British politicians may be struggling to finalise a deal for leaving the EU, but the country’s financial advice industry is getting on with making its plans regardless.
While arguments and protests are still raging over Brexit, UK-based wealth managers, financial advisers, insurance brokers and others in the financial advice industry appear to have accepted the need to plan as though Britain’s exit next March is inevitable.
Many have laid the groundwork for advising clients who are likely to be affected. However, some advisers are yet to put their plans into operation, given a presumed transition period until the end of 2020 at least.
One exception is over legal residency, in the case of clients who have been living in Europe permanently or for months at a time.
It is seen as an area which could become problematic, and potentially soon, depending on the progress of Brexit negotiations.
As advisers with expat clients living in Europe point out, Britons have been able to come and go from Europe more or less as they have pleased, to the extent that it is now effectively taken for granted.
The crunch facing some, such as Britons who plan to remain in Spain for the rest of their lives, is the need to choose between a British or Spanish passport, as under Spanish law they would not be able to keep both.
In France, meanwhile, draft legislation published by the French senate earlier this month caught the attention of the British media, as it appeared to set out some potentially onerous new rules governing employment, access to services and residency that could come into force in the case of a “hard Brexit”.
Urgent action required
It is unclear how many UK financial advisers have clients living overseas, in Europe or elsewhere. However, it is estimated that as many as half of all UK advice firms have at least one, and some many more, particularly as retiring to countries such as Spain, Malta, Cyprus and Portugal has become a popular option in the decades since the EU was established.
Working for a time in European cities such as Paris, Frankfurt and Zurich has also been a rite of passage for executives in a number of professions in recent decades.
Christopher Lean, an associate of advisers Aisa International, who is based in the Czech Republic, says: “We are telling any Britons who currently reside in an EU country to make sure that they have an application in for permanent residency, if they plan to live and work there going forward. Given that some jurisdictions can have a fairly long and bureaucratic process, the sooner their application is made, the better.”
Jason Porter, director of Blevins Franks, a UK-based advice group specialising in expats, particularly in Europe, says the need to apply for residency is increasingly urgent for those moving now who cannot show proof of a history of residence.
He says: “Many UK nationals have previously moved on the basis of the EU’s freedom of movement, and under these rules you do not need to obtain a residency permit.
“Post a hard Brexit, the UK will become a ‘third nation’, and a residency permit will be required after three months have passed. So getting in the system now, or as soon as you can, will mean you have already qualified and should not have an issue going forward.”
Porter says many of Blevins Franks’ clients have “or are now applying” for such residency cards, “so they can continue to live in their respective countries post-Brexit, if the agreement is not positive”.
An end to passporting?
Because some version of Brexit is due to come into force at the end of March it is, perhaps not surprisingly, forcing many people to act – either by returning to the UK or finalising a move to Europe – who might otherwise have waited months or years to do so, sources say.
Paul Stanfield, chief executive of the Federation of European Independent Financial Advisers, says he has anecdotal evidence on both sides of the equation of people moving back to the UK, or from the UK to Europe, with plans brought forward with Brexit on the horizon.
But the biggest change that Brexit will introduce to Britain’s financial services industry will almost certainly be to stop UK firms “passporting” their products and services across Europe. For some months this has prompted UK advice firms to consider how, if at all, they will be able to continue to look after their clients in Europe.
Some firms, like the Worthing-based Fry Group, have a European outpost that they will be able to use as their regulated base in the future. It inherited its Brussels office during the acquisition of Fulcra International Financial Planning in 2012, and managing director Jeremy Woodley admits he was unaware at the time that it would prove as strategically useful as it is now likely to be.
Others, such as Aisa International and Gibraltar-based Blacktower, say their advisory networks can provide a potential solution for UK firms that need to ensure European clients are looked after in a fully regulated way post-Brexit, but lack the resources to establish or acquire a European outpost of their own.
Aisa’s Lean says Europe’s regulators have made it known in the past that they frown on “brass plating”, where foreign firms set up offices without having a physical presence in the jurisdiction in question.
For this reason, he adds, smaller firms may find it more cost-effective to become affiliated with a network, ideally one “that can offer EU passporting for both investment and insurance” advice and products.
His firm has had the resources to set up proper European outposts; Aisa’s network is called OpesFidelio, and it has regulated offices in the Czech Republic, France and Dublin.
Feifa launched a new membership category last year, specifically designed to enable individual British advisers to join – rather than requiring their companies to – in order that they might take advantage of the organisation’s Brexit-beating solutions. Stanfield says Feifa can help locate and work with one of its Europe-based member firms to ensure existing clients living in Europe or planning to move there are properly looked after.
Stanfield says: “Let’s say you had a UK advisory firm with 12 advisers and only one of them had any expat clients. The firm might not want to join and pay the full corporate membership fees because it wouldn’t make sense.
“It wasn’t specifically in response to Brexit, but rather to do with our efforts to encourage professional collaboration, though obviously we did feel that collaboration might become even more important post any Brexit agreement.”
Helen Burggraf is former editor of International Investment