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UAE expats wising up on dodgy investment scams
| Published: | 17 Jun at 6 PM |
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As with most other expat locations worldwide, the UAE expatriate community is no stranger to the devastating effects of unregulated IFAs and their toxic products.
For many years, expat communities have suffered vast financial losses via dodgy purveyors of long-term investment schemes as well as outright fraud and mis-selling. The chief suspects as regards financial products are those offered to expat workers as long-term savings plans. Many UAE expat professionals tell identical stories of loss to those told by retirees and expat workers across the expat world.
IFAs target new arrivals in the UAE, offering long-term savings plans a an investment without mentioning outrageously high fees and devastating penalties for withdrawing before the due date. Importantly, no details of exactly what the fund will be invested in are provided. Some complex insurance-linked investments based offshore are minefields with little chance of growth as well as the likelihood of total failure.
Basically, the only beneficiaries of such schemes are the commission-hungry salesmen and the offshore insurance companies with which they’re working. In the case of disputes over mis-selling and other poor practices, UAE investors have little or no recourse due to lack of local regulation.
One UK expat newly arrived in the UAE to start his own health business was offered a long-term investment scheme, but was dissuaded by a friend who’d already fallen foul of a local IFA. Taking time to pause for thought, he researched his options and invested in low-cost indexed mutual funds via a UK asset manager.
Better still, bearing in mind his own narrow escape, he’s now set up a not-for-profit online forum offering need-to-known information on what to avoid and how to sidestep unscrupulous IFAs and their products. The forum, Wise, isn’t his only weapon against the crooks, as he plans to offer specific groups of people seminars and lectures on financial self-management.
Basic advice given includes ignoring all cold-callers and how to recognise mirror funds which mimic genuine bond funds or branded stock but are twice as expensive. Keeping your wits about you and trusting no-one at social events is another worthwhile tip.
According to one Dubai-based MD, the local regulator has always turned a blind eye to what’s really going on. It’s like the UK some two decades ago before regulation got teeth, he said, adding that not disclosing commissions and upfront fees is also rampant.
For many years, expat communities have suffered vast financial losses via dodgy purveyors of long-term investment schemes as well as outright fraud and mis-selling. The chief suspects as regards financial products are those offered to expat workers as long-term savings plans. Many UAE expat professionals tell identical stories of loss to those told by retirees and expat workers across the expat world.
IFAs target new arrivals in the UAE, offering long-term savings plans a an investment without mentioning outrageously high fees and devastating penalties for withdrawing before the due date. Importantly, no details of exactly what the fund will be invested in are provided. Some complex insurance-linked investments based offshore are minefields with little chance of growth as well as the likelihood of total failure.
Basically, the only beneficiaries of such schemes are the commission-hungry salesmen and the offshore insurance companies with which they’re working. In the case of disputes over mis-selling and other poor practices, UAE investors have little or no recourse due to lack of local regulation.
One UK expat newly arrived in the UAE to start his own health business was offered a long-term investment scheme, but was dissuaded by a friend who’d already fallen foul of a local IFA. Taking time to pause for thought, he researched his options and invested in low-cost indexed mutual funds via a UK asset manager.
Better still, bearing in mind his own narrow escape, he’s now set up a not-for-profit online forum offering need-to-known information on what to avoid and how to sidestep unscrupulous IFAs and their products. The forum, Wise, isn’t his only weapon against the crooks, as he plans to offer specific groups of people seminars and lectures on financial self-management.
Basic advice given includes ignoring all cold-callers and how to recognise mirror funds which mimic genuine bond funds or branded stock but are twice as expensive. Keeping your wits about you and trusting no-one at social events is another worthwhile tip.
According to one Dubai-based MD, the local regulator has always turned a blind eye to what’s really going on. It’s like the UK some two decades ago before regulation got teeth, he said, adding that not disclosing commissions and upfront fees is also rampant.
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