Just shy of two thirds (61%) of total revenue for advisory firms is now derived from recurring rather than initial fees as new regulations and market forces evolve the industry, according to the 11th edition of Insight Discovery's flagship Middle East Investment Panorama (MEIP) annual report.
This key indicator of growing professionalism was based on insights from CEOs of advisory as well as senior executives and product gatekeepers from wealth managements firms in the report, which revealed there are 55 private banks in the GCC, 72 regulated wealth/financial advisory firms in the UAE, 160 family offices which dominate the private office landscape and the $341bn total assets of pension funds in GCC.
In terms of the split in total revenue for businesses, 61% was now derived from recurring fees, compared with initial fees, which the survey said was an important reflection of how advisers and wealth managers measure their own effectiveness.
Well-over one-third (38%) looked at their annual commission, with roughly a quarter (24%) counting the number of referrals they get each year.
This reflected a move in the right direction following the impact on revenue from the BOD49 regulations, the report said.
Nigel Sillitoe, CEO of Insight Discovery, said quality of advice will become increasingly clearer and important as a differentiator in the region's competitive wealth management sector amid the new reality of a post-pandemic investment landscape.
To tackle concerns raised in the survey such as market and economic uncertainty and new UAE insurance regulations, advisory firms plan to embrace new technology and data analysis tools over the next year.
"Advisory firms and banks have little choice than to adapt, but they have done so remarkably quickly", said Sillitoe.
Key findings from the survey included:
- Investors now expect greater disclosure and transparency, plus are becoming more knowledgeable as access to information continues to increase
- In terms of the split in total revenue for advisory firms, just over 60% is now derived from recurring fees, compared with initial fees
- In line with an acceleration in digitalisation as one of the most notable and rapid trends to emerge from the pandemic, 38% of survey respondents said the greatest change to how they make investment decisions today is by dedicating more resources to technology
The MEIP also included a separate survey on end-of-services benefits (EoSB) in the UAE commissioned by Zurich, Equiom and Mercer to Insight Discovery to gauge the perceptions of the Dubai International Financial Centre (DIFC) Employee Workplace Savings (DEWS) scheme
The confidence in the DEWS scheme is particularly notable when comparing the responses of employees in the DIFC with the responses of employees across the rest of the UAE, where only 40% of UAE respondents outside the DIFC said they were aware of how their gratuity works and what it means for them.
Two-thirds were also confident that they knew how their gratuity worked, as well as what it meant for them financially.
Around 30% of respondents across the UAE have either only a basic level of awareness about their gratuity, or are completely unaware of their gratuity, while 35% of UAE respondent employees were either "not very" or "not at all" confident about receiving their gratuity payment when the time came.
The much higher level of confidence and understanding amongst DIFC employees, who have only been working with DEWS for the past year, shows "the significant trust generated - in such a short time - by the greater transparency, accessibility and personal control provided by DEWS," said Sillitoe.
The survey also highlighted the savings gap between expatriate and other employees in the UAE. For example, 45% of expatriate employees either had no means of maintaining a decent standard of living in their retirement, or were planning to work beyond retirement age to derive sufficient income, while 61% of expats said they had no long-term savings at all.
Claudia Maldonado, DC Solutions Leader at Mercer Middle East, said: "The opinions of DIFC employees familiar with DEWS demonstrates the importance of the scheme in focusing individual employees on the need to save for their future, by offering flexible and attractive investment options able to meet the requirements of individual employees and their savings goals."
In addition, by facilitating a new approach to savings via the workplace, an increasing number of employees, "are also choosing to make additional voluntary contributions from their salaries into the DEWS plan," she added.
By offering a certain amount of protection for individuals in terms of gratuity, DEWS has set a new tone in helping employees take the first step in building comprehensive savings and retirement plans.
The success of DEWS will also hopefully help more expats become aware of the need for planning, "to start to put in place relevant and suitable financial strategies to support them in retirement, triggered by the benefits of greater certainty in employee-related savings," said Reena Vivek, SEO at Zurich Workplace Solutions.
The outcome of the survey also suggests there is greater scope for DEWS to be used as a benchmark going forward.
The considerable planning and, especially, the broad industry consultation that went into the development of this legislation and, ultimately, the detail of DEWS, "presents a viable, and now tried and tested blueprint, for the rest of the UAE - and possibly even the region - to build a culture of long-term financial planning supported by regulated solutions that effectively enable discipline and consistency," said Chris Cain, Client Services Director (Middle East) at Equiom.
