By Robert Kent, of Kentingtons.
If like me, you are feeling shocked but not all that surprised by the final vote, you will eventually start thinking again about what this means for you practically.
We have seen the main concerns discussed over and over again in the weeks building up to the vote and I don’t intend to rake over those again, purely because much of what has been discussed is conjecture; we simply do not know what any deal with Europe might look like.
This means that concerns such as access to healthcare and the application of social charges to pensions etc. remain uncertain. What we are fairly sure of is that nothing much will change for the next two years. A UK national’s rights and obligations, under EU law, will remain unchanged until the UK officially leaves.
This is about “what now?”
99% of Kentingtons clients have all, or at least a significant percentage, of their capital in Euros. This has always been recommended by Kentingtons as it is clearly logical to maintain capital in the currency in which you spend. The outlook for Sterling is unsure, but volatility is a certainty and this makes planning a challenge.
During the last economic crisis we saw Sterling fall close to parity to the Euro. We advised our clients, who were not doing so, to draw income from their investments in Euros to defend themselves against the dramatic falls. This means that pensions were left building up in the UK in Sterling, (or being moved into a French compliant assurance vie though, remaining in Sterling) waiting for a better rate.
Clearly one needs to have sufficient capital to do this for a prolonged period as it is difficult to know how long the weakness may last. This worked out well, as we saw 1.05 in Feb 2009 and then 1.24 by April a year later and the very patient saw higher levels. So here we go again, not parity just yet, but let’s see.
Whether or not you should stop moving your pension, needs careful consideration and I would argue that we need to see significant falls before we do this. The point is that before panicking about the poor exchange rate, it is good to know that there are simple options to be considered.
Equity Market investing
If you are invested in the stock market, the value of your portfolio will be volatile, with the general short direction being downward. It is very important to understand that volatility and capital loss are not at all the same thing. The stock market is not rocket science; buy when prices are low and sell when they are high, but when it comes to private individuals, however, people panic and do just the reverse.
Almost all of our clients have at least half of their money invested outside of the stock market and this is so that they can calmly ride out significant market shocks, not ever needing to realise losses, safely drawing any income from a non volatile source.
For those who have a sufficient amount in secure capital, and are happy to accept some volatility, some buying is worth consideration. Markets and prices fall during periods of uncertainty and so good value is there to be found. Again, timing is the issue, so there needs to be sufficient capital remaining to be sure of avoiding realising any losses during the volatility.
In summary, there is no need to panic, but there is a need to make some carefully considered and well thought through decisions, based on logic and good common sense. There are options to guard yourself from Sterling weakness and even opportunity for those who have the capacity to buy in at potentially low prices.
KENTINGTONS SARL, Z.A. "LES ESPARRUS", 83690 VILLECROZE
Tel : 04.98.10.12.55 Fax : 04.94.84.37.65
RCS 500 163 282 DRAGUIGNAN,
Conseiller en investissements financiers, référencé sous le numéro F000116 par La compagnie des CGPI, association agréée par l’Autorité des Marchés Financiers
ORIAS 08038951 Garantie Financière et Assurance Responsabilité Civile Professionnelle Conformes Aux Articles L 512-6 et 512-7 du Code Des Assurances