Saving money: the black cloud in expats' lifestyle

Chris Ferguson is the managing director of the UAE arm of Guardian Wealth Management (GWM), which opened in the Emirates in 2010. The global financial planning and investment company with offices in cities such as Doha, Hong Kong and Geneva helps expatriates to map out their financial futures and Mr Ferguson says UAE residents are slow to realise their full savings potential.
 
How can expats benefit financially from living in the UAE?
They earn a high-level of income that is tax-free and most expat packages include housing and private education for their children's schooling. Therefore, the elements that you would say replace taxes in a place like the UAE are optional, such as dining out. Ultimately people earn a higher gross with less deductions and have less to spend on personally, therefore the net result for the household is the ability to save money.
 
What does that mean for a company like yours?
We organise people's finances and essentially create a plan that is going to deliver financial sustainability throughout their retirement years. In many economies around the world, retirement age is increasing while people's ability to have a safe financial retirement is decreasing - there is a huge hole in the retirement planning area. When people come to the UAE, they can put themselves in the driving seat and create a financial plan to enable a successful retirement.
 
Do expats here save enough?
No. There's a huge failure rate. Priorities are turned upside down; expats receive their income gross and spend on luxuries such as eating out and holidays - everything that's a luxury in the real world - rather than major financial milestones.
 
GWM is a relatively new player in the UAE financial services market. How do you plan to encourage residents to save more?
We want to introduce more of a lifestyle financial planning model. This means we cover the client's entire financial plan rather than just selling them a financial product. Many people in the UAE have a financial adviser but I'm not sure they've got proper financial planning. We use psychometric testing and ask clients 33 questions to ascertain their true tolerance to risk.
 
What does the testing show?
People can afford to take more risk than they actually take. I often find a client will express an attitude towards risk tolerance that they don't really understand. Then the adviser creates that portfolio and later in the review process, the client gets disgruntled because their portfolio has not performed in the way they wanted.
 
Why do financial advisers have such a bad reputation here?
It's more to do with the method that a client becomes a client than perhaps the advice that is ultimately given. In most developed economies, domestic workers have tax incentives to encourage them to save money for their retirement. Here, other than gratuity there isn't any incentive so it's the client's choice. In terms of marketing, advisory firms here have to take the products to the clients.
 
What three elements should every expat include in their portfolio?
Life insurance and critical illness cover, a will and some form of regular saving towards financial milestones - fundamentally retirement.
 
arayer@thenational.ae