At International Adviser’s inaugural intermediary CEO roundtable in November last year, Sardana made a call for life industry staple – the 25-year savings plan, to be scrapped on the basis that “99% of clients will not see through the 25 years” and that they are only sold because of the rewards to the life company and adviser.
Six months on, when IA pushed him on whether he is still in favour of scrapping one of the most popular products within the UAE market, Sardana is even more fervent saying he “will shout from the rooftops” that these products should be banned.
“How does a client know, after 25 years, that a company will still be there? Not to say they won’t, but these are not products which are suitable for most clients – in 99% of cases the clients will not see completion of the plan. These policies are only good for the adviser and the life company,” he says.
“These products should have health warnings like cigarette packets which say – ‘this product is not good for your financial wellbeing’.”
Sardana suggests instead that clients should be offered shorter-term savings plans, as the client is always able to purchase a new one after it has completed. Practising what he preaches, Sardana says if any of his advisers sell any policy of greater than 15 years, he will ask them to explain, and justify, why.
Challenge and choice
Sardana established Continental Insurance Brokers & Financial Services in the UAE just less than 20 years ago, so is well placed to comment on the effectiveness of long-term savings plans, having helped guide many of his own clients through from their wealth accumulation days to retirement.
The company was founded by Sardana in 1994 after he had worked for American Life Insurance Co (better known as Alico), formerly part of AIG, for around 17 years.
Sardana says he opened the business for two reasons – to further challenge himself, and to offer clients he had worked closely with during his career at Alico more choice.
“After 17 years I wasn’t being challenged anymore. Also clients kept saying to me ‘Ashok we want to deal with you, but is there anything else aside the Alico product that you have’. At that point I saw that clients want choice and that every company specialises in something. So, in order to provide the best solution to the client, you have to have more than one company on the panel.”
Starting with himself and “two or three others in the office”, Sardana worked to build the company over the past two decades to a total of around 350 staff now, working from six offices across the UAE and India, comprising two offices in Dubai and one each in Abu Dhabi, Sharjah, Bombay and Delhi. The Continental
Group also owns an advisory business in Kuwait, which is operated separately from the UAE and India business.
The past 20 years have seen the UAE move from a developing outpost for entrepreneurial risk-takers, to a fully-fledged financial and economic centre. Headwinds, highlighted by some local banks’ deep exposure to inflated property markets during the financial crisis, remain for the country.
However, it does again appear that the UAE is on an upwards trajectory – arguably strongly so, having faced the realities of a heavy slump.
This was confirmed last month when MSCI upgraded the country, along with Qatar, from “frontier market” status to an “emerging market”.
This small change will have a significant impact on the fortunes of the country, as large institutional investors will now be looking to shift a much greater allocation of their portfolios there.
The wealth creation brought about by the UAE’s progression from dusty desert outback, to first world opulence, has clearly produced significant opportunities for companies such as Continental. But as well as increased levels of wealth, Sardana says clients now come to the table with a much better understanding of the types of product they want and need than they used to.
“The market has definitely matured. Clients ask much more relevant questions and advisers are becoming more professional now,” says Sardana.
“Previously, I could hire a ‘part-timer, with no industry experience. Now the industry has changed, the clients are more aware of what they are buying and advisers are much better trained and equipped to offer the right solution to the client.
“The market is evolving, people are travelling more, they are making more money and are better informed because of social media and the internet – 20 years ago, no one knew what was happening. The consumer can do research on the internet before they come and talk to me to buy a policy.
“This is a good thing, but nothing can replace a one-on-one relationship with our clients, as much as the internet is there for them to do their research, ultimately, they want to meet a person and to see exactly what it is they’re buying – maybe I’m old fashioned, but I still value that.”
Playing by the rules
Sardana also says regulation has played its part in helping the market to mature. Indeed, he is well placed to talk about the growing pains associated with the imposition of a tighter regulatory environment.
Late last year, Zurich International Life was forced to suspend its terms of business with the brokerage following concerns Continental was not operating within the agreed parameters of the Insurance Authority licence under which it operates.
The matter has since been resolved, with the terms of business reinstated earlier this year. Sardana acknowledges there was a problem, but says it is now “business as usual”.
“Zurich wanted us to be more compliant and we listened to them, and as a company, we know that we have to follow the regulations,” he says.
“So, yes we did have some issues with them, but these have been addressed and it’s back to business.”
More widely, the insurance intermediary market in the UAE is facing some sweeping regulatory changes, which are due to be implemented at the end of November, changes on a scale which some estimate will see around two-thirds of the existing broker market put out of business.
Continental will, however, be one of the few remaining companies, as its size will insulate it from the new capital adequacy requirements which are likely to spell the end for many brokers. Are the new Insurance Authority rules a good thing for the UAE? Sardana believes so.
“The new rules are a positive move by the Insurance Authority,” he explains.
“There are many firms offering advice to clients without complying with the rules. Telling clients when selling a long-term savings plan, for example, that they can change their mind after 18 months if they don’t like the product.
“The market needs to be regulated and I think the Government is moving in the right direction – which is providing security for the client and for the brokers.
“I’m not saying the smaller brokers are necessarily bad, but sometimes they don’t have enough capital and are just trying to get the business anyhow. We want stable companies, which are going to be there for a long time. This offers advisers security, as they know they will be in a job for a long period, and security for the client, who will know the company is going to be there.”