Political and economic uncertainty surrounds the outcome of the UK referendum on 23 June, but the initial impact on the business of financial advisers, even if there is a vote to leave, could take some time to be felt, according to industry observers.
In the financial markets, a vote by the UK to stay in the EU should give sterling a boost, and possibly bonds and stocks as well, as the uncertainty and decline in economic activity generated by the referendum evaporates.
A leave vote could have the reverse effect as more uncertainty is generated over how the UK would exit the common market it first joined in 1973, and what the future arrangements with its biggest trading partner are likely to be.
But for financial advisers and the industry that distributes international fund, life and banking products, nothing major is likely to happen in the immediate aftermath of the vote.
“It is difficult to say with any certainty what impact a Brexit would have on financial advisers and their clients in the short or long term,” said Neil Jones, technical manager at Canada Life.
“A vote to leave the EU would put the UK and the EU in uncharted territory, and even a quick timetable is likely to be measured in years rather than months,” he said.
“Understandably, clients will want to know how this affects them but without knowing the detailed terms of an exit, it is very difficult for an adviser to know with any great certainty the impact on their client.”
It is a view that is echoed by Paul Stanfield, chief executive of the Federation of European International Financial Advisers.
“Until we know the result, it is of no benefit to speculate what might happen,” he said.
Top of Stanfield’s list of imponderables if there is a vote to leave is the issue of ‘passporting’ and, in particular, the ability of advisers to offer their services from one country to another.
“If we vote to leave, it’s not likely that a week later the EU will have decided to end passporting and enacted the legislation,” he said.
For UK advisers, it is worth noting that a leave vote would not affect current legislation on the UK statute books, particularly tax legislation.
Canada Life’s Jones said: “It is very much the UK government’s decision on how to apply tax and at what rate, and this will not change. There are also double tax treaties in place with European nations already. These are unlikely to change as a result of a ‘leave’ vote.
“And for expats with international bonds from providers in the Isle of Man, Dublin or Luxembourg, the referendum result will not change the treatment of these jurisdictions either.”
Pension payment freeze
Other issues post a Brexit vote are the payment of pensions, especially state pensions, across a new border between the UK and Europe, and access to state-provided health services.
AJ Bell, the online investment platform provider, said it believes a Brexit vote would affect around 472,000 UK citizens retired in the EU, who receive ‘triple-locked’ pensions – those that rise yearly in line with inflation.
Tom Selby, a senior analyst at AJ Bell, said: “Brexit would throw the position of expat pensioners, or those who wish to retire to Europe, into doubt.”
Under the current system, Britons retiring to a country within the European Economic Area receive annual increases to their pensions to match either wage or price inflation or 2.5% – whichever is highest.
However, Selby said if voters decide to leave the EEA, expats based in Europe could see their pension payments frozen as the UK would need to renegotiate agreements with individual EU countries for retirees to be entitled to increases.
This would put them on a par with pensioners living in Australia, Canada, New Zealand and South Africa.
“While some believe the government will be able to negotiate protections for expat pensioners in the event of a Brexit, it is worth noting that the UK has not arranged a similar deal with a non-EU country since 1981, primarily due to the costs involved,” said Selby.
There is some dispute as to whether the agreements are really necessary with some suggesting the UK could change its domestic laws and simply pay the overseas pensioners the uprated amounts.
Nigel Green, the chief executive of deVere Group, said there are also questions over what other EU countries’ policies will be towards British families’ access to education and healthcare.
“If we refuse to accept free movement of EU labour, will UK expats be able to carry on working in the EU? And will they be able to own assets under their own name?”
Green said whichever way the vote goes “there are likely to be repercussions for many British expats in Europe. They should consider taking steps to mitigate the financial risks .