As we fast approach the date of the UK’s impending withdrawal from the EU and due to the continued uncertainty around the terms of this withdrawal, we have been contacted by several of our clients asking us about the possible impact on their investments.
Therefore, this week I thought it might be useful to share with you the basis of those discussions.
What effect could Brexit have on my investments?
The actual impact will be dependent on the terms under which the UK leaves the EU. But it is important to remember that all investments can go up and down in value over time and returns are not guaranteed.
Most investments are designed to be held over the medium to long term and we would caution against making any decisions on whether to encash or retain particular investments based on the potential impacts of Brexit alone or any short-term fluctuations in the value of your investments.
In short, no-one can accurately predict how investment markets will be affected by Brexit or what the precise implications will be.
What about investments that I hold that are provided by non-UK companies?
If you hold money in funds/investments that are provided by a non-UK company that is based within the European Economic Area (EEA) then you should still be able to continue holding these investments even in the event of a ‘no deal’ Brexit. This is because the Government and the Financial Conduct Authority (which is responsible for regulating the conduct of all UK authorised financial services firms) have put in place special measures that will enable these companies to continue offering services to you.
Will Brexit affect the consumer protection I receive on my investments?
There will be no changes to consumer protection for most individuals.
The Financial Services Compensation Scheme (FSCS) will remain available to UK consumers post Brexit. It is designed to deal with claims from (and in the event of a successful claim, provide compensation to) consumers who have previously dealt with a UK financial services firm that has since gone out of business. The compensation limits are per person, per institution and currently set at £85,000 (deposit accounts), £50,000 (investments) and 100% of a claim with no upper limit (pensions and life assurance.)
EEA based firms doing business in the UK are not typically covered by the FSCS and instead the compensation scheme in their country of origin will usually deal with any claims against the firm. Brexit could result in a loss of access to these EEA compensation schemes if no deal is reached. This loss of access is dependent on the terms of withdrawal and at this stage, is far from certain.
In the event of an issue with the provider, or advisory business the Financial Ombudsman Service settles disputes between consumers and UK financial services firms where these arise. This service will continue to be available post Brexit, meaning that if you have a dispute with a UK based financial services firm that is authorised by the Financial Conduct Authority, you will continue to be able to refer a complaint to the Financial Ombudsman Service (FOS) if a dispute arises. It is also proposed that you will be covered by the FOS for the activities of EEA based firms that provide services into the UK.
Will product providers with whom I hold investments be updating me in relation to any potential impacts Brexit may have?
You may also receive communications from providers updating you with regards to the impacts of Brexit, although again given that the position is still unclear, they may not be able to provide definitive information. We are more than happy to discuss any questions you may have received from correspondence with any providers and to assist where we can.
For our existing clients, we will, of course, be happy to discuss the performance of your investments with you during your next ongoing review with us and we can also discuss any concerns you may have on issues that could affect your investments, such as the impact of Brexit. Where necessary, we will of course adjust your portfolio, based on your circumstances, preferences and risk appetite. Of course, if you want to speak to us beforehand, please do give us a call.
Whilst we are always happy to chat to you, we should stress that at this stage, we cannot accurately predict nor give you any definitive answers in terms of what the impact of Brexit will be, or even if Brexit will happen; but then, if we could …….
notes and risk warnings
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Errors and omissions excepted.