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Robo-advising in the UAE: Wealth management is now for everyone

Traditional financial advisers don't usually offer anything for free other than an introductory meeting and basic financial analysis. Here's what robo-advisors do for you.

Traditional financial advisers may charge a fee equal to 1% or your portfolio but most robo-advisers cost half of that or less Some robo-advisers offer free tools you can use whether you become a customer or not Robo-advice leveraging AI and data analytics is an area of FinTech that has enormous potential to improve investment decision making in the Middle East

According to Zawya, when signing up with robo-advisors, an investor will be greeted with a series of questions designed to gauge their risk profile. They will then get financial investing advice based on computer algorithms and will be matched with a specific portfolio (of exchange traded funds or ETFs), usually a combination of highly risky and conservative assets and holdings.

In news provided by CNN/ CNN Dubai Business , the media’s John Defterios visited an investment bootcamp in Dubai to hear about the region’s robo-advising fintech startup.

Sarwa, the region’s first robo-advisory, hosted the event, with an underlying bootcamp theme “how best to navigate these turbulent times”.

CNN spoke to the CEO, Mark Chahwan about the opportunity the company saw in the region: “It can be quite daunting because the industry made it that way. You don't know where to start. You hear of minimums that are quite high for someone starting out and the fees seem to be hidden sometimes. So that's where, we when we moved to the region and we started speaking to a lot of our friends, they definitely needed help with getting started.”

Read The rise of robo-advisors: The end for wealth management firms?

What benefits can Robo-Advisors provide?

One of the biggest benefits of using a robo-adviser is the fact that  where a traditional financial adviser may charge a fee equal to 1% or your portfolio or more (+ possible commissions on the investments they sell you), most robo-advisers cost half of that or less.

With Betterment, a key international player in Robo Advisory, you'll pay 0.25% per year on your balance — or about $25 per year for every $10,000 invested in your account.  

While traditional financial advisers don't usually offer anything for free other than an introductory meeting and basic financial analysis, some robo-advisers offer free tools you can use whether you become a customer or not.

Key UAE robo-advising fees

Sarwa has around 2,700 registered users, is now looking to reach an underserved customer base, with its mission to “democratise the whole wealth management industry,” according to Nadine Mezher, chief marketing officer and a co-founder at Sarwa, as published by The National . 

Sarwa, whose management fees range from around 0.85% yearly for account balances under Dh183,662 ($50,000) to 0.5% for balances over Dh367,325 ($100,000), describes itself as a hybrid robo-advisory, with wealth advisers available to help over the phone or in person if a customer needs financial planning for specific goals.

Another UAE robo-adviser is Wahed Invest, which was founded in the US in 2012 and offers sharia-compliant investment portfolios.

“The company has fees of 0.99% for account balances from Dh367 ($100) up to Dh918,313 ($250221.5), and fees of 0.49% on balances over this amount.

Richard Teng, CEO of UAE’s Financial Services Regulatory Authority (FSRA), said, “Robo-advice leveraging Artificial Intelligence and data analytics is an area of FinTech that has enormous potential to improve investment decision making in the Middle East and Africa region. With this guidance, we aim to make it easier for digital investment businesses to operate in ADGM and in turn provide investors with greater access to professional investment tools to help achieve their financial goals.”