Financial advisers, it would seem, just want the UK to get on with Brexit. These are the findings of Money Marketing’s latest survey, in which we questioned nearly 400 advisers up and down the country about their view on the most significant political change the UK has seen for decades.
Despite the group leaning toward the remain camp – nearly 60 per cent of advisers expressed this view – almost half (49 per cent) say they do not want a second referendum.
However, worries about the impact the UK leaving the European Union could have on advisory practices do persist, with continued uncertainty around trade and regulation weighing heavily on advisers’ minds.
The perceived intransigence of EU negotiators is hardening opinion, as is negative rhetoric and infighting among UK politicians. Financial advisers, like many other people living the UK, are now looking hard for the light at the end of the Eurotunnel.
One of the most important aspects of Brexit is the effect it could have on UK employers and jobs. For advisers, this impact has, to date, been neutral. Nearly 70 per cent of advisers told us that, so far, the UK’s impending exit from the EU has not impacted their jobs, while two thirds (63 per cent) told us their companies and employers are also unaffected. Moreover, around 45 per cent believe they will be unaffected after Brexit.
While some might see this as complacency, according to Pimfa deputy chief executive John Barrass, this is, in fact, a fair assessment.
Barrass says: “Brexit is clearly affecting everybody. However, the majority of our members conduct little cross-border business so will unlikely be affected by any change to things like financial passporting, for example.”
Barretts Financial Solutions managing director Kim Barrett agrees. He says: “The financial adviser is fairly unique to the UK – Europe doesn’t really have a similar model – and almost everything we do is overseen by the FCA. So I don’t see it having much of an effect.”
However, for those that have seen a Brexit effect, more advisers do report negative consequences than positive, with nearly one fifth stating that Brexit has already had a slight or strongly negative effect on their jobs and employers (versus around 13 per cent reporting positive impacts). Furthermore, more than 40 per cent of advisers say their companies would be hurt by a messy EU divorce.
One chief concern for advisers is how Brexit might hurt UK savers’ personal finances – something we are already seeing evidence of in rising inflation as a result of a weaker post-referendum pound.
Rowan Dartington investment director Tim Cockerill says: “The UK is probably going to have slower GDP, people are probably going to earn less, inflation will be higher and so they will start being more cautious, and I don’t think they’ll want services like financial advice as much as when times were good.”
Another area of concern is the wider financial market, which many agree is likely to dip on Brexit – especially if negotiations fail – and the impact this will have on client portfolios.
Facts & Figures director Simon Webster says: “Brexit is one of the major concerns overhanging markets at the moment – if we crash out with no deal, a lot of markets will go south very fast while we work out what the hell is going on. It may recover, but it does cast a long shadow.”
As is clear from the above, most advisers would like to see a smooth and amicable divorce from the EU, with as much of the current arrangement maintained as possible.
More than half of those surveyed say they want the UK to stay in the single market, and that they support a transition period of at least two years.
Barrass says: “We must minimise disruption to business, otherwise clients will pay. We want a transition period as near to the status quo as possible. By staying in the single market and customs union, there will be no disruption to the way you handle investment funds.”
Despite this, though, a surprising number of advisers (47 per cent) believe that no deal is better than a bad deal.
Courtiers Asset Management chief investment officer Gary Reynolds puts this seeming contradiction down to a lack of foresight.
He says: “I don’t think a lot of people thought [Brexit] through in a lot of detail. A lot of people put out protest votes and didn’t think it was going to happen.”
However, on the no-deal scenario, Reynolds agrees, pointing to pro-Brexit economist Patrick Mimford, who argues that the EU is not a free trade area as you must be a member to qualify, and that the UK would benefit by leaving and then opening up tariff-free trade to the world.
Barrett adds: “What is so good about the single market? We’re talking about a bloc of 500 million people that includes a lot of nations that are not worth a jot to us in trade. Take those out and we’re talking maybe 300 million, and why is a bloc of 300 million people so much more important to us than China and India where you have 2.5 billion people? Or the US – which has 320 million alone?”
Perhaps unlike the majority of respondents to the survey, both Reynolds and Barrett underline a view that sees free trade with the EU as a red herring in both the pre- and post-referendum debate.
Brexit is one of the major concerns overhanging markets at the moment – if we crash out with no deal, a lot of markets will go south very fast while we work out what the hell is going on
Hardening of opinion
Instead, what may be at the heart of this contradiction in adviser views – that being a strong desire for free trade and single market membership while preferring a ‘no deal’ scenario – may be a hardening of opinion against the EU.
This is suggested by the nearly 60 per cent of survey respondents who state they believe the EU is being too inflexible in its approach – one of the strongest ‘agree’ answers overall.
Moreover, in terms of disapproval ratings, president of the EU commission Jean-Claude Juncker leads, with two thirds of those surveyed viewing Juncker more unfavourably than any other Brexit politician.
This attitude is further underlined by an increase in the number of advisers that would vote leave in a fresh referendum – up from 40 per cent in June 2016 to 42 per cent today.
On why one survey respondent would now vote leave, they say: “I only voted remain out of self-interest. I believe the response of the EU to Britain since perfectly illustrates why we should leave. I have no issues with each national government and their position. The unelected in Brussels, however, are a different matter. Obnoxious, parasitic, arrogant, self-serving and corrupt.”
Barrett is equally vehement: “Why should we lay down and let [the EU] walk all over us?”
Others, however, believe that current expectations of the EU are unrealistic.
Webster says: “Turkey’s don’t vote for Christmas. There is no way the EU was ever going to give us an easy ride out. Anyone that thinks the EU is going to give us a sweetheart deal because they love us and need our money is in cloud cuckoo land. There is too much political capital invested in the future of the EU for it to go any other way.”
Cockerill agrees, adding that too much emphasis has been placed on the importance of our market to the EU.
He says: “In the EU, political consensus is more important than trade. This is where we are falling down in negotiations.”
Adviser view: Olivia Bowen, partner, Castlefield Advisory Partners
“I don’t think Brexit will have a negative impact on us. If (and that’s a big ‘if’) there is less regulation, this will be positive for our business, as we won’t have to spend so much on compliance and management information, with most likely the same end result for clients. In addition, our clients will continue to have money to invest given that we invest globally for them – as I’m sure most do given globalisation means many companies are international. So yes, overall we hope for less regulation, but there are no guarantees – the FCA is well known for in-depth reviews and shake-ups of our industry!”
One area where advisers are united, however, is in their desire to see a more positive rhetoric from Westminster and businesses from here on. Combined with the 60 per cent who simply want the Government to get on with Brexit, an equal number of advisers believe it is the Government’s ‘duty’ to implement it. Now that it seems the UK is firmly heading for the door, it is time to talk up the opportunities.
Cockerill says: “I have not heard anything positive from the Government about the future – especially on our trading prospects with the rest of the world. We need that.”
As perhaps already indicated, an open and welcoming attitude to global trade is a hallmark of this debate. More than 60 per cent of advisers agree that the ability to sign trade deals with non-EU countries is ‘very important’ now – the strongest affirmative answer overall.
Regulation is another area of aspiration, as highlighted by numerous survey respondents.
One person who responded to the survey says: “The possibility of lighter, certainly less onerous, regulation in financial services is the biggest opportunity.”
Another adds: “We could have the freedom to reduce regulation and become more productive.”
Unlike Cockerill, others also believe that the market upheaval potentially caused by Brexit could create advice opportunities, with caution driving clients towards professionals, while others merely look forward to the stock picking opportunities in such a market.
Overall, the mood might be described as plucky resignation. Reynolds says: “Like the raft of regulation we advisers have to deal with now, if you take the view that this [Brexit] will create opportunities – which it will – and go in with a positive mindset, I suspect it will work out well for the UK.”
Thus, it would seem that, despite fears over how Brexit might impact businesses and clients, the UK’s financial advisers are ready for the country to start extricating itself from the EU.
As ever, clarity and certainty are desirable – as are current arrangements around trade, and a grace period in which Britain’s economy, legal and financial systems can adjust to their newfound independence. As some have argued, this may be a little too wishful. Regardless, though, the message is clear: keep calm, and Brexit on.
57.8% Voted remain
38.8% Voted leave
60% Say ‘just get on with it’
19% Say Brexit has already had a negative impact on their jobs
12% Say Brexit has already had a positive effect on their jobs
52% Say the UK should stay in the single market
47% Say no deal is better than a bad deal
58% Say the EU is being too inflexible in its approach
Jean-Claude Juncker: Most unfavourably viewed Brexit politician
David Davis: Most favourably viewed Brexit politician
Expert view: Let’s use common sense and put customers first
A democratic decision has been made by the UK to leave the European Union, and it is now up to our Government and the EU to negotiate a workable solution that we can all benefit from.
For most advisers, it will be business as usual. Larger financial services firms are more likely to experience issues, but our consultations have revealed a fairly balanced outlook for small and medium-sized practices. For those that do have European clients, our post-Brexit agreement with the European Financial Planning Association means advisers’ qualifications will be recognised by a number of EU regulators.
In terms of a transitional arrangement, the UK has made a commitment to recognising contracts made under existing arrangements, and it is logical to assume that this will be reciprocated as part of the exit negotiations.
Going forward, I’d like to see us adopt a common sense approach and work towards getting arrangements in place to put consumers first in any new regulation. We absolutely need to avoid the law of unintended consequences, which will, in turn, help to address or mitigate any negative impact on firms and advisers.
Let’s be confident, optimistic and make sure the best interests of the public remain at the forefront at all times. There is little point worrying about things we can’t influence. Instead, we need to concentrate on the things we can do.
Retaining a clear focus on the public’s best interest – which is mutually aligned between the UK and the EU – will help develop greater certainty and better outcomes for all.
Keith Richards is chief executive of the Personal Finance Society