Countdown to Brexit begins

2 min read

Britain’s Prime Minister Teresa May triggered Article 50 of the Lisbon Treaty last week, bringing the UK a step closer to leaving the European Union.

Article 50 is the official announcement, under constitutional requirements to leave.

From now, negotiations begin towards reaching an agreement to leave within a two year period (or potentially another date).

What does this mean?

Other than uncertainty in the short term, what is happening is:

  • The UK has agreed to leave the EU. It is also leaving the EEA (a free-trade area that includes Norway, Iceland and Lichtenstein - Croatia is a provisional member and Switzerland is a former member with agreed special status).
  • The UK will once again become an independent sovereign nation governed from Westminster.
  • European treaties, commitments and agreements will be wound down.

The separation is not unlike a divorce procedure. It is anticipated the full unwinding of the relationship may take up to 10 years.

Further complications to the process may be the status of Scotland and Northern Ireland who are agitating about their own independence from the UK.

Three steps in uncertain times

Markets react in a range of ways to world events. In uncertain times like this, it’s good to remember your investment plans and long-term goals. Here’s a few things to keep in mind.

1.  Risk appetite and financial plan
Individual investment objectives and risk appetite (willingness and ability to accept losses or gains) inform an individual investor’s response to world events like Brexit. It is important to review investment plans on a regular basis as investors’ objectives and risk appetite will change over time.

2.  Diversify
Diversifying across a range of investments is a way of spreading risk and can help investors to smooth out overall returns in their portfolio. This could be achieved by spreading investments across different asset classes including cash, fixed interest, shares, and property. Another way to diversify is by investing across different countries or regions.

3.  Take a long-term view
Reacting to short-term conditions like Brexit by, for example, selling investments could potentially result in permanent losses that may or may not be recoverable down the track. Any potential reactions should be evaluated in the context of an investor’s appetite for risk and their financial plan, as well as the time horizon for managing any short-term volatility.

Need help reviewing your goals and investment strategy? Contact us to arrange to speak to a BT Adviser.

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This information is current as at 04/04/2017.

This information has been prepared and issued by BT Financial Group which is the wealth management arm of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714 (Westpac).

Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.