The ten plagues of Brexit 

The 'Seventh Plague' by John Martin engraved by H. Le Keux [Public domain], via Wikimedia Commons

Spending a week traveling around the UK also involves spending a great deal of time listening to BBC Radio 4 in the car.  It has struck me that it is almost impossible to listen to this station for any length of time without becoming keenly aware that the thread of broadcasting consists largely of a continual reiteration of disaster scenarios relating to Brexit.  Yesterday, we had the Today programme interview with Dominic Raab, followed by selective extracts from the interview in the news, followed by analysis of those extracts, followed by repetitions throughout the day of the same selective extracts, the cumulative effect of which is to suggest that the UK is poised on the brink of imminent civilisation collapse.  There's the fear of a no-deal with the EU, the fear of a collapse in the automotive industry, the fear of a decline in the financial services industry, fears for our manufacturing industry, fears of hard borders in Ireland, fears for the shellfish industry, fears that our medical professionals will leave the country en masse.  There is, apparently, the fear that the EU would somehow prevent the UK from importing food, leading people to stockpile.  The collapse of John Lewis's profitability, that last bastion of British patriotism, was repeatedly hammered home, throughout the day, as the last nail in Britain's coffin.

Truly, we are facing a doomsday scenario.

The licence-fee supported pundits seem to demonstrate an almost biblical mode of operation when it comes to their communications.  Firstly, we have the prophecies about what is going to transpire in the future, and those prophecies are imbued with a sense of looming judgement.  Secondly, those prophecies are increasingly apocalyptic in nature, to such an extent that the idea of Brexit triggering a plague of frogs, or the River Nile turning to blood seems almost mundane by comparison.  Interestingly, whilst in the original Exodus account, those ten plagues were intended to facilitate the Israelites' escape from slavery, the threatened plagues of Brexit seem calculated to dissuade the very idea of a departure from the EU.  We'll wait and see what effect all of this has on the British psyche.

Coupled with such dire prognostications, the Beeb were also making a big deal about the Credit Crunch.  As light relief from the suggestion that Brexit would lead to the death of the UK's cattle, or a plague of gnats, we were regaled with accounts of the sheer awfulness of the events which led to the collapse of Lehman Brothers (and others) and to the mystical financial alchemy of quantitative easing, in a perverse celebration of events which happened a decade ago.  Gordon Brown's sepulchral tones were deployed to great effect over the airwaves, as he spoke of financial institutions 'sleepwalking' into the next crisis.  There is a kind of existential, Darwinian battle going on behind the scenes:  will Brexit destroy our civilisation, or will it be the massed hordes of sleepwalking financial zombies, hoovering up our wealth as they engineer impossibly complex financial products that nobody really understands?

The honest answer, of course, could simply be "any of the above".   If you have a fancy for doomsday scenarios, you're going to be spoilt for choice.  John Rothchild, in his 1998 book Survive and Profit in Ferocious Markets devotes several chapters to exploring the unreliable whims of the prognosticators, and demonstrating why one should treat them relatively lightly.  Notwithstanding, one does encounter such commentators as Bill Bonner and Addison Wiggin (Empire of Debt) whose insights do tend to influence one's thinking in certain directions.  The trick is to plan for the best outcomes, whilst making responsible provision for the worst.  How might you do that in practice?  The following suggestions are sprinkled across ValidPath's existing guidance to Members, so there is nothing really new here:

  • Keep close to your clients with a view to strengthening their financial capability - your ability to weather adverse trading conditions is directly linked to theirs
  • Work at acquiring new clients of the right calibre, to replace those that may drop off the radar
  • Deleverage your business model where possible (and that includes minimising exposure to indemnified commissions)
  • Develop such an emphasis on delivering value that clients will find it difficult to dispense with your services
  • Don't 'sell' your proposition on the basis of some kind of outperformance, as that's likely to end in tears
  • Build multiple income streams, perhaps via differentiated service options to discrete client-groups
  • Avoid 'zombie' financial products, but if you must access complex investments, then make sure you use
It's likely that we have some challenges ahead.  IFAs have, unlike many other business people, had to learn to be flexible and rapidly adapt our propositions in order to survive a relentless sequence of regulatory changes, some of which arrive, like buses, at the same time.  If nothing else, this keeps us on our toes - but it should also have taught us to build sustainable business models.

P.S.  Another simple solution to all this pessimism comes to mind:  simply switch the radio off.
Kevin Moss, 14/09/2018