Get people Brexit-ready

That is according to Bank of America Merrill Lynch’s latest global fund manager survey. It reported that 85 per cent of fund managers now think the global economy is in late cycle. That is 11 points higher than the earlier high of 75 per cent back in 2007.

In short, that means they reckon the long period of economic expansion is coming to an end. They gave a resounding thumbs down to prospects for corporate earnings growth, while many also fear that global profits will fall over the next 12 months.

The survey was conducted against the background of the ongoing US-China trade war, which looks set to hit the finances of ordinary investors as their stock market-related nest eggs and retirement savings will likely shrink if the global economy contracts.

Sadly, most normal folk have no idea that events so far away from them and their lives could hit their planning so much.

Most financial advisers I know obviously do understand the impact of political posturing on purses and pockets. But how do you explain that to clients in a way they understand?

Spreading the word that building up savings and assets to give a cushion against economic shocks is a good way to get people thinking about their finances again.

Brexit, for all the problems it will bring, is a topic that could help everyday people get to grips with the idea that politics could cost them, dearly in some cases.

Just look at an alarming report published last week by the Financial Inclusion Centre. The ‘Brexit and the Regions’ study was published on behalf of Barrow Cadbury Trust and I reckon it is well worth a read by anyone involved in financial services.

It warned that weak economic performance in the North East, Wales, Northern Ireland, Yorkshire and Humberside, the North West, and the West Midlands leaves households in these regions particularly vulnerable to the potential effects of Brexit.

These are the vulnerable regions in the UK that have struggled to recover from the financial crisis. The report warned that: “Unless mitigation strategies are adopted by national and local government, Brexit will have serious consequences for the millions of households across the regions who are already financially vulnerable.”

It is scary stuff. But, as the report suggests, if action is taken at national and local level, those ‘serious consequences’ could be avoided.

What needs to be done? The report called on the government to promote household financial resilience by putting the focus on reducing over-indebtedness and helping households build up savings and assets to provide a cushion against potential economic shocks.

It also said the government needs to improve regional and local economic resilience and performance by tackling the large regional imbalances in economic performance, output and productivity.

Will the government heed the call? Not a chance. It is too busy tearing itself apart trying to sort out any kind of Brexit deal.

But the importance of people building up financial resilience against whatever disaster overtakes us after Brexit is something that we all can take up, journalists and advisers alike.

Spreading the word that building up savings and assets to give a cushion against economic shocks is a good way to get people thinking about their finances again.

With so much uncertainty ahead – both globally and locally – securing some kind of financial security now could well prove a wise decision, with inaction potentially proving costly.

One thing I hate is scaremongering. But when we can see disasters ahead, taking positive action to reduce the impact is simply a sensible approach.

The Titanic analogy is an obvious one, but I do not believe things are quite that bad. However, I do believe that now is the time to be talking about financial planning ahead of potential Brexit problems.

Does that mean we should be encouraging people to move their savings to safer homes? That will depend your own opinion of what you think may happen in the future, as well as what your client thinks about the risks. With so much uncertainty ahead it is hard to say, isn’t it?

But you should be encouraging people to think about it. I do not know how often most advisers contact their clients, but I reckon it should be fairly regularly, whether simply to reassure or reassess.

The coming Brexit event is a perfect opportunity to reassess plans and, if you have clients in the at-risk regions, then I would suggest you have a responsibility to raise the issue with them and encourage them to take positive action.

However, Londoners too could face problems. Some analysts believe the capital would do badly under, for instance, a hard-Brexit scenario because of the impact on its critically important financial sector.

In effect, that means almost everyone in the country needs to be aware of the importance of having another look at their financial planning. If they have sensible plans in place, it will not need drastic action.

Simon Read is a freelance journalist