How Will Brexit Impact on Wealth Management Services in Europe?
While it is early days in the Brexit negotiations, it is fair to surmise that the UK have been pressed onto the back foot by their EU counterparts.
This makes a mockery of the government's tough stance prior to the negotiations, particularly if the UK does end up paying a supposed divorce bill of £36 billion in order to progress potential trade talks. At the heart of this issue is the potential loss of business and investment into the UK as the final agreement draws closer, with wealth management services particularly under pressure amid dwindling interest in British assets.
In this article, we will look at how Brexit will impact on the wealth management industry throughout both Europe and the UK.
The Challenge Facing Wealth Investors and Funds in the Wake of Brexit
This issue has come under the spotlight recently, with a host of EU-based sovereign wealth funds reportedly finding UK assets and investment increasingly unattractive. A recent study by Invesco, which canvassed the thoughts of 97 sovereign investors, revealed that many are questioning the longevity of the UK as an investment hub for wealth managers once Brexit negotiations have concluded. This could have serious and incremental connotations for the UK, particularly with the survey respondents holding a collective total of $12 trillion in combined assets.
In terms of bottom line numbers, the UK's investment rating has slipped from a peak of 7.6 in 2015 to just 5.5 this year, although it is fair to say that the current uncertainty surrounding Brexit may ultimately be more impactful than the final agreement itself. This is particularly relevant when you consider factors such as imports and market access, as the lack of assurances regarding the UK's future relationship with the EU is forcing many investors to target overseas opportunities through experienced wealth management providers like Sanlam.
This is also reflected by the correspondingly rise of Germany's investment score, which has risen from 7 to 7.8 during the last two years.
The Good News for Wealth Management in the UK (and Those Who Hope for a Competitive European Market)
While the report highlighted a declining level of confidence in UK assets (along with a significant increase in sentiment surrounding European alternatives), it also offered optimism to British businesses and the economy as a whole.
The Qatar Investment Authority, which bought a 20% stake in London Heathrow's parent company back in 2012, has made a long-term commitment to the UK and pledged to invest a further £5 billion into the nation during the next five years.
This suggests that the final Brexit outcome may be more favourable for UK assets than initial reports claim, meaning that the main task of wealth management firms is to navigate the uncertainty created by the negotiation period prior to a final deal being agreed.