Lessons learned from 2018 – a year when the FTSE 100 suffered its worst 12-month loss since the 2008 financial crisis – could hold financial advisers in good stead for 2019.
Rising interest rates, a trade war between the US and China, plus Brexit fears, saw the FTSE 100’s ‘annus horribilis’ cemented on December 31 when it was confirmed it had lost 12.5 per cent of its value this year – more than £242bn.
As Prime Minister Theresa May was hit by a vote of no confidence and failed to get her Brexit deal through parliament this week, the index of the biggest listed companies plunged by £57.5bn in a single month.
At the start of 2018 the FTSE 100 was at just under 7,800 points, but on the final day of the year it was at around 6,600 points.
So, what should financial advisers tell their clients, who have endured a rollercoaster 2018 and now face Britain actually leaving the EU?
What are the other challenges and opportunities that the year ahead holds?
Brace for Brexit
As we stare down the barrel of Brexit in 2019, the one thing that all financial advisers agree upon is we are dealing with a world of macro-uncertainty.
Financial advisers gathered at an event in London looking at what to recommend to clients in the year ahead all agreed you must have contingencies around everything you are planning in 2019.
This is because pessimism about UK equities is similar to levels in 1974 – when the UK was in recession, according to Gavin Corr, director of manager selection at Morningstar.
He says: “Emerging markets look cheap, but the UK looks cheaper. When did you expect to hear that?
“As investors how do you gain from this scenario? If you want to bet on this it is a fool’s errand.
“Brexit is driven by a feeling of nationalism and that is arguably a more worrying issue. These are movements that cannot be solved quickly unless there is a proper redistribution of wealth, otherwise we are in a decade-long multi-generational fight.”
When discussing markets with clients, Mr Corr told advisers gathered at an event organised by recruitment consultants BWD Search and Selection that it is vital to explain that the UK is being priced on the back of British politics.
Mr Corr says: “Only a quarter of companies are prepared for Brexit, but how do you do that? It is no surprise that UK corporates aren’t prepared.”
James Roberts, financial planner at Partners Wealth Management, says given the continually moving feast that is Brexit, wealth planners need to start viewing the UK’s exit from the EU as “a bit of an irrelevance”.
Mr Roberts says: “Our job is to give reassurance, map out the future for clients and help them get through.
“For the day-to-day financial planner, Brexit is just another factor to talk about.
“This is where, as an industry, you have to strip back and understand the client you are dealing with.