Reimagining Brexit: Advisers give reasons to be cheerful

Early trade deals and new pension structures are mooted

Nicola Brittain
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Reimagining Brexit: Advisers give reasons to be cheerful

The Brexit fallout is still being described in apocalyptic terms, but with any great change there is also opportunity. PA asked the industry how it can seize this to bolster both investor confidence and the financial services sector

Few advisers will have been surprised by the market volatility since Brexit, but they will have different views on how to tackle this.

The most optimistic argue that the uncertainty provides an opportunity to reimagine the financial services sector and bolster certain aspects of it.

Others argue that, actually, investors and savers may do well even if the economy doesn't. PA asked four commentators for their reasons to be cheerful...

I would like to see the BoE set up a national pension fund


Philip Milton & Co f
ounder Philip Milton

There are structural issues that have needed addressing for some time.

Pension funds always hold government bonds and yet they yield almost nothing. Usually, if a currency falls in value a central bank will ratchet up the interest rates to hold inflation back.

This increases the value of government bonds. Of course, our government is doing the opposite. It is injecting more money into the economy and reducing interest rates which forces the yields even lower.

I think we should radically reconsider the way portfolios are structured as a result. Commerce is the only way pensions will be paid.

I would also like to see the Bank of England set up a national pension fund of some sort. It could bolster the British stock market - the FTSE100 or FTSE250 - by £100bn.

This colossal underpinning would help the whole system rejuvenate and recapitalise. It will create a baseline for savers and the economy more generally for a long time into the future.

 

Pensions are at breaking point and this will force a long-standing problem out into the open

Hargreaves Lansdown head of retirement policy Tom McPhail

The plunging gilt yields as a result of Brexit have caused pension scheme liabilities to soar. Pensions are at breaking point and this will force a long-standing problem out into the open.

How do we balance the interests of shareholders with retirees and a workforce of various ages?

Final salary pension schemes are demanding more money than is available. MPs Frank Field and Debbie Abraham (a member of the shadow cabinet) have both called for significant action to address this and now is the time to do it.

Any change provides opportunity, but the conversation around how to reimagine pensions needs to be managed carefully so as not to undermine confidence. We can now begin a considered examination of the options. This is a great opportunity.

 

Jumping ship gives us a chance to form early trade deals


Rowley Turton 
IFA Scott Gallacher

Although the economy looks likely to be heading towards recession, stock market returns are not correlated to GDP growth.

Investors with diversified portfolios are relatively well protected from this. Bigger companies in a stock market tend to do well during times of economic difficulty, they consolidate and pick of the weaker companies in their sector.

Similarly, many of them are international and exposed to variety in this sense. Most investors hold shares in bigger companies such as those on the FTSE100 and these still look strong.

Similarly, the weakness of the pound is good for investors in the economy as well as exporters.

This can afford opportunities for savvy investors. And there were many intractable problems with the EU, perhaps jumping ship earlier was better than later. It gives us an opportunity to form independent trade deals before other members leave and start to do the same.  

 

Teresa May's vision gives me confidence 

Ben Baldwin IFA Cass-Stephens Life & Pensions

I listened to Teresa May's speech yesterday and felt proud. She voted remain but says as leader she will "battle for a better Britain".

We need positive and confident leaders, and her vision gives me confidence. The Tories seemed united behind her and I believe she'll broker the best possible deal with Europe. Where there's confidence the markets respond.

As advisers, we can provide the same confidence to our clients. The media has been too negative and it is unwarranted, no-one knows what's going to happen or what sort of trade deals the new government will secure.

The FTSE is higher than it was six months ago and it has varied a lot over the last ten years. That's the nature of the stockmarket. With all this considered, I think it's important to inject confidence into conversations with clients.

With Teresa May in the driving seat and advisers telling their clients to remain calm and confident, there is every reason to be cheerful.

 

 

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