The “shocking” news in October last year that the UAE regulator is proposing sweeping new regulations concerning commissions, charges and disclosure really should not have come as a surprise, given the clear, irreversible shift globally towards transparency and a better deal for consumers in the investment world.
It has been well-known, and indeed well-signposted, for years that many overseas regulators were watching the UK and following the progress of the RDR with interest. A number of countries have already implemented regulatory changes and, in fact, some have the same RDR title.
Delay request
That providers and intermediaries were lobbying the UAE regulator last week for a two-year transition is just putting off the inevitable.
The same thing happened in the UK, as I recall, and it is natural to resist change but change did happen and we have a much healthier market for the investor now than we ever had in the past.
"I am 100% convinced that platforms will dominate many of the offshore markets and that things can, and will, change quickly and trying to hang on to the old model of opaque charges and commissions is doomed to failure."
Disruption
I recently had a discussion with a friend who is a consultant that specialises on the concept of disruption in markets and what can happen to businesses that, basically, don’t change with the times because they can’t see what is happening around them.
Some examples of market leaders that were rapidly wiped out – completely or nearly – are Kodak, Blockbusters, Pan Am and Blackberry to name just a few. Technology has accelerated the pace at which new innovations develop so the need to stay up with market change is that much more critical.
In the UK, platforms have completely taken over the retail savings space from life companies, the vast majority of whom have disappeared, with the handful that are left having had to transform themselves.
The same thing is going to happen in the ‘offshore’ markets and it is only a matter of time until this happens.
Platforms will dominate
Will there be a dramatic change with new platforms in the offshore space? Probably not this year.
I base my view from a UK standpoint as the platform concept is much more embedded in the UK than other jurisdictions.
My perception is that a lot of platforms in the UK are currently in the process of moving to new technology or still struggling to stem losses and few will have the appetite to throw the dice again into markets where the rules of the game are often yet to change.
But I am 100% convinced that platforms will dominate many of the offshore markets and that things can, and will, change quickly and trying to hang on to the old model of opaque charges and commissions is doomed to failure – those that try will become another Kodak or Pan Am.
A big challenge exists for most of the offshore platforms though, as most are still sub-scale and still burning cash.
At the same time, they do not have the sophisticated technology that is needed to operate a platform and need to invest substantial sums to be ready for when the big players make their moves. They are, in effect, stuck between a rock and a hard place.
We might see some being taken over in 2017 but my impression is that we will not see any real action this year – 2018 might be a different story though.
