Dubai: Long term financial planning among UAE residents is relatively weak with more than one-third (37 per cent) of people surveyed in HSBC’s latest ‘The Power of Protection’ study, say they have never had a conversation with anyone about long-term financial security.
According to the study, this lack of forward planning may be related to a sense of economic optimism far above the global average. While nearly 80 per cent of respondents in the UAE say they are managing well or very well, globally that number is only 67 per cent, and looking to the next three years, 96 per cent of people in the UAE say they expect their financial situation to either improve (50 per cent) or stay the same (46 per cent).
The Power of Protection is an independent consumer research study into global protection needs and trends, commissioned by HSBC. It provides insights into people’s concerns about the future and how they are protecting themselves financially, around the world. The report represents the views of over 13,000 people in 13 countries, and over 1000 respondents in the UAE.
The report also finds that nearly nine in 10 people in the UAE (89 per cent) are supporting a parent or child financially, and most (73 per cent) say those they support would not manage well if their assistance were significantly reduced.
“It is a well understood dynamic that most people in the UAE, whether Emirati or expatriate, are supporting family members. As well, the strong sense of optimism about people’s financial future is no surprise, given the country’s visionary leadership, commitment to smart, sustainable growth, and the powerful fundamentals underlying the broader UAE economy. However, even in the most robust market environment, uncertainty and unexpected conditions can affect any working person,” said Gifford Nakajima, Regional Head of Wealth Development, Retail Banking and Wealth Management, HSBC, MENA.
While globally, only about 50 per cent of those with dependents are supporting a grown child, spouse or parent, in the UAE 79 per cent are supporting a grown child, 81 per cent are supporting a spouse, and 80 per cent help a parent.
On the other hand, people in the UAE take a greater satisfaction in providing this support than those elsewhere, with 72 per cent saying they feel like a good provider, compared to 65 per cent globally and 73 per cent saying they feel appreciated for their support, versus 61 per cent globally.
When asked about risks that could put their financial security under pressure, respondents in the UAE mention becoming unemployed (39 per cent) as the biggest risk, followed by a sharp increase in the cost of living (36 per cent), reduced income (33 per cent), and economic downturn in their country (24 per cent).
While unemployment and cost-of-living increase are the top risks globally, two other leading risks cited globally are among the lowest perceived risks in the UAE. These include developing a serious illness, which is 32 per cent globally and 12 per cent in the UAE, and having a partner or family member become seriously ill, which is 30 per cent globally and 13 per cent in the UAE.
The study finds that UAE respondents are less prepared for unexpected outcomes, and this extends to insurance products. Only about 20 per cent of respondents have a life or disability insurance policy that would pay a lump sum or regular sum in the case of death or inability to work due to illness. That compares with more than 30 per cent of people globally.
“Given the importance that supporting family members plays in the lives of UAE residents, it’s particularly important that people have a financial plan in place that not only ensures you meet your life goals but also protects them. It can help balance competing priorities such as retirement, school fees and support to parents, and help families become more financially secure in the future. Making time to talk with relatives about your family’s financial future is an important step in preparing for life-changing events and putting financial safeguards in place. Seeking professional advice is another meaningful step to establishing a financial plan,” said Nakajima.