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Mel Kenny: Prepare for Brexit chaos

Until recently, we have been through an unusually benign environment in terms of giving financial advice. Lots of politics, of course, but markets have generally drifted up and Budgets have passed by with chancellors leaving financial planning relatively unscathed.

Major decisions around future policy have simply been deferred, as the legislative space in the parliamentary timetable has become a premium.

Chartered Insurance Institute exam questions and the like could be safely written without running the risk of being hopelessly out of date on publication. For the first time in a long time, things have felt dangerously predictable, making planning appear easier.

But the elephants have been slowly walking into the room and now they are difficult to ignore.

The Office of Tax Simplification has been working on potential inheritance tax reform since January. There is the delayed green paper on reform of the provision of long-term care. The combined £50bn income tax and National Insurance relief bill from pension contributions is now regularly reported and also due reform.

Then there is the Treasury’s chipping away at restricting relief to higher earners, leaving things far more complex than they should be, and confronting them with reams of red tape.

The greater need for fairness has already been widely acknowledged but soon we will have the biggest excuse for major change: the UK’s departure from the European Union will be upon us.

For once, it will not be the fault of the government. Indeed, it now has ample scope to blame the need for change on the popular vote, and the changing needs and desires of the electorate.

Surveys have already put better public services as the number one outcome that people would like to see from leaving the EU, as well as more jobs and fewer workers on low incomes. I have already seen private sector care costs rise significantly recently to accommodate a better wage in order to attract UK workers.

That, of course, has wider ramifications, but change is now an expectation, as are the short-term pains that can come with it.

Once again, this all points to the value of financial planners to make sense of it all, communicate what is important and prevent poor decision-making based on emotions and mental shortcuts.

No doubt clients will have their own individual acceptance of certain things and gripes with others.

But, more often than not, they will want to look to reduce any immediate hit to their own finances, with an eye on how things might pan out in the future.

There may even be an emergency Budget to contend with as well. Lots of planning for our community to get stuck into, then, and it looks like frustrations with exam questions could well be back on the agenda too.

Mel Kenny is a chartered financial planner at Radcliffe & Newlands

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Absolutely. One can imagine a really scary scenario. More public spending leads to higher inflation, leads to raising the bank rate, leads to non performing mortgages, repossessions, property price decline and banking in trouble – if not actually failing. Particularly if Corbyn gets in.

  2. Its difficult to see any outcome that wont involve a recession. Either short and hard or long and enduring.

    There is so many unknowns – from trade to laws, and across the many sectors that FS relies on.

    ‘Brace, Brace’ seems to be the only sensible advice at this stage.

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