The murky world of the offshore IFA

With very few exceptions, these unregulated and often ill-qualified individuals have but one person's interest in mind, their own.

Imagine you are a hyena looking for prey in the African bush. Do you pick the strongest animal for a challenge? Or wait quietly until you see a baby that has lost its mother and pounce?

This is exactly what offshore IFAs are doing when they phone around offices, or appear cruising clubs or business groups. The aim is to find the next victim. Of course, the approach is subtle, and the objective can be quite a long-term relationship - but there is no doubt who will win and on whose terms.

It is not that much different in more sophisticated markets. But they do have regulators who periodically check-up on IFA credentials, and there is a body to complain to, if you feel ripped-off.

In the Gulf States regulatory systems are still in their infancy, and markets are loosely regulated to the advantage of the unscrupulous adviser. Indeed, many of the 'professionals' are IFAs whose careers went sour in other markets and who headed for the sun.

The sort baby-like cry that will attract the attention of the roaming offshore IFA is any sign of financial weakness or most typically an irresponsible approach to investment.

'All I want is somebody to help me keep my money safe for a rainy day, but I don't have a clue about finance.' This is the type of statement that would send cash registers ringing in the mind of any offshore IFA worth his salt.

From this point it is a matter of establishing bona fides with the client/victim - perhaps an impressive-sounding sponsor, or a US affiliate, or a swanky office - then it will not be long before the investor is signing on the bottom line.

What would they like: Life insurance for a single person? A mutual fund which is run by the IFA's own company with high fees and dismal performance? Funds which pay the highest commission to the IFA and lowest amount to the client? Or just a plain Savings Plan that is nothing more than a bank account with upfront fees paid to the IFA?

Perhaps the GCC regulators should be a bit more active, but it is really up to people to look after themselves in the financial jungle. Parents should teach their children about this sort of thing, so should schools and colleges. Naivety and innocence in financial affairs is an invitation to the unscrupulous, and hyenas won't go near the stronger beasts of the jungle.

Go to an international or reputable local bank if you want to invest for a rainy day - but try to at least appear marginally interested.