Looming Brexit main worry for advisers’ clients

Looming Brexit main worry for advisers’ clients

Advisers have highlighted Brexit as the biggest concern among their clients in 2017, ahead of Donald Trump’s presidency and inflation.

According to research conducted by FTAdviser Advantage, the main worry for investors this year is close to home, with 41 per cent of those polled last week citing the UK’s imminent exit from the European Union, with Article 50 due to be triggered by the end of March.

The uncertainty surrounding the terms of the UK’s departure were thrown into further turmoil last week when Sir Ivan Rogers resigned as Britain’s ambassador to the European Union, to be replaced by Sir Tim Barrow.

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Donald Trump, who is set to be inaugurated as the 45th president of the US on 20 January, was the second biggest concern among advisers’ clients at 29 per cent, followed by rising inflation at 18 per cent.

The slowdown in China’s economic growth story was only highlighted as a worry by 12 per cent of those polled by FTAdviser Advantage, as more domestic issues took priority.

While the UK economy appears unperturbed by the vote for Brexit, with the FTSE 100 index ending 2016 on a record high, advisers and their clients are concerned about the long-term impact on their portfolios.

Jason Hollands, managing director at Tilney Bestinvest, noted political shocks have “loomed large” in investors’ minds and this has played out in their portfolios.

He said: “With such a barrage of change and uncertainty, the wall of worry that investors have faced… has resulted in a consistent pattern of cautiousness from retail investors.

"Based on the 10 months of data currently available for 2016, net sales of investment funds look set to be sharply down on the previous year. 

“UK equity funds have pretty consistently borne the brunt of such bearishness, with the [IA] UK All Companies sector featuring as the worst selling sector in 70 per cent of months.

"Conversely, targeted absolute return funds – which aspire to deliver low levels of volatility – have proven the most popular sector in 70 per cent of months this year.”

But The Share Centre’s chief executive Richard Stone has said he does not see the same potential for political surprises in 2017. 

He noted: “We believe the UK economy will continue to perform strongly to the point that interest rates may see their first rise in nearly 10 years.

"US interest rates will also continue to rise as the economy continues its recovery and responds to the higher spending and lower tax regime promised by president-elect (Mr) Trump.”

Mr Stone suggested events in Europe may even provide “a more accommodating backdrop” for the UK government in its Brexit negotiations, which may help to allay adviser and client concerns.

While China’s slowing growth was not high on advisers’ list of worries, Mr Stone warned the country is “the potential fly in the ointment” as authorities there try to stimulate growth.