What IFAs need to consider about Brexit

By Christina Bentley on August 3, 2018

Brexit could have a major impact on the financial advice industry

There have already been significant changes in the financial advice market following the Brexit referendum, and more are undoubtedly on the horizon. With Brexit itself now looming, independent financial advisers and financial advice firms need to think ahead and prepare for what is to come.

Changes to the market

Prior financial crises remain in the minds of many organisations’ leaders as Brexit presents the risk of market disturbances spread across borders and industries. Consider taking steps to manage these risks and limit solvency concerns.

Early indications show that Brexit is likely to lead to adverse economic conditions for some time. With house prices and transaction volumes under potential threat, LTV ratios, commercial property portfolios and valuations may feel its effects.

You must also consider regulation changes. Some EU laws enshrined in UK law will remain, but others are less certain.

Changes to your business

Given potential market volatility, do your product lines or even your business model need to adapt to limit the negative impact that these market changes may have on you?

  • Be prepared with resources in place to monitor and manage adverse effects on your portfolio and respond to sudden issues
  • Establish emergency procedures that include up-to-date contact details of colleagues and business partners at home and overseas
  • Think about the impact that redeployment of resources and staff will have on your overall business

Remember that stretching yourself too thin may compromise your ability to make decisions or keep good relationships with clients and business partners who also might be suffering.

Changes to your approach

Firstly, be aware of potential conduct risk. Everyone will want to preserve the viability of their business in these potentially challenging times, and as rules and regulations change, some companies may try and work around them or forget about principles, good conduct and proper treatment of customers. Maintain high standards of behaviour so that you do not risk further problems down the line.

Customer confusion may also play a factor as your clients themselves try to keep on top of changes in the market and regulations. Endeavour to remain a safe resource that they can rely on in uncertain times.

Focus on managing liquidity and monitoring rating changes and market data. Look at KPIs regularly and make sure that they remain fit for purpose.

What could change in the market

For many companies, especially larger ones, the key question is one of potential relocation. Under current rules. finance organisations can offer financial, advisory and trading services to corporate clients across all EU states through one local licence, but this may cease post-Brexit.

One way to ensure European market access is to move operations abroad. Economic think-tank Bruegel estimates that around 30,000 finance jobs may move from London to the EU due to Brexit. However, relocation may not be possible for some, particularly smaller businesses or individuals with commitments and attachments within the UK.

After the referendum, the UK experienced a weak pound, something that further uncertainty or Brexit itself could repeat, making imports more expensive. Coupled with potential tax rises and regulatory change, this presents real difficulty in long-term planning. Companies will have to keep a close eye on how laws could change to make sure that they keep up-to-date.

What could change for you and your clients

If businesses relocate on a wide scale, then those staying in the UK may be able to capitalise on this and play to their home-based credentials. While uncertainty makes business operations difficult, the key is to start planning now.

The importance of sound financial advice may never be more in the minds of customers than it is now. The uncertainty in the market that financial organisations experience will be even greater for investors who lack confidence in what could happen.

Those with drawdown pensions will need sound financial advice on limiting any reduction in the value of their pension pot during complicated economic times. Some may want to delay their retirement to allow their pension value to recover. Stock markets may take a further hit, prompting investor panic over the right course of action to take, while falling property prices and rising interest rates represent further challenges for many. All stand to benefit from the sound guidance and planning that financial advisers could provide.

Consider the opportunities

Uncertainty and volatile financial markets may mean that your current and potential clients will be looking for professional financial advice more than ever, which could expand the market. Larger companies may move their business overseas, putting smaller UK-based companies and independent advisers in position to take advantage. While Brexit may bring challenges, it could also provide an opportunity for you to cement your good standing with customers for years to come.

Always act in your clients’ best interests and ensure that you reassess your recommendations and working practices in case external changes make them unsuitable. If you can differentiate yourself from your competitors by offering knowledge, a cool head and a safe pair of hands during turbulent times, then you will be positioning yourself for future success.

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