Uncertainty, it seems, is the new normal. From the rise of Trump in the American Presidential race to the decision by British voters to exit the European Union. You could have made a killing betting on these results 12 months ago and it shows that even the bookies can get it wrong!
While it’s debatable whether either these events could be considered a “Black Swan” (some post event rationalising might suggest they were both possibilities) they both have significant implications for financial markets around the world. It is yet to be seen how much real impact the “Brexit” will have in the medium and long term, but in the short term it means uncertainty and volatility on world markets.
I would suggest that if Trump DID become president it may be an even bigger shock to the world economy. Who could predict what policies a President Trump would actually enact, let alone how they would affect the largest and most important economy in the world and what flow on effects may ensue.
While short term market volatility can be problematic, it is the longer term instability that can upset an individual’s financial plans and in particular, their superannuation.
In Australia, along with the current global volatility, we can add our own uncertainty to the mix in the form of an indecisive election result and proposed regulatory changes to the financial sector, including super contributions. Regardless of who ends up winning the federal election, there will be a period of uncertainty around new policy settings until they are actually passed into legislation.
What all this means in the real world is that Australian consumers may need to be reassured that they have the right plans in place to endure the ambiguity and doubt that is rife both domestically and abroad. This is actually an opportune time for advisers to reinforce their value, not only to their existing clients, but also to the wider community.
As AFA chief Brad Fox noted recently, it is during complex financial times that planners needed to articulate their value and indispensability.
This is surely such a time.
by Rodney Lester, Adviser Ratings