Living in Dubai affords a tax-free lifestyle in one of the most innovative, cosmopolitan and career-driven cities in the world. Yet, many of us — whether citizens or expats — can do a better job maximising the wealth-building opportunities this amazing city offers with the guidance of a digital financial advisor in Dubai.

Digital financial advisors use financial technology to overcome problems found in traditional financial advisory — such as high minimum investment requirements, generic financial solutions, lack of transparency, high costs, and complex industry jargon that makes the investment experience very scary. 

Partially because of these weaknesses within traditional financial advisory, 74% of UAE residents don’t use a financial advisor. Recent research by Insight Discovery also shows that UAE residents consider traditional financial advisors to have the fifth worst reputation in the country, behind recruitment companies, credit card companies, telemarketers, and real estate agents. 

However, today digital financial advisors are changing the landscape with investment automation, financial algorithms, and other financial technology products that provide easy, low-cost, transparent, simple, and personalised digital financial advisory. 

Yet, with many companies entering into the digital financial advisory space, investors need to know what makes a good digital financial advisor and how you should decide which one to work with to get the best value for your money. 

In this article, we will look at 8 things you should consider when choosing a digital financial advisor in Dubai, as well as how we at Sarwa apply them. 

In this way, you’ll get to know us a bit better in the process. 

These include: 

1. How much does the financial advice cost?
2. Does the digital financial advisor have a good reputation?
3. What does the advisory process look like?
4. Why is preparing a financial plan so important?
5. Why choose a digital financial advisor over a traditional one? 
6. What are the common goals that are achieved with digital financial planning?
7. Why is financial advice important for new residents in Dubai?
8. What should you know about taxation?

At the end of this article, you will be in a good position to choose the digital financial advisor in Dubai that is right for you. 

[Schedule a free call with a Sarwa Wealth Advisor today to learn how you can enjoy  low-cost, simple, transparent, and personalised digital financial advisory in Dubai.]

1. How much does the financial advice cost?

Generally, digital financial advisors are cheaper than their traditional counterparts.

By using financial technologies that help automate and digitise their processes, digital financial advisors incur less overhead costs. 

Moreover, digital financial advisors embrace passive investing, choosing to invest in low-cost index funds and ETFs, which is a less expensive strategy than active investing. 

Passive investing is less expensive because investors seek to track the performance of the market. Active investing is more expensive because investors try to outperform the market, incurring higher expenses in the process and yet still (often) failing miserably. 

[To learn more about the differences between active and passive investing and what it means for your investments, read “What’s the Difference Between Active and Passive Investment”]

So, by automating their processes and embracing passive investing, digital financial advisors can cut more costs and pass on these savings to their customers. 

For example, Sarwa, a digital financial advisor in Dubai, charges 0.5% to 0.85% annual advisory fees, which is less than half of the average fee of traditional financial advisors in the Middle East (2%).

However, it’s not enough that a digital financial advisor has better fees than a traditional one; it must also have fees that are competitive among other digital financial advisors.

For example, the average asset-weighted expense ratio of a Sarwa’s Portfolio strategy (0.12%) is less than the average in the overall ETF industry (0.50%). Since the expense ratio is the primary determinant of the annual fees a digital financial advisor offers, the lower it is the better.

Consequently, a digital advisor like Sarwa, with 76% lower expense ratio than the overall ETF industry average, can provide financial advisory that is more cost-effective than the traditional financial advisor and other digital financial advisors.

2. Does the digital financial advisory have a good reputation?

When it comes to investment, you cannot be too careful. One of Warren Buffett’s famous statements is that the first rule to investing is to avoid losing your money.

However, while money can be lost in bad investments, it can also be lost to disreputable financial advisors. 

Keep in mind: A good reputation is the soil on which trust is nurtured. 

Consequently, you should look out for these below four indicators of reputation when considering a digital financial advisor in Dubai before trusting it with your money:

Conformity to industry regulations

A digital financial advisor that uses its digital presence as an excuse to evade regulations is a disreputable advisor. 

A reputable digital financial advisor in the UAE will be regulated and recognised by the Dubai Financial Services Authority (DFSA), the Financial Services Regulatory Authority (FSRA), the Central Bank of the UAE and the Emirates Securities & Commodities Authority (SCA). These regulators impose certain conditions on advisors that ensure they protect your assets and operate for your benefit. 

Conformity to such regulations means you can hold a digital financial advisor accountable. 

For example, Sarwa is a digital financial advisor in Dubai that is regulated by both DFSA and FSRA. It is also incorporated in the Dubai International Financial Center and the Abu Dhabi Global Market, two financial hubs in the UAE. 

Experienced, reputable and expert professionals

When you are looking to choose a digital financial advisor in Dubai, ensure they have a group of qualified, experienced and reputable people on their team.

For example, the team at Sarwa includes former employees of Accenture, PWC, and McKinsey and Co., among others, and graduates from reputable business schools and universities all over the world. 

Sarwa also has advisors and experts that include Jiro Kondo, an associate professor at McGill University, Canada and J.F. Hanczakowski, the CEO of National Bank Insurance. 

Moreover, there are many directors, partners, CEOs, founders, and co-founders that function as Sarwa Ambassadors.

Strong online security protocols

A reputable digital financial advisor will have strong security protocols in place to protect your data and money from cyberthreats. 

For example, Sarwa uses security best practices such as  encryption at rest and in transit, bank-level, 256-bit, SSL security to protect your data and account information. It also uses strong firewall  technology and backup to ensure that your data are safe and always available when needed.

Moreover, Sarwa’s security procedures and processes are audited by regulatory authorities to ensure they align with industry standards.

Transparency

A reputable digital financial advisor will be transparent with the fees they charge, the way they structure their portfolios, and how they keep your money separated from the company’s money.

A company that is not transparent about fees is probably trying to hide something. Similarly, a company where you don’t know how and where your money is invested is not worth a penny of your hard-earned cash. More importantly, a company that does not disclose how they keep their money separated from your money (investments) cannot be trusted. 

With Sarwa, you know the fees you will incur, your portfolio details, and the custodian bank where your investable assets are held. 

Making such information publicly available is a good sign of a reputable digital financial advisor.

3. What does the Sarwa advisory process look like?

One of the main advantages of digital financial advisors is that they provide a simple, fast, and easy onboarding process. 

Getting started is a simple, fast, and easy process. The goal is to get only the most important information that will help create a financial plan that aligns with your goals, risk tolerance, and time horizon. 

Below are the simple steps included in Sarwa’s onboarding process:

1. Register: Just visit http://www.sarwa.co/register, input your name (first and last), email address, and phone number. Voila! You are now officially a member of the Sarwa community.

2. Complete the survey: The purpose of this survey is twofold: to help you understand your current financial situation and define your future goals, as well as to help Sarwa understand you and deliver a personalised experience.

The survey covers your existing financial position, investment objectives, previous investment experience and overall knowledge.

3. Get a personalised portfolio: Sarwa’s proprietary technology will analyse your data to determine your investment goals, risk profile, and time horizon. Based on those three, you will get a pre-designed efficient portfolio (based on the Modern Portfolio Theory).

For transparency purposes, you will see a breakdown of the details of that portfolio — the assets in the portfolio and what percentage of each asset makes up the portfolio.

As part of Sarwa’s commitment to a personalised experience, we allow you to change your risk tolerance level to something higher or lower than what our technology has calculated for you. However, we will ask you to state the reason for the change so that we can talk about it with you during our wealth advisory discussions. 

Also, you can choose to retake the survey if you feel the information you gave is not complete or correct.  

4. Supply KYC Data: As a reputable digital financial advisor in Dubai, we conform to regulations from DFSA and FRSA. Part of those regulations require us to collect Know Your Customer (KYC) data. Some of the questions include current employment status, source of funds, citizenship and place of residence. This is a typical step in opening an account in any financial institution around the world. We actually made the process all digital, and as easy as possible for you. No paper work, no printing, no hassle. 

We will also ask if you prefer an individual account or a joint account. If you prefer the latter, we will request some KYC data about the other person(s).  

5. Documentation: For regulatory purposes, you will need to upload three documents: a proof of address (which can be a utility bill, a tenancy contract, or any document that shows your full residential address), a passport copy, and a selfie (preferably with a wide smile 😀😀 ).

During this documentation process, we offer you an opportunity to speak to us on live chat. You can ask questions, request information, and make any inquiries. The goal is to make the process as seamless as we possibly can!  

6. Welcome call: Sarwa has always sought to integrate the human and the digital. So after agreeing to our terms and conditions and finishing your account setup, you will receive a call from a Sarwa wealth manager.

We want to put a face to your interaction thus far so you can be confident that you know someone’s face at Sarwa, someone that will answer your questions and provide you any and every support you need on your investment journey. 

7. Account setup: Your account should be ready the same day or the next day, at most.

Now you can deposit your money and invest in the portfolio we have created for you. At this stage, you will also find support professionals who are ready to help you through the funding process.

Once funds are deposited, your dashboard will be automatically generated. It takes a couple of working days. This is because your money has to hit the bank account and be traded. Now you can monitor the performance of your portfolio in a sleek and user-friendly dashboard available on mobile and desktop.  

8. Support: Now that your account has been set up, you can schedule a call with any Sarwa wealth associate at your convenience to discuss specific goals, ask questions about your portfolio and its performance, and converse on anything investment related.

The live chat is also available 24/7 for any simple and quick queries you may have.

9. Education: Sarwa also seeks to continuously educate the region about personal finance and investing. You can follow our social media channels and blog to learn more about the world of investing, including exclusive interviews with investment experts to nuts-and-bolts articles about Vanguard. We also host regular webinars for more interactive engagement. 

4. Why is preparing a financial plan so important?

Creating a plan is the first step towards achieving any goal. Everyone who has financial goals needs a financial plan. 

The first step in preparing a financial plan is to create a budget. Every financial goal requires money and you can’t have enough money to achieve your financial goals if your income does not exceed your expenses. 

A monthly budget — such as the 50/30/20 budgeting system, amongst others — will help you plan your income so that you have enough savings every month to meet your investment/financial goals.

[To learn more about how to save more money in Dubai, read “12 Hacks for How to Save Money in Dubai Like A Resident]

The second step in preparing a financial plan is to create an emergency fund. An emergency fund is a self-funded plan that you can fall back to when emergencies and unbudgeted expenses arise.

An emergency fund prevents you from incurring debt (with high interest rate) or liquidating your investment when emergencies arise. Putting three to six months’ worth of your living expenses in an emergency fund is a good financial practice. 

The first thing to do with your savings is to create an emergency fund. When that is done, the next step is to start allocating your monthly savings to your investment portfolio.

[To learn more about emergency fund and how to create one, read “How To Start An Emergency Fund That Is Right For You: Smart Planning To Mitigate Financial Troubles”]

A financial plan helps you cultivate an investment habit to set apart a certain percentage of your money every month.

Instead of timing the market and allowing your emotions to decide when you enter and exit the market, a financial plan will give you focus on the long-term rather than being tossed around by short-term fluctuations.

The longer you stay in the market, the better; this is simply because the global market rises more than it falls. And a financial plan helps you stay in the market for a long time rather than entering and exiting based on speculation. 

[To learn more about why consistent investing for the long term is better than market timing and speculation, read “Does Market Timing Work?”]

5. Why choose a digital financial advisor over a traditional one?

As we have seen, 74% of UAE residents do not have a financial advisor. And traditional financial advisors are the fifth least trusted professionals in the UAE. 

Traditional financial advisors tend to be very expensive, with average annual advisory fees of 2-3%. Similarly, traditional financial advisors are built for High Net Worth Individuals (HNWI) with many people unable to meet their minimum investment requirement.

Another problem is that traditional financial advisors tend to promote active investing, which is not as low-cost, transparent, and flexible as passive investing.

Traditional financial advisors also tend to mystify investment with complex industrial jargon that is inaccessible to the average person. Moreover, many traditional financial advisors still do much of their work offline, limiting their accessibility. 

Digital financial advisors like Sarwa came on the scene to remove these barriers and make financial advisory more accessible for everyone. 

Sarwa uses passive investing and automates their processes with the latest financial technology, which makes for more cost-effective investing. 

Digital financial advisors also reduce minimum investment requirements to the barest minimum. For example, Sarwa’s minimum investment requirement is now just $5, an amount so low that even a student can begin to invest in their future with ease. 

A digital financial advisor like Sarwa uses the Modern Portfolio Theory to create portfolios that align with an investor’s financial goals, risk tolerance, and time horizon. 

This ability to personalise portfolios based on data and statistics has been a game changer for digital financial advisors.

By digitising their operations, digital financial advisors in Dubai have become more accessible. You can now access the services of a digital financial advisor in Dubai in the comfort of your home and via mobile phone. Moreover, you can enjoy excellent customer service 24/7. 

With a digital financial advisor, you can automate your investments, which reduces the risk that you will spend money you should invest. Sarwa also provides automatic reinvesting and rebalancing, making the whole investment experience smoother.

Lastly, because their activities are online, digital financial advisors are typically more transparent. You can easily view your dashboard to see how your assets are doing and where they are invested.

[Schedule a free call with a Sarwa Wealth Advisor to learn how you can create your financial plan and start making your money work for you]  

6. What are the common goals that are achieved with digital financial planning?

The purpose of a financial plan is to achieve your unique financial goals. 

If you want to achieve any of the following financial goals (or more), creating a financial plan with a digital financial advisor is the right step to take: 

• Building wealth: Everyone wants to build wealth. While humans can only work for a limited time (limited hours over a limited number of years), money can keep working and earning more money 24/7 for as long as possible. If you are looking to make money work for you and build significant wealth over time, a digital financial advisor can help outline just how to get on this path. 

• Retirement planning: Anyone working wants to retire with a large enough nest egg to cater for them in retirement. No one wants to be broke when they get to an age of not-working-anymore. A digital financial adviser will help you create a plan that will help you generate the nest egg you need at retirement. 

• Financial independence: The desire to become financially independent — independent of a particular source of income, in particular — has hit fever pitch in recent years. When you are financially independent, you can quit a job in turn for one you love without concern for the salary; you can pursue your dreams without a lingering concern for the next paycheck. A digital financial adviser will help you create just such a plan. 

• Estate planning: For many, leaving wealth for family and the people/causes they care about most is an essential part of a well-lived life. A digital financial advisor in Dubai can help you make a plan to build wealth that will outlive you. 

• Homeownership: If you are trying to save enough money to buy a house or make a downpayment on a mortgage, a good digital financial adviser will be able to guide you and create the right plan to get you there. 

• Child Education Fund: One of the important ways to secure a future for your children is to give them sound education. Providing such an education requires a solid financial plan. You can create a child education fund by using a digital financial adviser in preparation for your children’s future. 

• Access to foreign capital markets: There are many opportunities to grow your money outside the borders of your country. In this globalised economy, every investor should be maximising their opportunity to invest in foreign markets. A digital financial adviser will provide you access to the most influential foreign capital markets, extending your ability to grow your money. 

7. Why is financial advice important for new residents in Dubai?

Dubai is one of the most innovative, cosmopolitan, and career-driven cities in the world. With 8.84 million expats, it’s evident that Dubai is a good destination for people looking for opportunities to improve their lives.

However, whether expats or locals, the luxuries and good life available in Dubai often lure many away from their financial goals. 

Despite earning good income, many wake up to the reality that they have acquired nothing substantial after many years. They have often failed to budget and overspent on shopping, socialising, and other costly indulgences in high-cost Dubai. They fall into what is known as the luxury trap.

The best way to escape the luxury trap, and its consequences, is to have a solid financial plan. As said above, such a financial plan will include a budget. Every expat needs to have a budget that allows him to save a specific percentage of his income every month (20% in the 50-30-20 system). 

Sarwa provides automatic investing so that you can automatically deduct a percentage from your savings or your income every month before you spend it.  It’s like taxing yourself so you can build for your future! 

Living paycheck to paycheck is a troubling situation. Waking up one day and discovering that you don’t have anything to show for the opportunities that Dubai has offered you is even more terrible. 

You can prevent (or overcome, if you are already there) such a situation by using a digital financial advisor in Dubai. 

8. What should you know about taxation?

As an individual living in Dubai, you are free from personal income tax and capital gains tax. The income you make from employment or the sale of your assets are tax-free. 

However, if you invest and earn money in other countries, you will pay some taxes on such income. For example, the dividends you earn from trading in a US-based exchange incurs a 30% withholding tax. For interest on bonds, the charge is 20%. 

Nevertheless, your tax burden with a digital financial advisor is less than a traditional financial advisor. 

How is this so? 

ETFs, the investment asset that digital financial advisors in Dubai like Sarwa use, generate less taxable events and are, therefore, more tax-efficient than mutual funds and individual stocks and bonds.   

How Sarwa changed the digital financial advisory landscape in Dubai

Previously, it used to be common for only highly wealthy individuals to hire a financial advisor in Dubai. And even then, service was not perfect. 

• Consultancy costs are high
• Investment holdings are vague, and never truly transparent
• In-person or over-the-phone meetings are inconvenient
• Investment industry language is not meant to be widely understandable 

By embracing the power of investment automation, financial advisory algorithms and online platforms, a digital financial advisor in Dubai is now able to offer an easier, lower-cost and more accessible investing experience.

Over the past few years, advancements made in financial technology have clearly improved the potential for how we can benefit from a financial advisor in Dubai. This is why we developed a fintech platform with the mission to make wealth management easier for everyone. 

We launched it in 2017, and called it Sarwa. 

Sarwa (Arabic for “wealth”) started as a hybrid robo advisor platform that offers a technology-first approach to financial advisory with the aim of better enabling long-term investment goals — what we like to call the “future you.”

One of Sarwa’s main goals was to offer a hassle-free and transparent financial advisory option, thereby solving the above shortcomings of traditional financial planners. Today Sarwa is becoming so much more: a go-to personal finance app with the launch of Sarwa Trade, as well as many investing tools to come. 

As a hybrid robo advisor, Sarwa Invest builds customised investment profiles and portfolios for our investors using financial technology, but supports this service with real human financial experts that you can easily contact and speak to — not chatbots.

When we built Sarwa, we ensured to offer the following experiences: 

Hassle-free, online financial advisory

A fully online application process, with no paperwork and no need for a face-to-face meeting. The use of an online questionnaire helps our algorithm assess your risk profile and recommend an investment portfolio that fits your goals. We then further customize this profile with the help of human financial planning expertise. 

Automated investments

Sarwa’s online platform performs automatic rebalancing and optimal reinvestment of dividends using smart technology. 

Ultimately, this enables you to sit back and let your investments work for you, all at a fraction of what it used to cost for wealth management services just a few years ago. 

In other words, Sarwa takes care of your entire investment plan for you once you have funded your account, leaving smart financial technology to handle the technical portfolio management

Unintimidating approach to the stock market

Low-fees and low minimums to start an account have been crucial ingredients to Sarwa’s success. This allowed us to offer democratic access to personal investing, which we provide through a passive investment approach that builds portfolios with a heavy emphasis on exchange-traded funds (ETFs).

Three important features of Sarwa make investment less intimidating and more accessible:

1. First off, as an online and technology-first service, Sarwa is practical, offering an easy way to open an account without the need for face-to-face meetings. 
2. Secondly, our online platform enables investors to have liquidity — there are no lock-in periods and there is an easy process to gain quick access to your money. 
3. Thirdly, Sarwa’s entire investment philosophy is founded on the mission to better educate investors. 

Your Sarwa wealth advisor will thus introduce you to the difference between active and passive investment and how smart investors can balance the two in the best way, having the bulk of their wealth in long-term diversified plans (which Warren Buffett, amongst others, also follows).

Vanguard, one of the top investment banks, has called ETFs a “democratic” investment asset, and we couldn’t agree more.

Using ETFs and the passive investment approach enables us to explain investing in an easy-to-understand strategy that is proven to benefit investors looking for reliable long-term returns.

The combination of hassle-free advisory, automated Investments, and a less intimidating and less accessible approach to investing has set Sarwa apart as a leader and trailblazer in the digital financial advisory space in Dubai. 

Now that you know why digital financial advisors are better and how to choose one, it’s time you start creating a financial plan with a digital financial advisor to achieve your financial goals. 

[Schedule a free call with a Sarwa Wealth Advisor and we will happily answer all your questions and guide you through every step of the way.] 

Takeaways

• Digital financial advisors are less expensive, more transparent, more accessible, and provide more personalised experiences than traditional financial advisors. 
• You should choose a digital financial advisor with a low expense ratio on its portfolio and a low annual advisory fee.
• To protect your money, choose a reputable digital financial advisor that conforms to industry regulations, has a team of experienced and reputable professionals, and provides an easy onboarding process.