Financial Advice in Saudi Arabia
LEARNING OBJECTIVES
We’re passionate about providing free, high quality and up-to-date information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
The benefits of financial advice
Red-flags to look out for in Saudi Arabia
The importance of regulation
Qualities to look for in an investment account
The best solution for Expats in the Middle East
Expat Investing
The Expat journey in Saudi can be richly rewarding. The Kingdom has attracted professionals from all over the world, with generous compensation packages and the attractive tax system. However, investing in Saudi Arabia can be incredibly confusing, with different expat financial advice firms recommending different products, investments and providers.
It can often become overwhelming, and difficult to know who to trust.
In our unbiased guide, we'll endeavour to highlight red-flags when taking investment advice in Saudi Arabia. We'll also run through the qualities that you should look for in an Expat Financial Adviser.
Red Flags
Saudi Arabia is not like the UK, where the FCA (Financial Conduct Authority) regulates the activity of financial advisers.
In the UK, advisers have to be qualified and pass multiple exams to provide advice to clients. They also need to complete CPD (continuous professional development), to ensure they are in the best position to continue to provide advice to clients.
Furthermore, there are rules about how much they can charge clients. These rules do not apply in the Kingdom of Saudi Arabia, which has led to a prevalent issue of advisers that do not act in the best interests of their clients. Let's explore the main red-flags to look out for as an Expat.
Guaranteed Returns
Any adviser that uses the word 'guaranteed returns' should be immediately discounted. In the investment world, the term 'guaranteed returns' should act as a warning signal.
An investment account in Saudi Arabia cannot guarantee returns, nor can anywhere else for that matter.
The US government issues bonds and promises to pay back the investor a fixed rate of return. Whilst the US government has never defaulted on a payment yet, even this is not risk-free.
UK Bank accounts may offer interest rate returns on fixed deposits or savings accounts. Again, this is not technically guaranteed. The bank could go under, or fail to meet their obligations. In such a scenario, the investor is only protected by the Financial Services Compensation Scheme (FSCS), which covers account values of up to £85,000.
Unregulated Investments
Be sure not to invest in any scheme or fund that is unregulated. Whilst regulation can increase paperwork and end costs to the client, it exists for a very good reason.
Regulated funds and investments means that everyone involved in the process is qualified to manage investments and provide advice. It also means that you will be able to access your funds, should you need to use them in a rainy day scenario.
Finally, and perhaps most importantly, regulation means you have the opportunity to complain in the even of malpractice or poor advice. For example, if you have been put into high risk funds as a cautious investor, you could claim your money back from the Financial Ombudsman Service in the UK.
For Expat investors, regulation means protection. Always do your research on any investment account that is recommended.
Lock-Ins & Exit Penalties
If you hear these mentioned by any financial adviser, be very sceptical. The existence of lock-ins and exit penalties means that someone is getting paid a very large commission for selling you a product (offshore, this is typically between 5-12% initial commission).
The moment an adviser is being paid to sell you something, they cannot be acting in your bests interests - conflicts of interest result in bad advice, and are ethically wrong.
Any adviser you choose to work with should be classed as a fiduciary, i.e. someone that can only legally act in your best interests, not theirs.
Pushy Sales Tactics
Investors need time to weigh up proposals. A common tactic used offshore is to put pressure on Expats to rush into a decision.
Take your time, share the recommendation with friends and do your due-diligence before proceeding with any proposal, no matter how good it may seem initially.
Expat Wealth Management
Now that we've covered the most common red flags, let's consider the things to look for in a offshore proposition:
Fully Regulated: check your adviser's regulations. Are they on a governing body's website, and listed as an adviser? If they can't show you this, do not work with them. Unregulated advice is dangerous and gives you no chance for recourse if things go badly.
Transparent: only work with advisers that tell you what they charge, and do so willingly and explicitly. High-fees and opaque charging structures will act as a big drag on your investment growth over the long term.
100% Access: no investment should be locked up without access. Be sure to only consider investment options that allow you access to all your money. Life can change as an Expat, whether it's priorities, family or your employment position. You may need to draw out your investment much earlier than anticipated.
Portable: the modern day expat leads a transient lifestyle, often working in various different countries around the world. Try to work with a company that can continue to service you when you move, as well as an investment product that can follow you as your residency changes.
The Best Investment in Saudi Arabia?
Given the tax laws in Saudi, tax-efficiency becomes less of a priority (unlike in the UK, for example, where capital gains tax is due on investment accounts).
Our advice is to use a regulated international investment platform that allows you to invest in all major currencies, and in any regulated fund. You can then work with your adviser to structure your portfolio accordingly, whether it's aggressive investment growth, or more cautious capital preservation.
With an offshore investment platform, you can access low cost tracker funds from Vanguard, Blackrock and the other major fund managers. You'll also have the choice of industry leading active managers, such as Fundsmith and Baillie Gifford.
Importantly, any investment account would be fully covered by the Financial Services Compensation Scheme, as well as FCA regulated - this ensures that you have the maximum level of protection with your investments.
The cost of your investment is another crucial component to a successful investment. The difference between paying 2% pa. vs 1% pa. over the long term is massive, and this continues to compound year after year. Streamline your costs to increase your long-term growth potential.
The Wealth Genesis is the first Expat Financial Adviser to charge the same flat-fee to all clients, regardless of the investment size.
Our charging structure guarantees no conflicts of interest, and ensures that our solutions are tailored directly to the needs and objectives of our clients.
If you're an Expat in Saudi Arabia considering your options, contact us here to see how we can help you.
FAQs
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For most of our clients, we would typically recommend Novia Global.
They are the lowest cost offering, at 0.30% per annum, as well as having a fantastic online portal that clients can track their assets with.
Other more technical platforms exist, however they may not be the most appropriate depending on your objectives. -
There are various opportunies, from local opportunities to unregulated assets (think Fine Art, precious metals etc.)
Our advice to clients is to only consider an unregulated investment if they are prepared to lose their money. Whilst they can be incredibly lucrative, the risks will often outweigh the rewards. -
The key giveaway is any product or recommendation that includes any of the following:
- early withdrawal charges
- exit penalties
- lock-ins
-signing up bonusesAll of the above mean that the adviser is being paid large percentages of your money to sell you a product.
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Each business is free to operate how they see best. However, commission means being paid to sell something.
We believe every client’s journey and goals are unique - as such, we advise accordingly.
A commission based adviser’s sole objective will be to lead you towards the investment that pays them the most, not the investment that gets you to your goals. -
We’re proud to be the only international adviser that charges the same publicly listed flat-fee to all our clients, regardless of their background, circumstances or investment amount.
Our flat Wealth Planning Fee is one-off, and represents the beginning of long-term relationships with our clients built on value, honesty and mutual trust.
