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Survey points to advisers' Brexit fears

Survey points to advisers' Brexit fears

Fears about the impact Brexit will have on investment returns now overshadow worries about low interest rates and overvalued markets, research from insurance giant Prudential found. 

According to a poll of 109 financial advisers, 84 per cent said they were concerned about the implications of Brexit on five-year investment returns.

By comparison, 66 per cent were worried that the overvaluation in financial markets could eventually cause a collapse in returns, and 55 per cent were concerned about the Bank of England keeping interest rates at low levels.

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These findings come as Theresa May signed the letter which formally begins the UK’s divorce from the European Union.

Vince Smith-Hughes, investment expert at Prudential, said triggering Article 50 will provide some certainty for financial planning.

However, he said Brexit will continue to highlight the need for advice which can help clients achieve their investment goals in the short to medium-term.

Pru’s research, conducted in October, found that concerns about five-year investment returns were driving advisers to consider smoothed multi-asset investment products to help protect clients’ funds.

The research found that 70 per cent feel obliged to offer these funds to clients in current market conditions.

“A key attraction for smoothed multi-asset investment products is their access to global market,” Mr Smith-Hughes said.

The survey also found that 58 per cent of advisers thought there will be a market correction soon.

Adrian Lowcock, investment director at Architas, said: “The initial reaction to the triggering of Article 50 should be fairly muted as it is largely baked into the price and should come as no surprise to investors this week.”  

However he warned that it could create volatility, and a response from the EU could upset markets.

“The best way to protect against volatility caused by Brexit and the triggering of Article 50 is to be diversified and in particular have exposure to international equities, which should rise in value for UK investors if the pound falls. 

“Closer to home there are companies and sectors which will be better insulated against a weaker pound and a weaker UK economy.”

He said companies in sectors which have a global presence and are not particularly sensitive to changes in economic conditions - such as tobacco, pharmaceuticals, consumer staples and technology - may help provide some protection against any disruption caused.

katherine.denham@ft.com