In this new series, International Investment is highlighting some of our stand-out Q&A sessions and interviews taken from our recent Virtual Events programme and video interiews.
In this transcript taken from this forthright and revealing interview - originally broadcast live from II's Middle East Forum on November 17, 2020 - International Investment editor Christopher Copper-Ind talks to Peter Culnane, head of pensions at Fairway Group.
CCI: Can you tell us how the recent BOD-49 reforms look to impact Fariway's model?
The impact BOD-49 will have will be transformative."
PC: The impact BOD-49 will have will be transformative. I've already witnessed that transformation in terms of the impact it's had on the UK's retail distribution review (RDR). Here in Jersey our equivalent, the Review of Financial Advice (RFA), essentially Jersey's equivalent of the UK's RDR. I think BOD-49 is just another example of how the UAE is trying to drive change in the region, for the better. I think those changes as we've seen them will be fairly significant in levelling the playing field, which is a good thing. Fundamentally the UAE reforms will increase transparency, and will probably lead to a change in produce charging models also. It will certainly lead to further emergence of financial technology and investment platforms, which we're already seeing.
I think another fundamental change is expectation. They say that life is about how to manage expectations, and I think better guidance on the illustrations of returns, for example, will better manage clients' expectations. So not only will they have the transparency they will also, more importantly, know what the outcomes can be within more defined limits. So personally I think all in all BOD-49 will inevitably create some short-term revenue challenges.
CCI: How does covid-19 feed into this change? Can you say something about how this year has affected Fairway Group?
PC: Covid-19 has been a massive challenge for everybody. For us, to some extent, it's been business as usual. There were a couple of weeks at the beginning of scrambling to get 100 offices set up almost overnight, with all our staff working remotely. But our IT department rose to the challenge. Looking back on the year the pandemic hasn't impacted our business at all in terms of servicing. But I think that the ongoing travel restrictions have had a small impact. We have been unable to be there on the ground in the Middle East. But fortunately the technology largely compensates for our physical absence. Our team has adapted incredibly well. From a regulatory and legal perspective, necessity is the mother of all invention, and I think what it's done is force better laws governing fintech and technology. We've essentially seen years of slow technical advancement shoehorned into six months.
CCI: Thinking about this new digital model, and in particular in terms of issues such as transacting business and online security, how is this going to play out going forward?
I think fintech is really the future. We're a trust business, essentially. Our entire industry, which is a broad church, is today built on fintech. I'll be bold and say that, probably within just five years, we'll be a technology business with a specialism in structuring trust companies. For the retail client, this journey is already well developed. Especially in the Middle East, all our clients seem to already do everything via their phone. This raises huge challenges, regulatory, legal, security. But all of that can be overcome. At this particular juncture I think the industry is actually slightly lagging behind the consumer in its adoption of technology.
CCI: You spoke earlier about levelling of the regulatory playing field. Could you say a little bit about Jersey in particular, and also the equivalent legislation in the UK?
Most businesses have begun the conversion to what has been known as the "new model adviser." And it is a painful process. But for businesses that have consolidated client basis, that process of conversion is made much easier if done in stages. So it's a combination of upfront remuneration (or fees) and then renewable remuneration. The latter is the foundation of an evaluation of any business. So it's in the interest of everybody in the industry to create that renewable revenue, by which the value of their businesses will be based. Here in Jersey, most of the advisers we work with have already undertaken the coversion.
To view all of the sessions from the recent II Middle East Forum click here.