In the days after the EU referendum vote investors appeared to remain sanguine about the outcome. Trading on the day after the vote spiked, with markets facing pressure and platforms struggling to get pricing due to the volume of trading. But the bulk of these moves were putting cash to work, according to a number of platforms, rather than investors fleeing the market. This was backed up by Platforum research, which shows just under two-thirds of advisers questioned felt the Brexit vote had little or no impact on their clients’ attitudes toward investments. The message from advisers was that clients understand they are invested for the long term, and the fallout immediately following the vote was just a blip. As a result, 73 per cent of advisers didn’t plan to make any changes to client portfolios because of Brexit.
However, the new normal of markets post-Brexit, coupled with Bank of England moves to cut interest rates and boost QE, might mean advisers should pause.
A panel of experts gathered for our roundtable, featured here, said the UK’s prospects before Brexit were already challenged, and the historic vote will not aid that. At this time, they argued, investors should look at their asset allocation and reassess the characteristics of “traditional” investments.
Diversification was the buzzword of the day, with investment professionals saying now more than ever investors need to be diversified across asset class, geography and risk measures. At times such as these, it is more crucial than ever that advisers and investors know what their fund managers are doing. Morningstar’s Dan Kemp highlights this here, looking at the shifts fund managers have made in the market volatility post-Brexit.
Instead of fearing short-term price movements, he says, we should be afraid of long-term under-performance and permanent loss of capital as a result of overreaction by managers.