So, I’ve just finished yet another online meeting, this time with a chap who has been sold several regular savings plans and wanted to know if they were okay. He’s the friend of a long-standing client, who suggested he could get a second opinion from us. Sadly, he had unknowingly acquired several rather expensive savings products. We picked apart the charges and will be able to help set up an alternative that should ensure a far greater proportion of his hard earned cash gets invested, instead of disappearing in undisclosed charges to pay for commissions. And the undisclosed aspect of these old-fashioned contracts is the bit our clients find most frustrating.
But now, help is finally at hand. Bod has arrived to help investors get a better deal. While you might be thinking of the little yellow character from the 1975 kids TV show, this is actually Bod 49, a new piece of legislation introduced by the UAE Insurance Authority. It’s taken almost four years of drafts and industry consultations to arrive and has been the subject of significant lobbying. Now that it has arrived, some industry commentators are suggesting that this new legislation will reduce the availability of products and might even result in increased costs. As Shakespeare famously wrote, “thou doth protest too much”.
As you can imagine, Bod 49 is a lengthy and fairly dry tome. None of the depth of Shakespeare here. But by significantly reducing commission on protection products, capping commission on investment products and banning the sale of long term contractual savings plans it delivers a pretty concise and punchy message. The addition of a ‘free look’ clause (much like the ‘cooling off’ periods used in many UK investment and insurance contracts), should also work to remove the pressure from the sales process.
At Abacus, we don’t sell products, we deliver financial planning and find appropriate solutions for our clients – it’s a very different approach. Where investors have existing products, we are able to provide a detailed analysis of ongoing suitability. In most cases we can provide a solution that dramatically reduces costs, (our analysis and conversion of such contractual plans resulted in an average reduction in costs of $48,000 over the remaining investment term, this also net of our advisory fees) and provides significant flexibility which is enormously helpful, especially in these difficult times.
Today’s meeting wasn’t the first time I’ve delivered the bad news to someone, about just how much of their investment is being soaked up in charges, and it won’t be the last. But this new legislation is a step in the right direction and I’m hopeful that we can move toward a better environment for investors.
By Con Lillis, CEO & Financial Consultant & Andrew Hedger, Partner & Financial Consultant