Financial services organisations are urging advisers and their clients ‘not to panic’, and to ‘continue to abide by EU law until further notice’, following the UK’s vote to leave the EU and subsequent market uncertainty.
The vote in favour of the UK leaving the European Union (EU) has seen markets dive, the value of sterling slump, the prospect raised of a second referendum on Scottish independence and the resignation of prime minister David Cameron – all in the space of one morning.
Despite these events, the overwhelming message from the financial services sector has been to continue as normal until new terms have been established between the UK and the EU. Such negotiations are likely to take a matter of years rather than months, with any changes to law taking place after this.
The Financial Conduct Authority (FCA) said the vote would have significant implications for the UK because so much financial regulation applicable in the country derives from the EU. It pointed out this regulation will remain applicable until any changes are made, which would be a matter for government and parliament.
“Firms must continue to abide by their obligations under UK law, including those derived from EU law, and continue with implementation plans for legislation that are still to come into effect,” an FCA spokesperson added.
Describing the result of the referendum as ‘momentous’, the Investment Association stressed that the protections that were in place for investors yesterday remain in place today.
The fund industry trade body added that, while the focus in the short term will be on how markets respond, the industry needs to adopt a collective long-term focus on how the UK can preserve the pre-eminence of its financial services sector.
‘Business as usual’
‘Business as usual’ and advisers and their clients avoiding ‘knee-jerk reactions’ were prevailing themes from other parts of financial services, including the pension sector. “Our key message to pension savers is ‘don’t panic’,” said Aegon UK pensions director Steven Cameron.
“Anyone with a defined contribution or personal pension will see its value affected by stockmarket movements so, if they are thinking of taking money out in the immediate future, they should seek advice first.
“Following the period of consultation, the UK government might consider other changes to pensions in response to wider economic conditions and we will be closely monitoring any possible impact on our customers.”
Similarly, Hargreaves Lansdown senior analyst Laith Khalaf warned against a ‘knee jerk reaction’ to the fall in markets. “The coming days are likely to be choppy on the stockmarket and further falls are possible,” he said. “Banks and housebuilders have been hit particularly hard this morning as markets try to factor in the Brexit effect on the UK economy.”
However, he added that the markets would bounce back at some point and so investors who only now switch to cash risk buying back into the market at a higher level and ending up in a worse position than if they had just stayed put.
Seneca chief investment officer Peter Elston struck a more upbeat note than many other commentators. “Markets have a tendency to overreact,” he said. “It is quite possible they will end the day well off their lows.
“Although the financial markets are sending a clear message today, a bleak future is by no means certain. Indeed, 52% of the electorate believes the UK’s prospects are now brighter. They and their flag-bearers should now be listened to.”
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