‘Keep calm and carry on’ has been the message from many financial advisers to their clients in the aftermath of the Brexit vote.
According to Stuart Anderson, head of marketing and communications for Clarion Wealth Management, the advice to clients is “basically a ‘keep calm and carry on’ attitude for now”.
He added: “Our clients’ portfolios are well-diversified and designed with their risk profiles in mind so we don’t envisage having to make major changes.”
Likewise, chartered financial planner Alan Mellor, managing director of Cheshire-based Phillip Bates & Co Financial Services, has been cautioning clients not to be overly concerned by the Brexit decision.
He said: “The result of the referendum was a surprise to most people and not a result markets anticipated.
“This inevitably leads to uncertainty, which is never a positive thing for investment markets. The FTSE 100 initially went down a little under 5 per cent, with European markets slightly more heavily affected.
“But this is a moderate reaction to the result and reflects the markets’ confidence the change to our political position will not have a major impact on company performance.”
Our approach throughout this period, consistent with our philosophy, has been to prioritise capital preservation with little exposure to either outcome David JaneBy close of play on Friday (24 June), the FTSE 100 was still trading just over 6,000 at 6,163.45, which is still 10 per cent higher than its low of 5,537 in February this year.
As Laith Khalaf, senior analyst for Hargreaves Lansdown commented, the FTSE 100 has fallen further in the past.
“On Black Monday in 1987, it fell by 11 per cent and on 11 September 2001, it fell 6 per cent”, he said.
Mr Khalaf added: “The UK stock market fell sharply on the morning of 24th, but has staged a bit of a recovery. The FTSE 100 has been bailed out by a falling pound.”
The fall in the value of the Pound relative to the Dollar has been one of the things most remarked upon in news headlines. Mr Mellor warned it could affect investments to a degree, as well as increase inflation in the short term.
He added: “It is absolutely essential the government and the Bank of England do everything in their power in the coming days and weeks to ensure as much stability as possible.
“My clients are looking for reassurance in the aftermath of such a historic and seismic event.”
Indeed, many advisers have said their clients are looking for reassurance and safety in the form of less correlated assets.
Immediately after the vote results were announced, FTAdviser Advantage’s poll, ‘Where are clients likely to put their money over the next few months?’, revealed client’s intentions.
Advisers responding online indicated their clients were shying away from the volatility of markets towards ‘safer’ asset classes.
According to the poll, which appeared on Advantage.ftadviser.com, 42 per cent suggested clients might be heading towards cash as a haven asset, while 33 per cent would head towards overseas equities.
Source: FTAdviser Advantage
There was a flurry of active trading in physical gold over the week leading up to the EU Referendum, with BullionVault’s customers trading £23.5m of vaulted gold and silver overnight in some 1,500 deals between 23 to 24 June.
This helped push the price of gold up overnight, its fastest ever move, leaping to new three-year high of more than £1,000 an ounce.
Despite this, advisers have not seen clients heading to gold, according to the FTAdviser Advantage poll, although David Jane, manager of Miton’s multi-asset range, believes gold is a good portfolio diversifier at this time.
He said: “Our approach throughout this period, consistent with our philosophy, has been to prioritise capital preservation, with little exposure to either potential outcome.
“We have had material exposure to gold, core government bonds, high quality investment grade corporate bonds and defensive equity. These positions are helping protect capital.
“On the flip-side, UK equity (especially domestic focused) and UK property is detracting from performance.”
But gold investment, especially investment in companies in the gold and mining sector, requires expert attention, according to Thomas Holl, a director at BlackRock.
In his blog post, he wrote: “In an Olympic year, it seems appropriate that gold has raced ahead.
“The metal appreciated by 22 per cent in the first three months of this year, its strongest quarter for 30 years, driven by sharply higher demand as a safe haven amid the volatility experienced so far this year and expected in the months to come.
“But compared with the share prices of gold miners, physical gold is some way off the pace: the FTSE Gold Mines index surged by 94 per cent in the first four months of the year.
“As investors in gold equities, this naturally makes us assess whether the miners’ valuations have become stretched. The rally means that stock selection will be critical.
“We have instead maintained our quality bias across the portfolios, sticking with companies that have strong management teams, premium assets, and robust balance sheets.
“So even in a grandstand year for gold equities, investors should remember not every stock will finish on the podium: an active long-term approach is as important as ever.”
