Fixed-term investment plans are failing UAE customers, says Friends Provident

Friends Provident International says the life industry "could do better" as the insurer plans to overhaul its products ahead of new regulations to protect customers from poor performing plans.

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One of the biggest providers of expensive fixed-term investment plans, the cause of a high number of complaints from UAE customers, has admitted that the products are not good enough.

Philip Cernik, Friends Provident International’s chief marketing officer, said that the life industry “could do better”.

He acknowledged the rise in complaints to the UAE Insurance Authority about life companies and the financial advisers that market the investment products, from customers frustrated by poor performance and very high costs.

"There is no room for 'one size fits all' customer solutions today … If expats like to save for less than five years, why are there so few alternatives in the market that reflect this?" Mr Cernik said in a column penned exclusively for The National.

FPI, owned by Aviva, is one the leading providers of fixed-term products in the UAE and other markets in the Middle East and Asia. The plans promise good returns but also come with high costs that include upfront commission fees and charges.

To offer investors better protection, the IA confirmed in April that it was pushing ahead with tough new regulations to transform the way savings, investment and life insurance products are sold in the UAE. Among the proposals were plans to impose maximum limits on the upfront commission advisers can earn from life companies. Advisers will also have to clearly illustrate all fees and charges for which the client is liable.

Mr Cernik said FPI has been working to raise the professional standards of advisers in the UAE, launching an Adviser Academy in 2015.

"If customers are wary of advisers, isn't it necessary for advisers to raise their professional standards?" Mr Cernik asked.

To date 200 UAE-based advisers have passed through the Academy and FPI said this will help brokerages adjust their business models “to make them fit for purpose” when the new IA regulations are introduced – something experts expect to happen in the third quarter of this year.

However, Sam Instone, chief executive of the fee-based financial advisory company AES International, said FPI’s proposals to transform its offering will not have an effect because “the system is broken”.

“It’s too little, too late,” he said. “They are trying to reinvent themselves – but they can’t. In reality, investment-based insurance is expensive and opaque and ultimately doesn’t work because the funds available via life insurance companies themselves don’t work.”