The unexpected ban, which is said to have taken effect on Sunday and has stunned many in the UAE’s financial advisory community, does not affect financial advisory firms that are licensed by the UAE’s Insurance Authority, sources there told International Adviser.
Still, the effect on banks could be significant. A story posted this morning on the website of The National, an English-language newspaper based in Abu Dhabi and owned by the UAE government, quotes banks and marketing executives as saying that the ban "could lead to job losses", as well as "an increase in annoying text messages" for UAE citizens.
The ban was announced in the form of a circular addressed to banks and finance companies and dated Sunday, a working day in the Gulf.
The circular, which International Adviser has seen (and the text of which may be seen by clicking "next page" below), says in part: "it has been decided to prohibit marketing bank loans and other services offered to individual customers through direct contact by telephone."
The circular does not mention fines or any other punishments for those who flout the ban.
“Those companies that are classified by the Central Bank as financial consultants will not be allowed to participate in unsolicited calling any longer,” said Sam Instone, managing director of London-based AES International, who spoke by telephone from Dubai, where his company has an office.
“It doesn’t affect insurance brokers, who are regulated by the Insurance Authority, or firms that are licensed by both.” AES is regulated by the Insurance Authority, Instone said.
Globaleye, the Dubai-based advisory firm, also will not be impacted, according to executives there, who said what limited calling the company does is not of the "cold" variety.
Also, noted Kapil Dev Sharma, a Dubai-based Golbaleye wealth manager, the new directive refers specifically "to actual selling of financial products over the phone", as opposed to meeting clients face to face and properly explaining the products’ terms and conditions, which is the way Globaleye and other good advisory firms operate.
Finally, he noted that the directive is mainly aimed at such financial products as credit cards and personal loans, which are more banking products than advisory ones.
Response to complaints
No one from the Central Bank was available for comment, and the bank’s website does not mention the ban.
However, it is understood that the Central Bank was responding to numerous complaints from UAE residents about the number and manner of cold calling practised by Emirate banks keen to sell products and services.
In a story on the ban yesterday, The National noted that the clampdown on cold-calling was “the latest demonstration of the regulator’s tightening of financial rules after the global economic downturn”.
A few weeks ago the Central Bank announced limits designed to curb excessive service fees, again in response to consumer complaints, the article said, while other previous actions have included a cap on the size of loans banks may offer their clients.
“Companies violating the latest directive face the possibility of fines,” yesterday’s National article quoted Saleh al Tenaiji, the senior manager of the Central Bank’s banking supervision and examination department, as saying.
‘Job losses feared’
In its story today, headed "Job losses feared from bank on bank telesales", The National quoted unnamed sources at First Gulf Bank as saying it was considering reducing the scope of a contract it had with an outside company that manages it telemarketing operations and is exploring "alternatives".
Other banks were likely to be considering similar moves, while banks that used their own employees to make calls could be forced to lay off some of their staff, the president of a Dubai company that offers training and other services to call centres told the paper.
AES International’s Instone also noted that for some advisory firms in the UAE that depend heavily on cold calling, the ban could be “a major deal”.
Nevertheless, he added that although it was always possible that the UAE Insurance Authority might also look to ban cold-calling, the arguments against companies being able to market such useful products as critical illness cover and life insurance were not as clear-cut as those applying to efforts to sell complex financial products, which many people might easily live without, over the phone.
“I would have thought that, realistically, they’re never going to stop cold selling,” Instone said of the IA.
Earlier this month, Instone defended some use of cold calling, telling International Adviser: “I have never known any potential client to phone up and ask for critical illness, income protection or life cover – but that definitely doesn’t mean they don’t have a tangible need for [such products].
“Many clients don’t even know how to find [them] – even if they do realise they have a need.”
Instone made his comments after a survey conducted via the International Adviser website found that even though a quarter of IFAs who responded believe cold-calling is not an acceptable sales technique, three-quarters make at least some use of it.
Of the 75% of advisers who use cold calling, 25% said it is responsible for more than 50% of their new business, while 20% said they use the sales technique frequently, the survey found.
What is more, almost 10% of advisers said that even though they do not believe cold calling is an acceptable sales technique, they sometimes still make use of it.