Revoking Article 50 could cause more short-term harm to client portfolios than a no deal Brexit, an adviser has cautioned, as investors concerned about the ongoing uncertainty withdraw billions from UK funds.
Richard Ross, chartered financial planner at Chadwicks, feared that, at this stage at least, if the UK was to U-turn and decide to remain, it could have severe implications on short-term portfolio performance, due to the effect on currency movements.
He said: “Any Brexit will be very damaging to the economy and a no deal especially so. It is ironic then, that our biggest investment concern is that if Article 50 is revoked and we call the whole thing off, we will see a rapid appreciation in the pound and the currency gains our UK holdings have enjoyed over the last three years will evaporate.”
Further clarity about the UK's future still looks some distance away.
Prime minister Boris Johnson’s hopes of meeting the October 31 Brexit deadline - regardless of whether or not a deal is struck – look to be fading. MPs opposing a no-deal scenario are in the process of trying to push through a bill that will require Mr Johnson to extend the Brexit deadline if a deal is not in place by October 19.
Such has been the political unrest over the past few weeks, investors and managers have been pouring out of domestic stocks.
Earlier this week, the Financial Times reported that £4bn had been withdrawn from UK equity funds since Theresa May announced she would be stepping down from her premiership.
But despite this, intermediaries are continuing the focus on the long-term picture. Mr Ross explained that his firm moved away from domestic assets before the vote back in 2016 and has not materially changed exposure since.
“Our response is to remain well diversified – now is not the time to pretend we know how this is going to pan out,” he said.
Darren Cooke, chartered financial planner at Red Circle FP, concurred.
He said: "We build globally diversified portfolios for the long term. I have made no asset allocation changes to them for Brexit or any other news for that matter. My clients all know they have globally diversified portfolios and understand that we should not make short-term decisions based on political noise."
