Brexit’s Impact on Investors and Wealth Management

June 19, 2017


In this Brexit series podcast, Dave Plaskow examines the impact of Brexit on investors and wealth management as he speaks with Timothy Speiss, EisnerAmper’s Partner In-Charge of the Personal Wealth Advisors Group and VP of EisnerAmper Wealth Planning. Speiss gives his in-depth perspective on how Brexit might impact British-EU investors and vice versa and how global investors are approaching Brexit. He also discusses client questions on Brexit, including high net-worth clients, wealth management impact, possible additional regulations, potential risks and opportunities.



Dave Plaskow: Welcome to another episode of EisnerAmper’s Brexit Podcast series, where we examine the fallout from Britain’s exit from the European Union. Our focus today is Brexit’s impact on investors and wealth management. As such, we’re happy to have with us Timothy Speiss. Tim is the Partner In-Charge of EisnerAmper’s Personal Wealth Advisors Group, and Vice President of EisnerAmper Wealth Planning. So, if there’s anyone who can shed light on this area it’s Tim. Tim, welcome.

Timothy Speiss: Thank you.

DP: Let’s start with the last link in the chain. How would Brexit impact investors, and specifically investors from the European Union who are investing in Britain, and, conversely, British investors who are investing in the EU?

Timothy Speiss: Right. I think the investor attributes you’re talking about is going to be short-term uncertain only because there’s a lot of facts not yet known. I can tell you that for example I was in Edinburgh Scotland last week and in Dublin. Ireland is very concerned. So, if I repositioned your question to say if it was a UK person or an Irish national I would tell you that from an Irish perspective, they produce in that country a lot of real estate construction materials - materials that countries use to build things. There’s a big slowdown in UK construction right now. Might that have happened anyway despite what happened on June 23rd? Probably. Most of Europe is in an economic downturn right now. Consumption is not very high. So, I wouldn’t read into that by simply saying that that was simply something that happened because of Brexit. I think that any astute investor, in the EU, to your point, would probably be looking around the world and looking at their long-term asset allocation strategy and trying to make sense of where they want to be positioned five years out, two years out. Certainly, they are concerned about tomorrow, but tomorrow is a very short time frame, and in clients that we work with, we’re looking at five, and ten, and twenty year projections, and then modifying as risk tolerance changes, rate of returns, economic principles, I think that’s what you’re going to see here. By the way, it’s still uncertain when the official separation would occur, there’s a two-year rule in the referendum. Might it get re-negotiated? There’s a lot of uncertainty, but certainly to your point, people are considering it and trying to determine what to do.

DP:Ok, Tim, let’s step out of Europe for a second. What about those investors in, say, Argentina, or the US, India, and elsewhere around the globe. How should they approach this? Oh, it’s just Europe, we don’t have to worry about it? Or is this something that will trickle through the whole global economy that they really need to keep an eye on?

TS: They should be focused on it. Most of our clients are invested in a global context, in that they are invested in either instruments, or companies, or funds that are not just US centric. They are invested or have sub-investments that really are located all over the world and they’re astute enough to know that this is a significant happening, a very significant event. Scotland for example, Aberdeen, Edinburgh, very respectable size financial center, probably only second to London in the EU. They’re considering a separation vote within the next twenty-four months. So, you really, and we counselled clients that really take a broad view, what they end up deciding to do, based upon their own risk tolerance and attributes will be, of course, their decision, but we try to educate them, and of course, they have their own view.

DP:What questions are you getting from your clients on Brexit?

TS: Not yet, anything very significant. I think a lot of our clients, they are very aware of what happened in the UK, even the UK capital markets within days of June twenty-three. You know, approaching June twenty-three, there was a significant downturn in the UK markets, and then it recovered back up almost to where it was on June twenty-two. We have not received to date, questions around what we should have been receiving perhaps if we were trying to forecast it, but questions around, no questions yet on acid allocation, no questions yet on yield forecast, global growth appreciation – we have all that research available, and of course, we bring that into the discussions when we meet with our clients, which we do formally on a quarterly basis – so that will definitely be part of the discussions, but there haven’t been any top of mind, burning questions, to date that we’ve received.

DP: In looking at the short term, when you’re talking with your high net-worth clients, what advice are you giving them about Brexit? You know, give us a few “do’s and “don’t’s.

TS: To remain very broadly focused, and to take an objective view, and try not to make any decisions premature of having actual information, or data to support a decision, one way or the other, I will tell you we’re getting more questions from our clients that are not only investment clients, but that are tax clients. We represent a lot of, many US persons working abroad: expats, so to speak, and also inpats, foreign persons here, living in the United States, they’re asking about tax treaty issues. Some of them are asking, if they live outside of (meaning non-UK residents, but business interests there), how might the tax treaty be renegotiated between the UK and the rest of the EU? There’s model treaties right now.

DP:What are you saying to that?

TS: We’re saying it’s not yet known. But think about it, trade treaties having to be renegotiated, tax treaties, possibly being renegotiated, a lot of factors to consider. It’s premature, but again, sophisticated investors, sophisticated business persons are asking these questions because they are accustomed to being well-prepared and addressing these things in advance at the extent they can.

DP:Now, we’ve heard about Brexit vis-à-vis immigration, passports, movement and so on, that will create some additional red tape. Will we see any of that in the investment area, you know, perhaps additional regulations?

TS: I would think that from the UK, EU side, yes. As far as investments from a US treasury, department of justice, even, initiative, I’m thinking offshore voluntary disclosures and so forth, I would say that we have really become a lot more transparent in the US. I don’t see that going away. I wouldn’t say that it’s going to become more so, so for example, if you’re a US person with foreign investments, you literally have to now disclose on your US tax return as an accompaniment to file, where your assets are, what they are, it’s almost like disclosing your non-US bounty, literally. You still have, of course, the foreign bank account reporting. All that’s from the US side, that’s not going to change. It shouldn’t really change, just because of the Brexit, but what I’m saying is it could very well change from a UK regulatory or EU regulatory when you start thinking about tax treaties and taxation of investment income amongst an EU member, which the UK would not be, compared to an EU member.

DP: In looking at Brexit’s long term impact, what potential investment risks and opportunities do you see?

TS: Well, from that perspective, I mean, I wholeheartedly agree that two years is really just a bookmark. I don’t think it’s going to take any sooner, I think it could, in fact, take longer. You still hear people meandering or stating that there could be a second vote. I’m not sure anyone knows the answer to that, but as far as what to do in the interim, I’d be watching, we are telling our clients that if they are invested in specific companies, they should really be focusing on: what are the companies doing? Could you see plants move from one location to another? Yes. Could you see work forces move? Yes. So, could that impact the company’s performance if you are in, say, and EU fund or an EU ETF? Yes. You’d probably be wise to understand what could be some of the upsides and downsides of the underlying companies you are actually invested in. Keep in mind, we don’t recommend nor provide any advice around stocks, nor do we sell any investment products, rather our job is to help clients understand and then monitor their portfolio, but these would be some of the points we’d be emphasizing and are to our clients around specific holdings that they have.

DP:Tim, any final thoughts on how Brexit might impact the wealth management area?

TS: I think that it’s going to be more-so driven by the actual investors vs the infrastructure, or investment advisors, or investment managements firms, per say. And that’s because, since 2008, what we’ve seen occur, and that was the year, really, that everything started to become very volatile here in the states with the banking crisis and so forth. Investors since that time, at least in our client base, have been a lot more weary, a lot more astute, asking questions, wanting to understand, certainly in my career, more-so than others, exactly how they are investing, what are the risks, what is the confidence level to attain a desired rate of return, a lot of detailed questions. And I think because they experienced the past nine years or so, eight years or so, and I think that’s going to be the same, again, this time. I think if you are an advisor and you are trying to help a client make prudent investment decisions, you should be expected to receive a lot more questions around the how, the why, fees, a challenge around why a particular allocation might make sense for them – these are questions from the investor – and being prepared to answer those questions.

DP:Ok, Tim, thanks for this great insight. Tune into the next EisnerAmper podcast where we get down to business.

About Timothy Speiss

Timothy Speiss is a Tax Partner in the Private Client Services Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.

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