As we move closer to the 18 September referendum, a surging frenzy over the possible consequences of a yes vote is spreading out among many wealth managers and their clients, writes Valentina Romeo.
Several wealth firms said clients have in fact been moving money out of Scottish banks, and pension funds out of the stock market and into cash, diversifying over short-term scares.
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Online discretionary wealth management firm Nutmeg has already switched £50 million of British savings into equivalent US investments saying it is taking ‘precautionary actions’.
Multrees Investor Services, a manager of banks accounts for the wealth management industry, told the Financial Timers it alone had to move hundreds of millions of pounds on behalf of various clients, in response to their rising concerns.
But, isn’t it too soon to make such big moves? Are HNWIs really worried?
Mouhammed Choukeir, CIO at wealth manager Kleinwort Benson tells PBI: "The current low volatility in UK financial markets suggests investors are calm about the outcome of the vote at the moment. No doubt in the run up to the vote, uncertainty will cause some jitters, especially to stocks with significant exposure to Scotland."
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By GlobalDataMargaret Connolly, a tax specialist at accountancy firm Reeves and a Fellow of Glasgow University adds: "It is reasonable to assume an effort to avoid capital flight in the months that follow a ‘yes’ vote for independence. So expect reassuring noises.
"I would recommend keeping assets and domicility away from the new national state until the tax picture becomes clearer, but not withdrawing any currently in place."
As Connolly says, what has been striking about the independence campaign is the utter absence of any revenue raising details from the ‘yes’ camp. "That makes me nervous," she admits.
Very close to these views, is Duncan Lawrie’s, whose ‘actions’ are, instead of many other players, realistically balanced.
James Humphreys, head of research of the UK private banking and wealth management boutique, says the concern of clients after the vote would be mainly around market volatility rather than assets’ switching. He says even if there is a yes vote, that’ll take more time to negotiate and make actual changes.
"There is no need to make a short-term decision at the moment," Humphreys says. "The main worry for investors now is responding to media as this could cause panic among clients," he concludes.
Early pool results from law firm Withers Worldwide show that many UK wealth managers remain divided on the possible impacts of the Scottish referendum, reaching an almost 50/50 split in their opinion.
So, why all the rush? No one knows what is going to happen anyways.
Connolly suggests that a ‘no’ vote could also produce opportunities. She says: "Largely forgotten in the referendum battle is the Scotland Act, which from 2016 devolves significant income tax reducing or raising powers anyway north of the border.
It may pay someone to arrange their tax affairs by making Scotland their official home. This can be done on as few as 16 days a year, given the right circumstances, and at most 92 days. Once holidays and weekends are factored in, this looks very achievable."
