What wealth managers can do to get Brexit-ready

  • Grasp why planning for Brexit is not just a compliance matter and how it can be planned for.
  • Learn the biggest risks for wealth managers and advisers of leaving the EU, including identifying weaknesses.
  • Consider how to treat location requirements and maintaining cross-border client relationships.
What wealth managers can do to get Brexit-ready

Last month signalled the second anniversary of the UK’s EU referendum, and with only eight months to go until the UK leaves the EU, wealth managers have a way to go when it comes to contingency planning.

While the impact of Brexit is likely very minimal for UK wealth managers who service solely UK-based investors, for the majority of the industry Brexit’s potential consequences are significant.

Most boardrooms and executive management teams acknowledge that it’s the biggest challenge in what could be the largest ever upheaval of the UK’s financial markets.

But is the industry ready?

Here are six things wealth managers and advisers should account for.

It’s not just a compliance matter

First and foremost, when it comes to Brexit planning it should be treated like any other business transformation project.

For some – and particularly those firms with clients based in the EU27 – Brexit is business-critical, so why should it remain in the confines of the compliance department?

This is a board-level priority that should be afforded the budget for a fully-staffed internal project team.

Horizon scanning is crucial, whereby this team can identify priority weaknesses and, from that, a business case can be formed for change, and with buy-in from senior executives, drive decision-making forward.

Priority weaknesses may include the negative impact of loss of passporting and the subsequent changes to the firm’s structure which will then impact upon contractual relationships with some clients and require changes to product disclosures and marketing documents. Every firm will make different choices.

In mid-sized firms, decision-making is naturally easier, but don’t underestimate the potential log-jams in moving transformation processes forward – especially when Brexit still seems a remote reality and there are competing priorities for time and cost.

Know when to cut your losses

As part of the process to identify priority weaknesses, firms should acknowledge what they’re good at.

Despite attempts for robo-platforms to chip away at the edges of the traditional wealth management business model, relationship management remains a fundamental component of the industry’s success – and potential failure.

One of the biggest risks posed by Brexit is that firms can find themselves with clients in jurisdictions with which it is not compliant.

A root-and-branch analysis of investor relations is high on the list of homework for every chief relationship officer.

Investors’ location and their requirements will inform whether the service provided is Brexit-compliant, during and beyond the withdrawal transition period.

No doubt there will be a competitive spirit for those Brexit-compliant firms in and outside the EU27 who bid for clients falling outside the scope of compliance for UK-based rival firms.

By doubling down on what you’re good at, and where firms may be best able to compete effectively in a post-Brexit marketplace, expect some hard decisions to be made.