A missive landed in my inbox this week alerting me that a UAE research firm is launching a survey of financial advisers in the region. This struck me as a good idea and I found myself nodding along with the sentiments of the top man behind the project.
"It's apparent that there is a dearth of quality research available on professional advisers in the Middle East," said Nigel Sillitoe, the chief executive of Insight Discovery, the company conducting the study.
The survey will look at "opportunities and challenges facing the professional adviser community", but the results will not be released for several months. It will also not address how the industry is perceived by consumers.
Allow me to fill in that gap.
As it happens, I've been doing research of my own and I can report that most of the consumers I've spoken to rank financial advisers in the UAE somewhere between incompetent and annoying. Some even go so far as fraudulent.
As there are no professional certifications required to work as a financial adviser in the Emirates, someone could be working as a used-car salesman one day and set up shop as a financial adviser the next. Or, as is reported to be the case with several local companies, salesmen can be recruited overseas and sent here with little training to work in commission-only jobs that provide short-term rewards that often run counter to the long-term savings goals of their clients.
According to an e-mail I've seen, the managing director of one prominent advisory firm late last year sent a note to his staff encouraging them to "urgently switch" their clients away from one investment provider and into another simply because the commission was greater.
Now, this is not illegal but most consumers would expect their adviser to sell them a product because it was the best one available - not merely because it paid a higher commission.
Safe to say, that is not what most people expect when they entrust their hard-earned cash to someone who presents himself as a qualified professional.
I've spoken with more than a dozen individuals who say they bought long-term savings policies - pitched as an alternative to a pension - that they did not fully understand. These people did not learn until months later that the policies included additional fees and commissions and also levied severe penalties if the policies were cancelled early.
One Dubai man told me he was planning his retirement until he realised he would incur a 60 per cent penalty if he tried to withdraw his money now instead of waiting another 20 years. "I nearly fell off my chair," the man said.
Now, it's important to note that almost all of the consumers I spoke with conceded that they signed all of the documents associated with their investments.
Again, what the advisers are doing is not illegal. It is what is known in the trade as "mis-selling" - the practice of convincing consumers to buy products based on lofty verbal promises that do not match the fine print of the actual investment.
If you think this is just a matter of a few cranky individuals with buyer's remorse, just listen to some of the other advisers in the market who are urging reforms.
"On a scale of 1 to 10, if 10 is that this is cowboy land and anything goes, [the industry here is] at 10," says Robert Parker, the chief executive of Holborn Assets in Dubai.
Or this, from Sam Instone, who opened a Dubai branch for his UK advisory firm AES International a little over a year ago: "What I have seen in the last year is unbelievable, what they get up to."
This comes against the backdrop of some incremental improvements to the country's regulatory structure. The Central Bank in March issued a circular banning cold calls and Dubai Financial Services Authority (DFSA) brought in new rules to prevent companies from making misleading promotions out of the Dubai International Financial Centre (DIFC).
But the trend needs to go further. "We know that self-regulation does not work," Mr Parker says. He is among those who point out that the US and UK are in the midst of enacting major reforms of the industry in the wake of the financial crisis.
Here, some advisory firms are regulated by the Central Bank, and others by the UAE Insurance Authority. Those who are based in the DIFC are overseen by the DFSA.
The creation of a unified, effective regulator overseeing the entire industry would be a solid step forward.
There are without question qualified, well-intentioned advisers in the country who deserve to make a good living for providing a valuable service. There are also too many who see an opportunity to make a killing because they know there is no one minding the store.
For some of the companies who fit the latter description, the bad behaviour appears to be less a case of a "few bad apples" than a corporate strategy to put profits over the well-being of the people they are claiming to benefit.
A more effective regulatory structure would make it more difficult for such companies to continue to operate in the UAE with impunity.
