Advisers are increasingly recommending a cautious investment strategy due to Brexit, according to research from Canada Life.
The analysis has found that 30% of advisers say they are more likely to invest in defensive stocks as a result of the referendum. This is up substantially from 10% a year ago.
The results also outline the difficult choices faced by advisers when it comes to recommending a financial strategy and also revealed an increase in appetite for international investments.
Richard Priestley, executive director at Canada Life, said: “Although we are only a few months away from B-day, the impact remains far from clear. Advisers continue to plan client portfolios that address the known and unknown alike. Invest too much outside the UK and you could miss out on a roaring economy. Stay in, and potentially watch the value of your clients’ investments fall.
With Brexit looming nearer, our research suggests more advisers are likely to take a cautious approach until the impacts are better understood.
“While the exact consequences of Brexit continue to remain unclear, it’s likely that in the event of a hard Brexit we would see some devaluation in sterling. That would benefit those businesses with overseas revenues, something advisers may need to keep in mind in terms of their clients’ financial strategies. In fact, as total UK exports last year were worth around £616 billion, you can get an awful lot of exposure to overseas revenues by investing in UK companies that export.
“It’s not surprising that international markets are looking increasingly attractive, as advisers fear an adverse impact primarily focused on the UK.”
While caution is increasingly the watchword, that is not translating into a fear of international investments. Among advisers, 19% are looking more at opportunities to invest overseas. This is up from a year ago when the figure stood at 7%.
Only 3% of advisers are not investing in an EU jurisdiction because of Brexit.
Mel Kenny, chartered financial planner at London-based Radcliffe & Newlands, said it is reasonable for advisers to adopt a cautious approach when the perception of risk is greater.
He added: “The future has always been an unknown but critically the current perception of risk is abnormal given the emotion and attention given to current economic and political decision-making. When the perception of risk is greater, then people err on the side of caution whether warranted or not.”
Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation
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