branch executives and sales staff.

Most advisory firms in the UAE are taking steps to abide by the Insurance Authority’s norms for deploying qualified advisers.

They prescribe minimum qualification or certification levels for financial advisers in the wake of increasing competition and complaints.

There has been rampant mis-selling of investment products, putting the reputation of many investment advisory firms at risk.

The draft regulations had proposed curbing the untrained specialists who sell investment products after the regulator received a number of complaints from residents about mis-selling, hefty commissions, upfront fees and surrender charges for savings products collected by investment advisers.

Dearth of quality advisers

On the issue of prescribing minimum qualification and certification for financial advisers, Navin Nihalani, founder and chief executive, Compass Insurance Brokers, said: “That’s the first step that should be implemented.

“Experience can also be allowed as a replacement for the same initially. But a continued education programme should be implemented which is the need of the hour and it should be linked to individual adviser licensing by the regulator.”

Nihalani had said there was an absolute dearth of quality advisers and it’s time the industry implemented standardised qualifications.

“The new draft may have both pros and cons. If implemented, this could do good for the industry. But they should allow experience as a replacement for education in some positions. Also they should not restrict life and GI sales people to do both activities as long as they are qualified to do both,” he said.

Krishnan Ramachandran, chief executive of Barjeel Geojit Financial Services LLC said, on top of prescribing minimum qualification and certification, advisers must undergo a minimum period of internship and acquire experience before they start advising clients.

Ashok Sardana, managing director of Continental Insurance Brokers, is of the view that investment firms should hire only qualified people who want to service their clients. He agreed with others and suggested that advisers must have qualifications before offering any financial solution.

“It should be mandatory for all advisers to be qualified to some level to provide advice as they are dealing with people’s life savings and retirement funds, and therefore firms cannot have non-qualified advisors advising people.”

CII’s training help

Gaenor Jones, regional director of the Chartered Insurance Institute (CII), said: “Those companies who continue to value the importance of regulation and who support their employees in their attainment of professional qualifications will continue to prosper.

“Ideally, the HR function should be putting robust and appropriate training plans in place for their employees so that they have achievable time-considerate objectives to meet, enabling advisers to study and attain qualifications without any negative impact on their day-to-day obligations,” she said.

“We fully endorse and support any drive to raise professional standards in the financial planning and insurance sectors, and that endeavor starts with encouraging advisers to attain minimum qualifications on which they can build a wealth of tailored qualifications appropriate to their career path and chosen areas of expertise,” she added.

CII is working closely with HR professionals to identify needs and address the requirements, before providing relevant study materials and examinations. The institute offers a wide array of qualifications for the insurance and financial planning sectors.

These are available in both English and Arabic and are appropriate for both newcomers to the sector, as well as more senior stalwarts.

The new year, however, dawned with the optimism of taming the pandemic and a positive outlook on growth.

International Adviser asked a cross-section of advisers in the UAE to take stock of last year and crystal-gaze the prospects for the new year.

Vaccinate to victory?

Advisers in unison said the 2021 outlook is positive and promising in view of the prospects of containing the pandemic and regaining investor confidence.

Ashok Sardana, managing director, Continental Insurance Brokers, said: “Now that vaccines have come and are being used widely, the fear of the virus spread has somewhat subsided and growth prospects are becoming rosy.

“The attitude depends more on us than on our surroundings. The outlook for 2021 is of course positive.”

Krishnan Ramachandran, chief executive of Barjeel Geojit Financial Services, is of the view that 2020 has been a year of consolidation and opportunities for advisory business on the whole.

“There were periods of uncertainly especially; during March, April and May. But after this period of lull the investment horizon showed signs of improvement month-on-month.

“This period also witnessed the rise of the retail and mass affluent investors who actively participated in the markets and have reaped good returns and offered prospects to rebalance their portfolios.”

Navin Nihalani, founder and chief executive of Compass Insurance Brokers, believes 2020 was one of those years where Wall Street became a fantasyland that was unaffected by events in the real world.

“It’s been a bull market like never before and almost everyone has made money in the markets even with passive instruments like ETFs and index trackers. There is a massive difference between valuations and earnings of most companies which has created the perfect platform for markets to crash.”

Turnaround and after

How will the new year play out for advisers and investors?

Ramachandran says most macro-economic indicators, globally, have turned around and there are expectations of the growth momentum getting back on track in 2021 and beyond.

“The focus for advisors in 20201 will be on identifying value creating propositions and risk mitigating investment opportunities for their clients.”

Nihalani advises that investors should exercise caution soon as the rally is held up by some serious quantitative easing programmes and stimulus packages.

“The next tumble for the markets, which might still be far away as there’s yet steam left in certain sectors, will be devastating if people don’t exercise caution.

“I strongly believe the need for active investment advisory will be highlighted heavily in this new decade as people will realise that passive investments can be very expensive when markets collapse.”

Regulatory measures

Last year saw some significant regulatory measures after a long gap.

The implementation of the BOD49 regulations by the UAE Insurance Authority has been perceived as a game-changing exercise, which forced the advice market to change track.

Sardana said businesses should adapt to the new environment. “We have to work smarter. Add new solutions to what we offer to our clients. Collaborate with different advisers who offer other specialised solutions.

“Sometimes a big jolt is required to get out of our comfort zone,” he said.

The market kept guessing about the prospects of big ticket consolidation and the exit of small players following the implementation of BOD49 regulations.

“Many brokers will consolidate which is the regular way to go with new regulations,” said Sardana

Ramachandran agrees with Sardana. The prospects of consolidation will continue to happen in a much faster pace. Advisory firms need to re-invent their business models & processes and create an environment of mutual trust.

He said the new regulations are bound to create more transparency and establish best practices in the insurance sector.

“This will benefit both the customers and brokers alike in the long term.”

Was it really game-changing?

But Nihalani  does not see any big ticket consolation.

“Consolidation is a complex subject and even though the Insurance Authority allows for mergers I don’t see a lot of those happening at the moment.

“It has already triggered the exit of smaller players who are getting acquired by the bigger ones.

“Mostly it’s book and advisor acquisition than an actual license acquisition at this stage as the IA license isn’t as affordable as in other more regulated jurisdictions around the world.”

When others call it game-changing, Nihalani says the recent regulations as yet to earn a game-changing qualification. “BOD49 isn’t final yet as we are yet to see some slight amendments.

“As a lot of advisers leave the industry due to the same and a lot of clients are orphaned, it’s going to be difficult if  markets actually collapse and a lot of clients are left without the right advice at the right time.

“These changes definitely favour the clients more than the adviser in terms of product charges but in effect don’t favour either as the cost of good advice is ‘immeasurable’.”