UAE investors ready to take on more risks without much knowledge
The annual global investor study, conducted by the Durable Portfolio Construction Research Centre of Natixis Global Asset Management (NGAM) highlights a clear opportunity for Middle East financial advisers in helping investors achieve their financial goals whilst at the same time mitigating risk.
Against a backdrop of diminished confidence across global markets due to on-going political events, UAE investors acknowledge the need to take on increased risk within their portfolios to ensure asset growth during unstable times. This appetite for risk is not balanced with access to, or the willingness to seek, professional advice, with the majority (66 per cent) stating that they have never consulted a financial adviser.
The majority (56 per cent) also no longer feel that stability is the most important focus for their investment, with 57 per cent saying that they are willing to increase the level of investment risk, compared to the average of 44 per cent globally, according to the study.
“These findings demonstrate a clear change of direction for regional investors, who are now willing to be more adventurous than ever in their investment decisions,” said Moad Touhami, Head of Distribution, NGAM Dubai. “This is an opportunity for the region’s financial advisors to help nurture the investment potential investors can achieve, while at the same time educate to have a clear strategy in place.”
Investors remain cautious of volatile markets and global economic instability; however, they are now realising that inactivity will not result in them meeting their financial goals. 74 per cent of UAE investors believe that asset growth is a priority over protecting capital, exceeding the global average of 67 per cent.
Despite knowing what they want to achieve, investors do not have a clear plan to meet their financial goals. Their optimism to take on more risk in order to grow their investments is limited by their own ability to make the decisions that could tip the balance in their favour. The study shows that a staggering majority of eighty per cent of UAE investors say they do not have strong investment knowledge, with only twenty per cent confident of their knowledge and choices.
The study also shows a disconnect between financial knowledge and financial planning. Only 35 per cent of UAE investors say they have a plan that will help them reach their financial goals. In case of a shortfall in funding for retirement, twenty-one per cent will turn to government programmes for support, with the majority more likely to rely on their children.
One in two people in the UAE believe that investing too much in cash was the reason they missed taking advantage of the recent rally in stocks, while globally just over four in ten people (44 per cent) believe that holding cash was the main reason for losing on the market rally opportunities.
For the UAE in particular, having an investment strategy that leads to expected future returns seems to be a greater priority than for the rest of the world. Investors are most concerned with inheriting less wealth than expected, with two fifths worried about this – representing nearly double the global average. Furthermore, confidence in their investment approach to taking advantage of bull market periods is very low, with 17 per cent of investors being very comfortable and 21 per cent moderately comfortable.
“More than ever, it is critical that investors seek financial advice in order to give themselves the best chance of reaching long term financial goals. We encourage everyone to speak to a financial advisor that is properly licensed by the relevant authorities in the region,” said Moad.
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