According to a Twitter poll carried out by Private Banker International, 56% respondents think that Brexit will adversely affect London’s position as a global wealth management hub. But what are wealth managers and private bankers saying about how Brexit will impact the UK’s financial services industry? PBI finds out from select experts
According to a Twitter poll carried out by Private Banker International, 56% respondents think that Brexit will adversely affect London’s position as a global wealth management hub.
However, big banks are not saying much yet about how Brexit will impact the UK’s financial services industry on the whole, its wealth managers and private banks, or London’s position as a global private banking centre.
Group Chairman of HSBC, Douglas Flint, said that Britain and British businesses are "entering a new era" in the post-Brexit world. He also added that HSBC’s "commitment to British businesses, customers and staff in the UK remains undiminished". This comes at a time when Morgan Stanley has denied moving 2,000 of its London jobs – reportedly in its senior banking positions and investment banking units – to Dublin and Frankfurt in light of Brexit.
HSBC’s Flint said: "The work to establish fresh terms of trade with our European and global partners will be complex and time consuming. We will be working tirelessly in the coming weeks and months to help our customers adjust to and prepare for the new environment."
London’s attraction as wealth hub unlikely to diminish
The referendum to decide the UK’s fate within the European Union took place on 23 June with almost 52% of British people voting to leave the EU. This led to the pound slumping to historic lows and gold surging.
Stanhope Capital’s CIO, Jonathan Bell, told PBI: "We had good currency diversification going into the vote, so if the vote went against us, the fall in sterling would slightly offset the fall in the equity markets in sterling terms. People are more concerned about how long this carries on for. Clearly the politics of it will take many months to unwind.
Bell added: "There has been a lot of scaremongering by the Remain camp ahead of the vote. I suspect what we’ll now see over the next few months is companies saying – it’s not quite as bad as everyone said it might be."
According to Bell, the property market in London may experience a longer pause but Brexit will not significantly impact London’s value as a global private banking centre.
"I don’t think people will change where their money is managed at the moment. Because of course you can have it managed in London and custodied wherever you like. You’ve got probably two to three years at least until you know whether you could have it better off managed somewhere else.
"I don’t think we’ll see a particular change in the private banking community. We have a Swiss office and of course, if there is a change, it’s likely to be to Switzerland where we slightly re-configure resources. But that I think is a long way down the road."
Continue to support wealthy clients and take a long-term view
Camilla Stowell, head of Coutts International and Coutts Private Office (also member of the PBI Editorial Board) told PBI that over the last couple of weeks, clients have been positioning themselves from a currency standpoint by building up USD exposure, and the trend from some of these clients has been to buy back some GBP this morning.
"However, longer-term there will be pockets of value reappearing in certain asset classes, namely good quality UK property, the UK mid cap companies as well as the FTSE 100. While market volatility is likely to be with us for a while, we believe these positions offer the potential for significant long-term gains."
Stowell added that Coutts also continues to be consistent in its appetite to "lend to support clients to buy good quality property assets in a sensible way".
Glass half full or half empty?
Justin Oliver, deputy CIO at Canaccord Genuity Wealth Management says that Brexit presents a "significant shock just when the industry doesn’t need it amidst slowing global growth".
Canaccord Genuity has taken capital out of UK/EU equity markets and is keeping assets in cash for the time being, Oliver tells PBI. "We were quick to adjust clients’ portfolios to protect against volatility.
"We had been underweight towards UK equities in the run up to the referendum. We clearly could have been further underweight, but the situation would have been very different if the vote had gone the other way.
"At this point, it’s difficult to see an upside for investors, post Brexit."
However, Bell says that if the FTSE fell below 5800, a good buying opportunity can be reviewed, particularly if sterling is in the ballpark of 1.35 (against the dollar).
"Stock markets have actually held up reasonably well today (24 June). FTSE is only off 2.5% at the moment and currency at 1.38 isn’t that far away from where it was just a few months ago when it went below 1.40.
Bell expects a weaker sterling to translate back into higher Sterling profits as the UK equity market has a significant proportion of its earnings coming from outside the UK.
International companies and exporting companies should also benefit in the short to medium term, Bell tells PBI: "I think that will be greater than the impact of changes in tariff barriers between us and the rest of the EU. The impact on bonds is a short term impact. Bonds have gone up, but I don’t think that will be particularly long lived."
For a UK investor, Bell says, the need to be invested internationally to reduce currency risks is paramount.