Trust me, I’m a financial consultant

How would you feel sitting down in front of a dentist with drill in hand, who announces: “This is my first go. I don’t have any qualifications, but I’m a quick learner”. Sitting comfortably?

We tend to sit in front of lawyers and doctors assuming that these professionals know what they are doing. We don’t ask them if they are competent, but trust their reputation. A second opinion might sometimes be required, but we assume they are qualified because the authorities license the practitioners in these industries.

But, in the UAE we are not yet at the point where the regulators of the financial services business have defined who can and can’t provide financial advice. It is possible to approach banks and financial advisory businesses operating under an array of licenses, and meet practioners who sell products, without any knowledge of how they work. The authority that regulates the legal and medical professions is missing.

That, however, might change very shortly. Behind the scenes we can see the emergence of a “twin peaks” regulatory structure: the UAE Central Bank will probably deal with financial prudence, while the Securities and Commodities Authority (SCA), will handle the “conduct of business”.

It is already in the public domain that to improve the “conduct of business” stockbrokers have to pass four CISI (Chartered Institute of Securities and Investment) exams. Somewhere around about now, the axe will begin to fall on stockbrokers who have not passed these exams. They have been given the time to pass; the exams are relevant to their trade; and why would you want to use a dentist who doesn’t know how to use a drill? This action is in keeping with the SCA’s aim of building fairness and quality into the countries capital markets.

With the stockbrokers tidied up, who next? Financial consultants? The companies listed under the “financial consultancy” button on the SCA site will confirm that they are engaged in one way or another with the authority about examinations. Hopefully, this is the beginning of setting a standard for financial advice across the country, across licenses, across free zones. Watch this space.

The developed world has a lead on professional qualifications for sure, but not by much. Outside of the US, the oldest generation of practioners in the industry started their trade without any academic benchmarks.

Now, a paper recently released by the Investment Management Consultancy Association (IMCA) called “Defining Wealth Management: Servicing [high net worth individuals] with a distinct body of knowledge”, argues that “specialisation” is new to the financial advice industry.

Other professions, the report notes, such as doctors and nurses, ‘specialise’ as a means of improving competence. The IMCA have an agenda in selling their certification, but nevertheless, their main point that separating the competencies of financial planning and wealth management is good for the overall profession, is correct.

The “good news” is that the IMCAs definition of the main role of a wealth manager, looks a lot like that of a financial planner from the CISI. The “bad news” is that they use different terms for nearly the same thing.

Maybe they can agree on the responsibilities of “relationship managers” or “financial consults”, leaving “financial planners” and “wealth managers” to decide on the minimum amount of funds they are willing to manage.

The writer is chief executive officer of Mondial Financial Partners.