How do you prepare clients for an election as a financial adviser?

Summary

• Changes in government can affect taxation, regulations, economic policies, and political stability.

• History shows volatile market performance around UK elections, which impacts investments. 

• Financial advisers should emphasise the importance of expecting unforeseen developments during election periods to their clients.

• Financial advisers can suggest strategies for client preparation, including diversification of revenue streams and risk management.

What can affect clients when there is a change in government?

As the UK heads toward the general election on 4 July 2024, financial advisers have a crucial role to play in client preparation to ensure they navigate potential changes and uncertainties.

The effects of change in the government can cause rapid changes in the markets and economy, causing a knock-on effect on businesses and individuals. 

The following are some of the effects that UK citizens may face:

Taxation policies: One of the first things a new government might tweak is taxation. Changes to income tax rates, corporation tax, capital gains tax, and inheritance tax can all be on the table. For example, if capital gains tax goes up, clients might need to rethink their investment strategies and asset holdings, prompting the drawing up of a tax preparer checklist for clients to reassess their financial plans.

Regulatory changes: New governments often bring new regulations, which can impact how businesses operate and what they spend on compliance. Stricter environmental regulations, for example, might mean businesses need to invest in greener technologies to stay compliant and avoid penalties.

Economic policies: Broader economic policies, such as shifts in interest rates, public spending, and trade policies, can also play a big role. Higher interest rates, for instance, might lead to increased borrowing costs, which can affect both consumer spending and business investments.

Political stability: The level of political stability after an election can significantly impact market confidence. If there’s prolonged uncertainty or instability, it can lead to increased market volatility, affecting everything from stock markets to investment flows.

What can financial advisers suggest to prepare clients for an election?

To aid the preparation of clients in dealing with the uncertainties of an election, financial advisers can suggest several techniques and strategies, including how to prepare a proposal for a client outlining potential impacts and recommended actions:

Expect the unexpected

Advisers should stress the importance of expecting the unexpected during an election. Elections often bring unforeseen developments that can disrupt even the most well-laid plans. 

Here’s why this approach is crucial:

Think of a small manufacturing business. As a financial adviser, you might recommend they keep an emergency fund and ensure their supply chains are flexible.

This way, if new trade tariffs or import/export restrictions come into play, the business can quickly adapt by finding new suppliers or adjusting production schedules to keep things running smoothly.

This preparation minimises disruptions and maintains business continuity, regardless of the election outcome.

Invest in training the workforce

Having a knowledgeable and adaptable workforce is key to navigating changes that a new government might bring.

Investing in training helps businesses stay competitive and compliant. 

This is an example of why this is beneficial:

For a client in the tech industry, you could suggest investing in continuous training programmes.

This might include upskilling employees in new technologies, regulatory compliance, or industry standards.

By enhancing their skills, the business can adapt quickly to new regulations and trends, keeping them ahead of the curve.

Transition into environmental sustainability

Encouraging clients to adopt sustainable practices is increasingly important, given the growing emphasis on environmental regulations and corporate responsibility. 

Consider this example of why you should advocate for this transition:

A manufacturing client might start using renewable energy sources or adopting more sustainable production methods.

By investing in solar panels, energy-efficient machinery, or waste reduction practices, they not only reduce their environmental footprint but also prepare for future regulatory changes.

Plus, going green can boost the brand’s reputation and attract environmentally conscious customers and investors.

Stay up-to-date with election news

Keeping up with election news is crucial for making timely decisions.

As a financial adviser, you should encourage clients to stay informed through reliable sources. 

Here’s why this is important:

Suggest clients subscribe to reputable news outlets, set up news alerts, or follow updates from trusted industry associations.

A business owner could set up a daily briefing to get updates on election developments, economic forecasts, and policy changes.

This proactive approach ensures they’re always in the know and can quickly respond to significant announcements or shifts in the political landscape.

Keep on top of risk management

Effective risk management is especially important during election periods.

You should help clients in identifying and mitigating risks associated with potential policy changes. 

Consider the following example:

Diversifying investment clients' portfolios can reduce their exposure to market volatility.

This might mean spreading investments across different asset classes, industries, or geographical regions.

If a specific sector is at risk of increased regulatory scrutiny, you might recommend reallocating investments to less affected sectors.

Diversification helps protect clients’ assets against unexpected market swings or policy changes.

Make sure to communicate with stakeholders

Maintaining open communication with stakeholders is essential during times of change.

You should encourage clients to regularly engage with employees, suppliers, customers, and other key stakeholders.

Here’s an example of why this is beneficial:

For a business owner, regular stakeholder meetings or updates can help discuss potential election impacts and planned responses.

Quarterly meetings with key suppliers and customers to talk about strategies for adapting to new regulations or market conditions can reduce uncertainty and boost collaboration.

Diversify revenue streams

Diversifying revenue streams can provide a cushion against economic uncertainties and policy changes.

As an adviser, you should suggest clients explore new income sources. 

Consider this example of how this can be implemented:

A retail client could expand into e-commerce or explore new market segments.

By developing an online sales platform or launching new product lines, they reduce dependence on a single market, making the business more resilient to economic fluctuations and regulatory changes.

This strategy not only enhances revenue stability but also opens up new growth opportunities.

Want to work with Unbiased?

The role of financial advisers in preparing clients for the effects of change in the government cannot be overstated.

By offering tailored strategies such as diversifying revenue streams, investing in workforce training, and staying proactive about risk management, advisers can empower their clients to navigate political shifts with confidence. 

Unbiased Pro will send clients seeking advice on financial planning opportunities for the upcoming election and beyond straight to your inbox. This ensures you can grow your business in a sustainable way.