The B word, Brexit, has been a metaphorical pain in the backside for the financial sector since the vote was announced in June 2016. Many firms have had to rejig their business in the UK to access clients across Europe due to uncertainties.
Last month, International Adviser reported on the financial adviser market in Portugal, where DeVere Group’s Andy Oliver said UK expats were accelerating their plans to move to the country with some two or three years ahead of schedule “just in case Brexit gets in the way”.
But what is the rest of Europe feeling about Brexit? Especially with a no deal on the horizon.
Is it really end of the world as we know it for the financial adviser market?
For Nicholas Chappell, founder of McLaren Asset Management, which offers financial advisory services in Spain, it has been a game changer.
“Brexit has been the final straw, as far as expansion of the business is concerned. It has completely changed the landscape for me,” Chappell told IA. “I was registered with the Spanish regulator CNMV (Comisión Nacional del Mercado de Valores) until Brexit. I spent most of 2017 winding down my licence with them.”
McLaren AM is a Federation of European Independent Financial Advisers (Feifa) member.
Dwindling financial advisory market
On 14 January, the Spanish government unveiled a dedicated Brexit section on its website, which outlines the various issues that UK nationals and businesses will face. But there hasn’t been anything concrete on how UK expats will be dealt with.
Chappell added: “The financial advisory market is going to dwindle. It is going to shrink. No question. It is not worth parachuting people in, in the hope that you are going to pick up tonnes of expat business because it is not going to happen.
“I have seen so many people return to UK residency since the Brexit vote because they are so uncertain what their entitlements will be and what the landscape in the future will be for them.
“Those that are fortunate enough to be able to get back into the UK, if they have properties in UK and Spain, have gone back and terminated their Spanish residency. Clearly some people are not able to do that. It has certainly turned things upside down.”
Pre-Brexit issues halted expat flow
In Cyprus, the expat market has declined but Brexit was not the catalyst.
Caroline Shearman at Elgin Associates, a network of financial advisers, told IA that currency exchange rates before the referendum had a hand in the drop in expat numbers.
“For retirement, I have heard more about clients moving back to the UK because of the drop in the pound against the euro,” Shearman said. “That was a trend that had begun prior to the referendum which has been exacerbated since 2016.
“I don’t know about the future, moving abroad to southern Europe is still a very attractive position for many people.”
Shearman also spoke about Cyprus’ Brexit plan, but said the threat of a no-deal has left expats with a lot of questions that no one can answer.
She added: “After the referendum, there was a memorandum of understanding implicating that residency is going to be resolved, I don’t know whether this is still the case, as we are looking at a no-deal Brexit. A lot is up in the air.
“What we have been advising our clients is that they must get, what is known as, an MEU1, known commonly as the yellow slip, which registers that you reside in a European country, then upgrade it to an MEU3 for permanent residence.
“We have advised people, where appropriate, to go ahead and seek citizenship in Cyprus.
“But, for the vast majority of people, that is not the best thing or a necessary thing because Cyprus is one of those countries in the EU that has forced heirship. Where you have state planning issues, it is not in the best interest to become a citizen, and you can resolve that in other ways.”
We want you to stay
There are some jurisdictions in the EU that are looking to keep a special relationship with the UK.
Malta announced on 23 January that UK nationals living in the country would be eligible for special 10-year residency permits, whatever happens with Brexit.
Edward Scicluna, Malta’s finance minister, said during a breakfast briefing attended by IA: “Any Maltese or any Brit in either jurisdiction will have free service to health, the agreement still stands.
“We have a special relationship. The two prime ministers have already met on this. We agreed for us nothing will change. Short of breaking EU law, we will make it as normal, whether day before Brexit or day after, our relationship and freedom of movement – we will make it as it is now as much as we can.”
There is a huge benefit for UK expats in Malta, as its official language is English.
James Edwards, director at Feifa member Templar European Investment Services, told IA the English-speaking culture will be a major factor for future expats as there is “little to no fear” about being daunted by another language.
Edwards also spoke about whether Brexit will deter UK expats to enter Malta.
“Yes and no. I think if firm plans are in place with a new employer or there is a family situation pulling them to Malta, then no,” Edwards added. “Similarly if it’s a younger person with no family responsibilities it’s all a lot easier. There is a huge and very successful i-Gaming sector in Malta and much of the talent in that sector is on the IT side and, in general, they are relatively young, with no family responsibilities.
“If it’s a retirement or lifestyle decision, then I think it’s highly likely to have an influence. If people are considering a permanent move to Malta that may involve selling a property in the UK, then the current uncertainty is adding a good deal of angst to what is already a very stressful decision.
“I am sure some people in that situation will postpone any purchase and rent in the short to medium term before they bite the bullet or perhaps delay the move for the time being until the dust has settled.”
The expensive beauty of Italy will keep Brits away
Malta has not been the only country to send a persuasive message to expats.
From 1 January 2019, any retired immigrants who are not resident in Italy and are in receipt of a pension could be eligible for a 7% flat-rate tax on all their foreign income.
But even incentives are likely to keep the UK expats away from Italy.
Michael Lodhi, the Spectrum IFA G’sroup (Feifa member) chairman, chief executive and director, told IA: “Since Brexit is as yet unknown, it is difficult to say what exactly we will need to do to adapt to it, but one thing is for sure; there are likely to be less UK expats moving to Italy, post Brexit.
“Most likely, although Italy has always attracted a wealthier type of client, mainly because it is more expensive to live in Italy, but Brexit will inevitably deter those who cannot demonstrate they have sufficient resources to not be a burden on the state.
“This requirement will not affect the working population but may reduce the number of retirees moving to Italy for ‘La dolce vita‘.”
France government looking to sort out issues
The attractiveness of France has been part of the French government’s plans. It has tried to protect the right of UK expats in France, but only if the same rights are guaranteed for its citizens in Britain.
From 29 March 2019, the bill enables UK nationals living in France to have:
– The right to remain without a permit and access existing rights for a 12-month period;
– A one-year window in which to acquire formal residency; and,
– More favourable treatment than other non-EU nationals.
David Vacani, principal at Beacon Global Wealth Management, was a bit more upbeat about clients in France than his financial adviser counterparts.
“The main issue on Brexit is Brexit itself and that is a concern for clients already in France, as well as those looking to emigrate,” Vacani told IA. “Clients already in France have needed to get their Carte de Sejour (residence permit) and we have assisted clients in making sure they can get this document.
“There has definitely been a slowing in people moving to countries like France but we have still seen a steady flow going to France and also people have tended to adopt the attitude that if they want to go they go and will not have their dreams upset by politicians.”
But he did admit that Brexit has affected the financial adviser market.
Vacani added: “Yes it already has. Increased regulation and the need for experience in the specific area is paramount. There are less advisers definitely already.”
Trade association sees optimism and compromise
Speaking for the whole financial adviser market in Europe, Feifa chief executive Paul Stanfield said that Brexit will “present a number of issues for both advisers and expat clients”, but the association is looking to improve the situation.
“As Pimfa (Personal Investment Management and Financial Advice Association) confirmed recently, it is now looking highly likely that UK advisers will be unable to advise clients based in EU countries after 29 March this year, unless they set up an EU operation or join an EU advisory network,” Stanfield said to IA. “This could obviously create major issues where they have British expat clients.
“One of the areas that we have been working on for some time is, in general terms, professional collaboration.
“In this particular circumstance that predominantly means assisting UK-based advisers to work with appropriate financial advisory firms based in mainland Europe to ensure continuity of suitable advice to such clients.”
