Nic Cicutti: Brexit will expose the salesmen posing as advisers

Nic Cicutti

Last week, while millions of UK citizens decided whether they wish to remain in or leave the EU, I was taking part in one of the most important pilgrimages in the scootering calendar: the Euro Lambretta rally in Germany.

More than 1000 Lambrettas and their owners met in Geiselwind, Bavaria, to talk about their scooters and swap stories about their journeys, the breakdowns they had suffered and how they had overcome huge hardship to make it to the event.

The rally, as I mentioned, was taking place just as people were voting in the UK. Those in Geilselwind – Germans, Dutch, Belgians, Spanish, Portuguese, Italians and other European nationalities –  all wanted to know how I had voted and what I thought of the referendum.

The honest truth is that as an Italian citizen without dual nationality, I did not have a dog in this fight – not that it stopped me having my own opinion on the matter. What really struck me, though, was the way so many of those I spoke to were surprisingly sympathetic to the Brexit argument.

Most wanted the UK to stay, of course, but understood the British (or is it just the English and Welsh?) perception of an overweening and unelected Brussels bureaucracy that insisted on telling people what to do all the time.

Not only that but one or two even told me they were secretly pleased the UK vote had gone in favour of Leave. It meant bureaucrats would be more wary of making decisions without effective consultation of national electors.

Back in England before the vote, I was intrigued by the poll in Money Marketing, which showed a reasonable 56 per cent of advisers were in favour of remaining in the EU. Not long ago, I remember another survey which showed the Leave camp was supported by something like 60 per cent of advisers.

If the Money Marketing poll accurately represents the views of advisers, it is a small but important sign the majority are not only putting their own interests first but those of their clients too. Because, as we are beginning to find out, this decision is truly momentous, with massive consequences for the finances of millions of families.

How will things break down? Royal London policy director Steve Webb is surely right when he says the triple lock for pensions will remain protected. Is it really conceivable that a Boris Johnson-led Government will kick millions of pensioners in the teeth after they voted in favour of Brexit in the first place?

Annuity rates, on the other hand, are already falling as gilts prices have gone up in the wake of the vote, in turn pushing down yields. The move will affect hundreds of thousands of retirees every year.

One side effect is that faced with lower and lower annuity rates the temptation for many will be to cash in as much of their pensions as possible. Advisers may well be inundated by requests to be involved in so-called reluctant execution-only services by people wanting to take out at least the 25 per cent minimum tax-free lump sum.

Some will go down that route, leaving others to pick up the compensation bill via the Financial Services Compensation Scheme five or 10 years down the line.

One thing I do not believe will happen, contrary to the dreams of Garry Heath’s Libertatem, is a bonfire of regulations by the FCA. A new government is already facing the danger of an end to passporting rights to operate in the rest of the EU.

Even if they had the will, a new government of Brexiteers will not want to risk the possibility of being forced out of financial services operations within the rest of Europe. Weakening of regulation will not happen.

As for mortgages, fixed rates may come down but just who will be eligible to borrow the money and will they want to borrow anyway? Recessions lead to a battening down of hatches and cannibalising each other’s home loan books, as existing borrowers moving to take advantage of cheaper rates is not the way forward for lenders.

The biggest question mark is for advisers themselves. I have suggested that the majority of those polled by Money Marketing showed remarkable maturity in backing the Remain camp.

But they will face very similar issues with regard to Brexit as they did during the financial meltdown eight or nine years ago. Clients will need to have complex issues explained to them, as well as being advised on the best options to choose.

A huge amount of handholding will be required. The majority of advisers will rise to that challenge. But there will be a minority who have focused primarily on sales at the expense of offering genuine advice, coupled with regular monitoring and reviews of their clients’ portfolios.

The result is that some clients will suffer – and they will take out their frustrations on advisers.

The next few months offer the opportunity for all advisers to do what some are already very good at doing. And others will have the chance to learn. This is a tremendous opportunity for the industry to demonstrate how it can add value and protect the finances of millions of consumers.

Wasting the opportunity would be a tragedy: almost as serious as voting to leave the EU in the first place.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk