Group investment effort begins to pay off

With fixed-term savings and investment plans failing to provide many investors with the flexibility or returns they need, a growing number of people are supporting each other as they take control of their financial futures.

Dorota Lewna and Sebastien Aguilar have adopted a do-it-yourself approach to their finances. Anna Nielsen for The National
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When Sebastien Aguilar first arrived in the UAE six years ago, he says he made the same mistake that many others do.

After thoroughly researching the market and carefully selecting a financial adviser, he signed up for a fixed-term savings plan on the back of their advice.

“It wasn’t tailored to my needs and actually locked me in for 10 years in my case with relative inflexibility,” says Mr Aguilar, 31, a consultant in energy management from Belgium.

“My contribution was US$815 [per month] but my fees were up to 4 per cent on average annually, and that is huge really. Thankfully I wasn’t investing everything. It was just part of my savings. So I looked at other options.”

And that is when he realised he didn’t need a financial adviser at all. Reading investing sites online and information in books taught him all he felt he needed to know about going it alone.

Mr Aguilar is part of a growing group of people who are adopting a do-it-yourself approach to their personal finances as they reject the costly fixed-term investment and savings plans sold by financial advisers.

The National hosted a roundtable this month to discuss whether fixed-term savings plans are providing any benefit to those who buy them and sell them amid “an alarming amount of complaints” from policyholders, according to the UAE’s Insurance Authority, which is bringing in new regulations to protect consumers.

Mr Aguilar, who welcomes the new regulations, says he soon realised many people were in the same situation as himself.

“No one was really sharing this know­ledge with everyone. It is not something we talk about at school. We don’t talk about this with family,” he says. “I started just explaining this to my friends, my colleagues at work. And then the more I was talking about it the more I realised this is something people should know about.”

Through his research, Mr Aguilar stumbled upon a forum about Bogleheads, an investing philosophy that follows principles established by Jack Bogle, the founder of Vanguard, one of the world’s largest investment companies. He promotes low-cost, conservative index funds and encourages people to buy and hold their investments long-term.

“Bogleheads is a global community really that follows the principles of passive investment,” says Dorota Lewna, 33, from Poland, Mr Aguilar’s fiancée.

“There is a whole strategy involved in that, but it is basically about investing through discounted brokers as cheaply as possible, so lowering the fees as much as you can. When you look at the local retirement plans that are offered, they are usually based on about 2 or 3 per cent in fees. We are trying to keep the funds below 1 per cent and preferably about 0.5 per cent. These are usually index funds, so they are not actively managed by fund managers but they are run by computers and they are basically reflecting the market average indices.”

Mr Aguilar spotted a message left on the international Bogleheads forum by Jennifer Lincoln, 32, from the United States, a fellow Boglehead advocate, in 2014 asking if anyone in the UAE was interested in meeting up and forming their own chapter. He said he was, and the UAE Bogleheads Common Sense Personal Finance and Investing group was born about two-and-a-half years ago.

Ms Lincoln, who still lives in Dubai, says it quickly became clear Mr Aguilar had a lot of enthusiasm for the subject, so she asked him to join her in running the group.

“I am very lucky and persons involved in Bogleheads UAE are very lucky to have Sebastien, as he is a master organiser who has intense enthusiasm for the group and its cause,” she adds.

Initially the group had 10 members and would meet casually every few months. Today it has 300 Facebook friends and about 75 who attend meetings, which tackle the entire spectrum of personal finance, from getting out of debt to savings and investments.

Ms Lincoln, who has lived in the UAE since 2013, was introduced to the Boglehead philosophy by her father.

“I come from a family of persons intensely interested in investing, especially my father, and life was planned around investment strategies and milestones. I opened my retirement account at age 14, invested in appropriate mutual funds, and contributed the annual maximum thereafter,” she says.

“After I landed my job in the UAE, I was sufficiently financed to take my investment planning to the next level, as well as set up a Bogleheads chapter to create a group of like-minded investors who believed in the Bogleheads philo­sophy.”

However, not all the group’s members were necessarily as knowledgeable about it when they first joined, like Cay, 31, a Filipina who has lived in the UAE for four years. In fact when she first arrived in the UAE she was a spender who took out a personal loan, a car loan, and a credit card. She started looking at her finances after her mother fell ill. She was paying down her debt when she heard about the group through a friend.

“[The group] was really helpful for me because a lot of my friends here in Dubai are mostly people who came here to work and have started spending. So it is really difficult to find people with the same mindset of saving and investing. So just because I was able to talk to people, like-minded, it really helped me prioritise my life.”

Cay paid off the last of her debt last summer and now saves 50 per cent of her salary, which she uses to invest in stocks, exchange-traded funds and index funds. Her aim is to increase her savings to 70 per cent of her monthly salary.

“One of my usual questions is about taxation, which I guess is very different from other countries. And when I was looking for advice I find it more in the Philippines. I use financial advisers from the Philippines. But then the group is really good because they contribute to their ideas,” she says.

“One of the talks Sebastien came up with dealt with, if you continue to save this amount, how soon can you retire? So for example, if you save 70 per cent of what you earn you can retire in 10 or 15 years, something like that. So that kind of guidance helps you towards a goal.”

Demos Kyprianou, 34, an organisational psychologist from Cyprus who has been here three-and-a-half years, found the group after becoming interested in saving and investing following what happened to his country’s economy in 2012-13.

"Having lived through scenarios where I saw thousands of people out of work and wondering where are they going to find money … really prompted me to start thinking about what should I be doing to protect myself from such scenarios. I had already started reading a book by a guy called Kim Stephenson called Taming the Pound. He is both a finance professional plus he is also a chartered occupational psychologist."

He started implementing the advice in the book and started reading books on the Boglehead philosophy to address his retirement. Through that interest he found out about the group.

“The real reason I joined this is also partly because you get this community feel and there is a lot of support there, so you are actually learning from people who are not trying to sell you something. It’s been enormously useful because it has given me access to information that I have been trying to find that I couldn’t get a hold of until I was referred to the appropriate books, and then ask people what they have done. Sebastien, for example, shared an example of his spreadsheet, how he monitors his returns.”

Fellow group member, Hannah Matta, 35, from the UK, has always had her retirement in mind, but coming to Dubai about three years ago she became concerned about having a higher disposable income and no pension plan.

“I knew I wanted to save. But I wanted to save and get the best return for my money,” she says.

She came across the group after reading an article in The National that quoted Steve Cronin, who runs a non-profit personal finance website called Wise.

“He had shared his views and I was Googling these long-term offshore pension plans that all the wealth managers in this region sell, so when I was Googling that and literally days away from signing on the dotted line I came across that article. I saw his contact details and I got in touch with him. He made a lot of really good recommendations. I then bought the Andrew Hallam book The Global Expat’s Guide to Investing: From Millionaire Teacher to Millionaire Expat and then he also told me about the group, which is when I went along for my first session,” she says.

She ran a session last year on her journey with passive investing so far and is just about to make her first investment. Having picked her broker and formulated her plan, she is ready to start adding the funds to her account. She is a little nervous, but excited to start investing.

“Because you are buying into perhaps a whole world investment fund you are not going into technology or specific sectors,” Ms Matta says.

“You are actually getting broad coverage across the world. If one market is up, another one could be down. There is nothing to be nervous about. As long as you know you are in it for the long term, you know the return will always be going in the upward direction,” she says.

The ultimate goal of everyone in the group is to retire early, a milestone that is now significantly closer for Mr Aguilar, thanks to his research.

“The first six months saved me 10 years of work,” he told a recent meeting. “I knew at the time I was going to retire at 65 or earlier. The next six months saved me another 10 years, so I don’t think I am going to still be here more than [when] I am 45,” he says.

He says anyone can learn to manage their investments using the information that is out there and available for free.

“If you want to get rich and that makes you happy, fine,” says Mr Aguilar. “But really it is about how to enable happiness.”