Can I ever trust anyone who works in finance?
My grandmother trusted a stockbroker in a pin-striped suit.
My parents, a ‘charismatic IFA’ who’d visit their house or meet my father at his office or golf club.
Neither of these methods worked.
Overseas; financial train wrecks, car crashes and minefields abound.
In the jungle of banks, brokerages, insurance companies and advisers – is there anyone out there you can trust to care about YOU?
Most people I meet have financial ‘trust’ problems.
It’s comically depicted here.
We’ve all had bad experiences in the past.
Mine began when my local bank encouraged me to invest in ‘tech’ stocks.
Just before the dot com crash…
It left me distrustful, fearful of investment and confused…
Preferring property or cash to repeating my mistakes.
Human behaviour is easily manipulated.
By misplaced ‘friendships’, family advice, media noise, suave sales or just greedy banks.
Regardless of website promises, in my experience, the best place to start is with the fundamental assumption:
No one cares about your finances as much as you!
Always take personal responsibility and do a little legwork to understand the fundamentals.
After all, “time spent in reconnaissance is seldom wasted”…
As my squadron leader used to drum into me.
From this position of safety you can begin to untangle the deliberately complicated web of names, titles and types…
Carefully constructed to serve itself not you…
To decipher what financial advice or service may be best for you, if any.
My last blog on this topic irritated one reader who commented:
“You’re all the same.”
But are we?
It’s certainly true that to some extent, everyone other than yourself is conflicted (and the truth is that you’re biased).
All human beings are incentivised to act in a certain way.
When faced with evidence that conflicts with what we think are in our best interests, we often either ignore it, or strive extra hard to counter it.
In my view, it’s the understanding and management of these conflicts that will likely give you the best opportunity for investment and life success.
So how can we be sure someone’s acting in our best interest?
Fortunately, there are two camps.
Non-fiduciaries and fiduciaries.
Commission-based advisers (paid by the product company) and fee-based advisers (paid by you).
I think of the split as mercenaries and missionaries.
‘Fiduciary duty’ may not sound life-changing but the understanding of it can make the difference between a jet-set retirement on a beach and living on benefits.
What is a fiduciary?
A fiduciary is legally and ethically bound to act in another person’s best interest.
Not their own.
In summary they:
- Put their clients’ best interests before their own
- Seek ways to maximise their clients’ money
- Act in good faith and provide all relevant facts
- Avoid and disclose relevant conflicts of interest
- Do their best to ensure they provide accurate and thorough advice
The term usually refers to someone who manages assets on the behalf of an individual, family or company.
Situations requiring total trust, good faith and honesty.
This certainly seems a far better place to begin than considering taking advice from a non-fiduciary.
Believe it or not, most banks, wealth managers, brokers and independent advisers around the world have no such standard to uphold.
They simply act on behalf of the product provider to maximise their returns not yours…
If a structured product pays them more – you’ll get it.
If a stock or fund pays them a backhander (retrocession) – you’ll get it.
In fact, you’ll likely get whatever product or suite of products pays them the most commission that day.
In order to fund this commission, you also get locked-in with exit penalties so you can’t get out.
How to choose a fiduciary
A fiduciary adviser in Dubai is like a hen’s tooth.
Financial salespeople typically come here when they get banned in other countries…
Working in the highly regulated Dubai International Financial Centre with global professionals located all around the world, provides us with the opportunity to begin to change this marketplace.
To transform through education not speculation.
To innovate through science not spin.
To pioneer a profession not promulgate the industry.
Unlike professions such as law and medicine, any salesperson can call themselves a financial adviser.
Very often these salespeople find clients through cold-calling…
An outdated technique used by the traditional financial services industry to sell you a product and make a big, fat commission.
Trust me, professionals don’t cold call.
Perhaps try this FREE CHECKLIST to know what to look out for.
By the way, not everyone needs a financial adviser…
(At least not all of the time)…
But there’s no one who wouldn’t benefit from good financial advice.
The right type of adviser is potentially the most important link in the value chain.
So choose carefully and don’t be afraid to ask us for a second opinion.
AES Financial Services Ltd, trading as AES International, is registered with the Dubai International Financial Centre as a foreign registered company, licence no. 2128 and is regulated by the Dubai Financial Services Authority; the registered office is Office C102, Level 1, Burj Daman, Dubai International Financial Centre, PO Box 191905, Dubai, United Arab Emirates.