Have you been working for years for your bank or financial services provider?
The answer lies in a study by the European Consumer Council that has highlighted a striking opportunity in the world of investments.
It reveals that people could potentially achieve significant savings over a lifetime by switching from traditional bank-offered solutions to more cost-effective and efficient investment alternatives such as online trading platforms.
These savings are so substantial that they could translate into the possibility of retiring years earlier than planned.
The financial sector has faced criticism for prioritising short-term gains over long-term benefits to clients and society.
This is often also seen in the compensation models offered by banks and service providers to their employees, which should be questioned as to whether this is in the interests of clients or the bank and its staff.
This trend has sparked a movement among consumers, who increasingly opt to switch between banks and other more cost-effective wealth and investment providers.
This shift is supported by technological advancements and a growing awareness of the need to evaluate the services and, not least critically, the costs offered by banks, especially those within the investing community that have been traditionally overlooked.
Compounding effect of fees on investment returns
Understanding the compounding effect of costs and fees on long-term investment returns is crucial. Even seemingly small fees can significantly erode the value of an investment portfolio over time.
For example, a 2 per cent annual fee may sound insignificant, but over a period of 30 years, it can reduce the potential value of a portfolio by more than 50 per cent.
This impact is due to the power of compounding, where not only investment returns accumulate over time, but the costs and fees as well.
This means that every dollar paid in fees is a dollar that is not earning returns in the growth of your portfolio.
Over long periods, this can have a dramatic effect on the wealth-building potential of investments.
Therefore, selecting investment options with lower fees can significantly enhance the long-term growth of an investor’s portfolio.
It is a relatively simple concept: The fewer fees on your portfolio, the larger the portfolio value and the greater the power of compounding!
In diverse regions, regulatory authorities have recognised the emergence of cost-effective alternatives to conventional investment funds.
Notably, index funds and exchange-traded funds (ETFs) have gained prominence as attractive options.
These investment vehicles, which track market indices such as the S&P 500, Nasdaq and Dow Jones, provide a feasible and more affordable avenue for investors.
However, the widespread availability and subsequent adoption of these alternatives exhibit significant disparities among different countries.
The ramifications of opting for more efficient investment solutions carry profound implications for investors.
Beyond the potential to reduce the retirement age, the accumulated savings from embracing these alternatives can substantially elevate lifestyle choices.
This could translate into the ability to make significant financial decisions, such as acquiring a holiday home or indulging in extended family vacations.
The shift towards cost-effective investment options not only affects individual financial trajectories but also contributes to a broader paradigm of financial accessibility, empowerment and independence.
Investment advisers and financial service providers ought to be committed to raising awareness about more cost-effective investment solutions.
Unfortunately, too many have prioritised short-term revenue targets from advisory and execution fees over a longer-term view of client loyalty and increased client assets.
If advisers and service providers take a longer-term view, there may be a short-term impact on lower immediate revenue.
Still, there will be upsides of increased recurring revenue as happier clients stay with their providers and their portfolios grow due to this compounding nature of portfolio assets.
Some of these custody fees, which are typically charged as a percentage of your portfolio size, will grow in value as the client’s portfolio grows.
Suppose your provider offers securities or stock lending services. In that case, increased portfolio holdings increase the probability of revenue from lending, from which both the client and the company typically benefit.
Hence, the industry should be looking to do the right thing for the longer term, rather than what we have seen for many years, which is focused on short-term gains, often at the expense of their clients.
People must be encouraged to reflect: Is the service and advice from your current bank worth the equivalent of working additional years? If the answer is no, then it might be time to explore alternatives.
Damian Hitchen is chief executive of Saxo Bank Middle East and North Africa
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
What is cyberbullying?
Cyberbullying or online bullying could take many forms such as sending unkind or rude messages to someone, socially isolating people from groups, sharing embarrassing pictures of them, or spreading rumors about them.
Cyberbullying can take place on various platforms such as messages, on social media, on group chats, or games.
Parents should watch out for behavioural changes in their children.
When children are being bullied they they may be feel embarrassed and isolated, so parents should watch out for signs of signs of depression and anxiety
How to get exposure to gold
Although you can buy gold easily on the Dubai markets, the problem with buying physical bars, coins or jewellery is that you then have storage, security and insurance issues.
A far easier option is to invest in a low-cost exchange traded fund (ETF) that invests in the precious metal instead, for example, ETFS Physical Gold (PHAU) and iShares Physical Gold (SGLN) both track physical gold. The VanEck Vectors Gold Miners ETF invests directly in mining companies.
Alternatively, BlackRock Gold & General seeks to achieve long-term capital growth primarily through an actively managed portfolio of gold mining, commodity and precious-metal related shares. Its largest portfolio holdings include gold miners Newcrest Mining, Barrick Gold Corp, Agnico Eagle Mines and the NewMont Goldcorp.
Brave investors could take on the added risk of buying individual gold mining stocks, many of which have performed wonderfully well lately.
London-listed Centamin is up more than 70 per cent in just three months, although in a sign of its volatility, it is down 5 per cent on two years ago. Trans-Siberian Gold, listed on London's alternative investment market (AIM) for small stocks, has seen its share price almost quadruple from 34p to 124p over the same period, but do not assume this kind of runaway growth can continue for long
However, buying individual equities like these is highly risky, as their share prices can crash just as quickly, which isn't what what you want from a supposedly safe haven.
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Stage 2
1. Mathieu van der Poel (NED) Alpecin-Fenix 4:18:30
2. Tadej Pogacar (SLV) UAE Team Emirates 0:00:06
3. Primoz Roglic (SLV) Jumbo-Visma 0:00:06
4. Wilco Kelderman (NED) Bora-Hansgrohe 0:00:06
5. Julian Alaphilippe (FRA) Deceuninck-QuickStep 0:00:08
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
