In times of trouble good advice is all the more valuable and the latest numbers suggest money managers are going to be in demand as much this year as in 2016.
Earlier this week the market reacted positively to British prime minister Theresa May’s speech laying out some of the government’s negotiation plans for exiting the European Union.
However, the speech provided no real clarity as to the shape of any Brexit deal – and this uncertainty is likely to persist until a final agreement is reached, however long that takes.
We can expect many turning points as the negotiations progress — meaning further volatility — even if it is unlikely to be on the same scale as the initial shock in June last year when the surprise Brexit vote came in.
There are some winners, however
This is good news for wealth managers, as it will drive further demand for investment advice, and the positive rates of returns delivered during an unpredictable 2016 are a perfect marketing tool.
GlobalData’s latest estimates suggest that 2016 saw total UK retail savings grow by 8.3 percent – the fastest pace since 2009.
Despite record-low interest rates, GlobalData estimates that deposit balances alone grew by 6.3 percent in 2016 — the highest growth since 2007 — as many opted for the safe haven of bank accounts to protect their portfolios from volatility.
Yet those who decided to invest their cash probably did well. As the FTSE 100 rallied towards all-time highs, the value of savings held in funds and directly on the stock market surged, making up for any outflows.
But there is a fly in the ointment
Paradoxically, much of the growth was fuelled by a significant drop in the value of the pound due to increased uncertainty, as the FTSE 100 is dominated by companies that make the majority of their money overseas.
But as global investors gradually accept and adjust to the new reality this trend is likely to reverse, or at least weaken.
The challenge going forward is maintaining these impressive rates of growth to meet clients’ expectations.
And there is another challenge – this time operational – for investment managers with foreign clients. While UK savings grew in local currency terms, the weaker pound offset this growth from a dollar and euro perspective.
Consequently, for some players the UK investment market just shrank, meaning they will have to rethink their operations in the country.