Dubai: Financial advisers across the UAE are concerned that majority of individual investors in the UAE tend to be too focused on short-term market events, leading them to make irrational investment decisions, according to a recent survey of 150 financial advisers from the UAE — part of a larger Natixis global study of 2,400 advisers in 14 countries across the globe.
About 87 per cent of UAE-based investment advisers say it is important to prevent investors making emotional decisions which are often irrational; this in line with advisers globally (82 per cent) who believe their ability to keep clients from making emotional decisions is a critical success factor.
Seven out of ten (69 per cent) advisers from the UAE believe making emotional investment decisions is the biggest mistake individual investors make along with focusing on short-term market movement (64 per cent) and having no financial plan (59 per cent).
“Given today’s market complexity, the role of advisers has become critical to helping investors set long-term goals and stick to them. Being consistent is the key to avoid making rash investment decisions”, said Terry Mellish, head of global institutional services and the Middle East North Africa business at Natixis Global Asset Management.
While the survey finds that, both at global level and in the UAE, the overall risk appetite of investors is on the rise and investors in general are keen on discussing risk with advisers.
The survey revealed that 60 per cent of UAE advisers (63 per cent globally) say clients today are more interested in discussing risk than they were willing to do so over the past year, with 50 per cent (57 per cent globally) claim their clients’ level of investment risk is increasing.
The Natixis survey also shows that advisers across the emirates are increasingly aware of the need to tailor their offerings to the unique needs of rising powerful demographics such as millennials and women investors. More than eight out of ten (84 per cent UAE, 82 per cent globally) advisers agree that establishing a relationship with millennials is critical to their success. And they think that women investors will represent 40 per cent of advisory clients in the UAE by 2018.
Advisers in the UAE, however, are confident in their ability to cater to such groups. Nearly four out of five (79 per cent) believe they have adequate tools to support such demographics, and 55 per cent (60 per cent globally) believe that those able to attract younger clientele will grow faster in the long-term compared with financial advisers who only service older clients.
“Clearly, the investment landscape is changing, but advisers are up to the challenge. Complex and changing markets are forcing advisers to rethink the role of alternatives and the mix of active and passive investments in their portfolio strategies,” Mellish said.
Despite challenging markets, UAE-based advisers expect business growth of 15.7 per cent on average in the next 12 months.
In the UAE, 49 per cent of advisers anticipate market performance to be an important driver of growth (45 per cent globally).
However, advisers accept there are potential factors that could hinder growth.
Amongst the macro-barriers hindering current business, the biggest factor is seen as assets withdrawn by departing clients, highlighted by over half of the advisers within the UAE, at 57 per cent.
Market performance and regulatory change were also seen as major contributing factors at 32 per cent and 20 per cent respectively.