OpinionSep 15 2014

IFAs should be eyeing up cross-border opportunities

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Investment advisers clearly need a strategy for dealing with Scottish independence.

Whether you believe this is simply a matter of hand-holding clients through some turbulence or equipping them for significant economic disruption, they will surely be demanding answers about the implications of a ‘Yes’ vote.

I still suggest we are heading for a narrow ‘No’ vote, particularly if one examines the range of opinion polls. But the independence camp has the momentum for now. Cometh the hour, cometh the IFA.

Investment advice is very much about the management of risks, and there are a host of them with a ‘Yes’ vote.

A still-in-the-UK Scotland may be given the powers to dramatically vary several tax regimes. That could change all manner of areas of planning John Lappin

We may face not just economic but political dislocation. Markets, finally, are worried. ‘Scottish’ firms are being penalised, underlining the fact that financial institutions may well have been correct to warn about the implications of independence. That flash headquarters of Standard Life in the shadow of Edinburgh castle might well become a branch office.

However, it is probably not markets that represent the biggest challenge – or, not the market for shares at least. Scottish banks can surely deal with independence – although not in a way that will please Scottish nationalists – by moving headquarters to the larger country.

But several years of uncertainty about the ultimate settlement, the currency, the EU membership of Scotland and more… is just about the last thing the UK needs economically.

That may neither be immediately apparent nor indeed an immediate priority for a working-class, Labour-voting Glaswegian, who’s worried about the NHS and welfare reforms, and is tempted by the promise of no more ‘English’ Tories governing Scotland again.

Apart from pausing on any portfolio to deal with short- or even medium-term disruption – probably more for bond and currency markets, than shares – IFAs may also need to adjust their approach in significant other ways.

Even ‘devolution max’, which is not on the ballot but is as good as copper sealed, brings huge changes. A still-in-the-UK Scotland may be given the powers to dramatically vary several tax regimes. That could change all manner of areas of planning and is likely to come just after a root-and-branch change to pension income rules.

It may even leave opportunities for cross-border financial planning. Surely Wales and Northern Ireland will at the very least be asking for more powers. And while northern English MPs are apparently still lukewarm on devolving more powers, that is certainly not the case in the local authorities of northern English cities such as Manchester and Liverpool.

This could easily be the birth of a federal UK and the biggest constitutional change since women got the vote. The best thing for advisers in all areas of the UK is that, along with unprecedented change and disruption, financial planning opportunities will abound.

Advisers across the country, whatever the status of their part of the UK in the coming years, are surely more than capable of rising to that challenge whatever it’s going to say on their clients’ passports.

John Lappin blogs on industry issues at www.themoneydebate.co.uk