Brexit – What are investors to do?
The United Kingdom unexpectedly voted for Brexit on 23 June and since then, reassured by soothing words from the Bank of England and the Chancellor, not to mention a recent reduction in base interest rate to an historic low of 0.25%, the main United Kingdom investment market has held its nerve.
However, for those who are nervous about the ups and downs of markets, cash investing has become even more difficult with many short term cash accounts paying almost no interest.
In the short term i.e. under three years, there is much uncertainty as Brexit negotiations have yet to commence. The new Prime Minister, Theresa May, has indicated that she will not invoke Article 50 of the Treaty until she is satisfied as to the basis of negotiations, and the EU is steadfastly maintaining its stance that any deal with the United Kingdom must include the free passage of people across borders.
With inflation rising mainly due to the significant depreciation in Sterling post Brexit, poor investment advice can prove costly, not only in interest earned but also in maintaining the spending power of capital in the medium to long term.
Good professional advice is essential but investors should be realistic when deciding how much investment risk they are willing to tolerate.
Most investments carry some risk – even cash deposits. Cash as a long term investment has provided poor returns for a number of years now so those requiring income may have to be more flexible in where this can be obtained, whilst maintaining a good level of security.
The Financial Conduct Authority Retail Distribution Review, completed some years ago, was extremely helpful for public reassurance in providing that all investment and financial advisors must have professional qualifications. Further, a definition of what is ‘independent’ in the service provided by an advisor was clarified by the RDR. It also became compulsory, if the independence label was to be retained, that a fee based option was available in the charges to investors.
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