It’s a crazy world for advisers to navigate at the moment, with the uncharted waters of Brexit posing challenges, and political risk clouding investment decisions. We asked them what are the big issues keeping them awake at night, and how they are managing client portfolios in light of these concerns.
Martin Dodd, Midlands Investment Agency, Wolverhampton
Defined benefit doom
What’s keeping me awake at night is the amount of defined benefit pensions transfers going on.
I’m not doing much of this myself but, anecdotally, from speaking to product providers and the people doing the transfer value analysis reports, it seems like there are a lot going on.
I’ve been in the industry 30 years and I’ve seen it all before. This to me looks like the pension review all over again.
Advisers are probably inadvertently being incentivised to move pensions. From what I hear, the volume of it is very high, even product providers think there is too much going on.
The FCA is well aware of all this. If I have looked at 10 DB pensions, only one of those would justify a move.
Transfer values have gone up enormously because of the reduction in gilt yields, but if people move their pensions they could run out of money and they won’t know this is going to happen until years later when it is too late.
With the best will in the world, any of us could be swayed – if anything looks grey, we could decide to move it.
Trystan Lewis, Griffin Wealth Management, Chester
Babies and Brexit
I have a 10 week old baby who is keeping me awake at night but, in the advice and investment world, it’s Brexit which is the worry.
The fact stock markets have done well for a good number of years means there is nervousness over what could happen with the economy.
We have had a few years of slow recovery and, with Brexit, we might have a few more years that are a bit more difficult.
I’m not changing anything in client portfolios because we don’t speculate, this recovery might continue for a couple more years or there could be hurdles to overcome, and it will remind clients that there is risk out there.
Nothing has upset markets for a number of years, but given where we are in the business cycle, we could be entering a more difficult phase. Clients who will need to take money out of their investments in the next few years might be more cautious.
The other concern is what’s been done since 2009 to shore up the economy – quantitative easing will reverse at some stage, it has artificially pushed up asset prices, and interest rates will go up.
Potentially we have got a generation coming through that has never seen interest rates above 0.5 per cent. The economy has been on life support for some years and, when it ends, people will have to make sure they have got their finances in order.
Michelle Gibbs, Helm Godfrey, London
Always uncertainty
It’s uncertainty really, but there is always uncertainty. We don’t know what will happen with Brexit and politically at the moment which causes concern among investors.
We remind our clients that we are looking at the long term, and if you are investing you always see periods of volatility. It is about educating them about this, looking back over what’s happened in the past and showing that it is quite normal.
Clive Balchin, James Trickett & Sons, Blackburn
Sleeps like a log
Nothing keeps me awake at night because I think markets are always recovery, and investing is for the long term. We live in a strange world, but we have lived in a strange world for a long time.
I always say to my clients that I don’t want them lying awake with one eye open because of something I have recommended.
They need to take a five-year view.
If you had put £100,000 in the bank in 1987 and left it there, you would have £362,000 today.
If you had invested in property you would have £1.2m, if you had invested in stocks and shares you would have £1.1m, and in bonds you would have £900,000.
Markets go up and down but inevitably they continue to rise over the long term.
