While UAE advisors remain confident about the growth of their businesses, projecting an average of 24% annual growth in the coming year, managing client emotions is posing a challenge, according to a new global survey of financial advisors from Natixis Global Asset Management.
Eighty-six per cent of UAE financial advisors cited clients reacting emotionally to markets as one of their top challenges to success and 90% highlightedinvestor behaviour.
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Furthermore, in a separate Natixis global survey of individual investors, 89% of Gulf-based retail investors say they are making investment decisions based on gut instinct and 63% have no clear financial plan.
"When investors make emotional decisions, they decrease the odds of reaching their financial goals," said John Hailer, chief executive officer of Natixis Global Asset Management in the Americas and Asia. "Financial advisors cannot control the markets, but they can head off adverse reactions by creating portfolios designed to stand up in a variety of market conditions. Just as important, they can work with clients to agree on what to do before market-changing events occur. By doing this, they can help take the emotions out of investing."
Advisorsin the region and across the world are moving away from the traditional 60/40 portfolio split when it comes to risk management and towards more durable portfolio models that are better suited for today’s complex modern markets. When questioned on the suitability of the traditional 60/40 portfolio, only 26% of UAE advisors agreed and 12% strongly agreed, which is in line with global statistics. Fifty-five percent of UAE advisors saytraditional diversification and portfolio construction techniques need to be replaced with new approaches to achieve results.
As a result, more advisors are implementing goals based strategies to helpclientsdevelop a consistent financial plan, stay invested and focused on long-term goals, with 73% of advisors encouraging clients to have a specific target return, and 69% encouraging this to be independent of the market, with 7 in 10 advisors globally agreeing.
Matt Shafer, Managing Director – International Distribution, Natixis Global Asset Management said: "Providing clients with a less emotional path to achieving their long term saving goals is essential to sustaining growth for retail investors across the region. This, along with investor confidence,iscriticalto success for advisors and investors."
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By GlobalDataAdvisors are helping clients to more clearly define retirement goals and expectations on retirement income with 79% of UAE advisors pushing clients to set specific long-term saving goals independent of the market. Sixty per cent of clients in the UAE highlighted retirement planning as atop priority while 78% want stable income producing products, which alongside the US was one of the top markets to highlight this demand.
The 2014 survey of financial advisors looked at attitudes to a range of topics such as business growth, portfolio construction (including volatility, risk and income), client service, advice proposition, time management and investment challenges.
