Financial planners are thinking over their client communication strategies as they await the results of a hung parliament.
With just one seat left to count, the Conservatives have fallen eight seats short of the 326 needed to win the general election, and 12 fewer than their count at the last election.
Postcard Financial Planning director Rohan Sivajoti says: “It appears that Theresa May has scored the biggest political own goal since David Cameron.
“The result is a bit of a mess. With just days until the start of the Brexit negotiations I’m not sure where we go from here. There’s all sorts of permutations: A second EU referendum? A new Prime Minister? A Conservative and DUP coalition? It’s too early to say. Early signs show that the Next Generation came out and voted in high numbers and maybe Brexit highlighted to the youth of today the importance that politics can have in shaping their futures.”
Many advisers have warned against knee-jerk reactions to the result like rebalancing portfolios.
Rose and North financial planner Hayley North says: “It’s been a year of unexpected results and our message has remained consistent throughout. We are long term investors.
“For equity investors as a whole, the strong message should be that over the long term there is really no point in trying to take politics into account when predicting equity returns. Over the long term there is very little impact on returns and as you can see from the FTSE today, it’s very hard to predict how the market will react and when.
“Market timing is incredibly difficult. We leave the longer term strategic decisions on timing to the quality fund managers we select and focus on the long term financial plan for clients.
“Our message once again is ‘don’t panic!’ and be prepared to weather a choppy few months while the dust settles, knowing that the impact will be limited over the long term.”
The message to client
Advisers appear split on the merits of communicating with clients to reassure them their investments will remain safe.
Engage Financial Services managing director Sam Sloma said he does not feel the need to send out communications to clients to reassure them about the impact of the result, and to “keep calm and carry on” was the best strategy.
However, HFS Milbourne joint managing director Rod Milne says, though no clients have contacted him so far, he will be sending out a message to clients this morning detailing how the firm’s portfolios are prepared for the eventualities.
Milne says: “Communication with them is key, rather than do nothing because you think the client understands what the FTSE or a weak or strong pound means.
“Our job is not to comment on the politics. Our message this morning to clients will be don’t worry because the portfolios are constructed in such a way as to be diversified. We are not overweight in the UK by any means, so any movement in the UK market won’t particularly affect the performance of your portfolios.”
Mill says his portfolios have actually risen this morning.
Milne notes that a hung parliament could herald a softer Brexit that would be welcomed by business, and that a fall in sterling could offset market falls given the significant proportion of overseas earnings for large-cap companies.
However, smaller companies may face a tougher test, he says.