If you’re hiring a financial adviser to manage your money, it pays to put any investment advice through a stringent due diligence process before handing over your cash, whether you’re a sales manager in the UAE or a 15-time NBA all star basketball player, experts said.
It emerged over the weekend that Tim Duncan of the San Antonio Spurs is suing his former financial adviser claiming that he lost more than US$20 million in a series of investments that his adviser either owned or had a controlling interest in.
These included hotels, beauty products, wineries and sports merchandising companies, according to Texas court filings.
“Over the course of 17 years, I invested in a series of opportunities presented by Charles Banks, on his assurance that we were working together for my family’s long-term financial security,” said Duncan. “Banks exploited my good intentions and our relationship for his personal gain and my substantial loss. I’m saddened that my name will join the list of athletes to fall victim to this sort of misconduct.”
Mr Banks told Bloomberg that Duncan was using the lawsuit against him as leverage to get out of limited partnership investments.
Duncan’s experiences will be all too familiar for a number of expat investors in the UAE who are under increasing pressure to save more for retirement amid rising living costs like rent and utilities.
HSBC’s Future of Retirement 2015 report this month revealed that UAE residents of all nationalities are not putting away sufficient funds early enough to prepare for their retirement, with 68 per cent fearing that they will run out of money after they stop working.
The situation leaves many residents vulnerable to the wrong type of financial advice including being seduced by offers of high returns only to be locked into poorly performing products with high fees.
The UAE’s regulatory bodies are increasingly cracking down on such practices, according to William Wells, the head of intermediary sales for the Middle East at Schroders.
“Many of the problems in the past have centred around investment funds and structured products sold with an insurance wrapper by insurance brokers,” he said.
“The Insurance Authority has responded by increasing the amount of regulations on insurance brokers in the country, and becoming more active in their regulation of day to day practices.”
The Securities and Commodities Authority has also increased its regulation of investment funds, he noted, mandating that all funds offered to retail customers by banks must be registered with the regulator first.
Despite such increased regulatory oversight, it still pays to do your research before selecting a financial adviser and committing to investing, according to Nigel Silitoe, chief executive of the strategic research company Insight Discovery.
“Customers need to ask a series of questions before they enter into a relationship,” he said. “Who are you regulated by? How are you rewarded? Do you offer independent advice or are you tied to products from just one or two providers? And, of course, do you or your company have a stake in any of the products that you’re selling?”
In Duncan’s case “the need for separating business from personal relationships” is also highlighted said one Dubai-based financial adviser, who did not want to be named.
“There is an argument for always getting a second opinion prior to making financial decisions,” he said.
jeverington@thenational.ae
Follow The National's Business section on Twitter
