Complex Made Simple

Do you need a financial advisor? How should you manage your money?

By: Ambareen Musa, Founder & CEO,

In 2008, Musa worked as a consultant for Bain & Company Middle East. She went on to set up the consulting arm of MasterCard Middle East and Africa, where she stayed for two years before founding in 2012.

Over the last few years, there has been a lot of talk about rampant misselling of investments in the UAE. Quite a few gullible investors have found themselves stuck in long-term investment schemes and insurance plans that are completely misaligned with their financial objectives. And what’s more, investors are bleeding money in exorbitant fees and charges.

Times like these underscore the value of trustworthy and legitimate financial advice. The team sheds light on the how, what and why of professional financial advice.

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Advisor or DIY – How should you manage your money?

Most people who manage their investments themselves usually let emotions come in the way of sound financial decision-making. For example, while it’s all fun and games when the stock market is booming, many would panic and want out the moment it hits a downturn. This is one of the times when a seasoned financial advisor can keep a long-term investment outlook in mind and help you with a rational view of how you should manage your hard-earned cash.

How do financial advisors get paid?

How your financial advisor gets compensated shouldn’t be a mystery. Before enlisting the services of an advisor, make sure you enquire about how he or she gets paid. This will help you understand if they are a broker or advisor, and how unbiased their financial advice really is.

From all-inclusive financial planners to brokers and agents, financial advisors are spread across a wide spectrum. Here’s a look at two of the most common variants and how they get compensated.

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Comprehensive financial planners

Comprehensive financial planning includes multiple areas of financial management – Investments, insurance, debt management, retirement planning, estate planning, as well as taxes and offshore banking specifically for expat investors.

Most financial planners follow a fee-based compensation structure. These advisors are paid a fee by their clients, which is a percentage of the assets they manage. This fee may vary across different portfolio sizes, and you may be able to negotiate a lower fee for a larger portfolio size.

This fee covers the two types of services that the advisor provides – Financial advice and investment management. The fee-only compensation structure eliminates any potential conflicts of interest, since advisors are only paid by the clients and not by financial companies to get the clients to invest with them.

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Investment brokers or insurance agents

Although many investment brokers or insurance agents prefer to call themselves ‘advisors’, they usually act as salespeople for their employers. Since these brokers are compensated via commissions paid by the employer or directly by the financial company whose product they sell, their loyalties and primary obligation may not be towards the client.

Clients must take their advice with a bit of prudence, since highly recommended financial products may only be the ones that pay the highest commission to the broker. While such a product may be suitable for you, it might not be the best in helping you achieve your financial goals.

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How can you choose a credible financial advisor?

There are some great and sincere financial advisors out there, and some not-so-credible ones too. How do you find one who is genuinely interested in helping you make the most out of your money, and is willing to put your needs ahead of their own?

There are many ways a financial advisor can add value to their client relationship. A good advisor will…

1-Actively listen to you and understand your financial situation and goals

2-Explain the rationale behind his investment advice and give you straightforward answers

3-Disclose all fees and charges up front

4-Be accessible whenever you need financial advice

5-Keep you informed about how your investments are doing and if and when a change in investment strategy is warranted.

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It’s just as important to know what to watch out for when choosing an investment advisor. Beware of advisors who

a-Talk about guaranteed returns on your investment

b-Dodge questions about how they get paid

c-Insist on selling you a specific financial product

More specifically, if you’re looking for a financial advisor in Dubai, choose one who is…

1-A qualified investment professional, preferably a Certified Financial Planner

2-Affiliated with a reputable and regulated financial planning organization

The bottom line – As an investor, you must acknowledge your advisor’s responsibility towards your investments. And while it’s great to have someone manage your money for you, it doesn’t hurt to do some of your own research and learn about finance to be able to ask the right questions and keep your advisor on his toes.