Sunday, Jan 22, 2006
This week's space is a result of three recent questions, amalgamated they add up to: did I think that financial planning would "catch on" in the United Arab Emirates?
The first draft of the question was raised in Mumbai where financial planning certification now exists.
According to Indian stock brokers Padmakshi, there are now some 250 registered financial planners in India which reflects the regulators nascent steps to bring a professional code of conduct to the financial planning art in India. 250 out of a billion is a low count, but the point is that the process has started.
The examination regime is tough, being based on the Certified Financial Planner exams of the US.
A trend India seems to have copied from Singapore and a number of other Asian countries.
The second draft of the question was raised in Japan, where the Japanese seem to be sensitive to advice and sales to the domestic market leaving minimum attention to what and how financial planning is dispensed to expatriates.
Culling process
Finally to Hong Kong, where the recent impact of internal regulatory audits seem to have raised the standard of financial planning. "Without a doubt", says Howard Clark-Burton, "the industry is well on its way into morphing into a profession".
Clark-Burton runs a team of 20 Independent Financial Advisers in Hong Kong for Financial Partners International.
For evidence, Clark-Burton points to: compulsory examinations for individual licensing, which means that before "advice" or products can be sold, advisers need to obtain the SFC and CIB (Security and Futures Commission and Confederation of Insurance Brokers) licenses which consist of passing the "fit and proper" definitions of an adviser with some emphasis on examinations.
Maintaining the license requires demonstratable Continual Professional Development files. Supporting this professional push is a growing log of legal case histories which help codify the advisers "duty of care".
All in all, a long way from the uncodified regime that exists in the UAE. This is odd.
The UAE purports, with some justification, world wide standards in investment opportunity. The Central Bank inspections are conducted to explore: systemic risk, consumer care, due diligence and anti-money laundering procedures.
Yet there is no clear practice or agreed standard on what constitutes "good financial planning advice", and what constitutes good financial planning procedure.
Is it important? Whilst there are good financial advisers in the UAE, there are clearly some poor ones with little control or "culling" process to prevent their spread.
It reminds me of Mayor Giulliani's "broken window theory".
The theory states that if you allow one bunch of boys to throw stones at a building and break a window, soon enough all the windows will be broken.
Once the one building shows the features of dilapidation it soon spreads to the rest of the community. The theory goes that, to avoid a community from being run down, you need to step in and set the rules at the lowest possible level to keep community standards from falling.
In the world of financial services, financial planning is often seen to be the "poor cousin". The "doesn't really matter" end of financial services.
At this end, some of the windows are broken. Internationally, it does have an impact on the UAE's reputation.
The good news is that the solution is straightforward: regulate and set standards. When that happens, I will be able to answer that financial planning is "catching on" in the UAE.
- The writer is the Managing Director of Mondial (Dubai) LLC.
Gulf News 2006. All rights reserved.
