Advisers back "best hope" Tory/Lib Dem pact

IFAs will welcome the new Coalition between David Cameron's Conservatives and Nick Clegg's Liberal Democrats as they believe it is the 'best hope' for a strong government.

Speaking to IFAonline last week, this what advisers hoped would be the resolution to the political uncertainty.

Martin Bamford, managing director, Informed Choice

"The make up of a coalition is potentially scary if Labour tries to cling to power. The Government could end up poorly representing England because of the focus on Wales, Scotland and Northern Ireland as power brokers.

"I hope Nick Clegg does the right thing and joins with the Tories. The differences between the Lib Dems and the Tories on inheritance and income taxes are likely to go in the Tories favour, as they have more seats and the balance of power.

"Cameron won't put Vince Cable in Number 11 ahead of George Osborne. I expect the Lib Dems will sacrifice their economic policies to secure concessions on voting reform, hope for the coalition to collapse, and use the changes in the voting system to make gains in a second election.

"Clients will be pushing for financial advice but it is dangerous to advise based on speculation. I will tell clients not to worry about making short term gain in this temporary period of volatility, but to focus on the long-term view."

Darius McDermott, managing director, Chelsea Financial Services

I am aware there is a constitutional issue in that the existing Prime Minister has the first right to try and form a Government, but if Labour is 50 seats or so short of the Tories then they do not have a mandate to govern.

"A strong Government can be formed from a coalition and I think a Tory/Liberal Democrat pact holds out the best hope for a strong Government. A Government led by the Tories will please the markets because the markets want to see a cost-cutting plan put in place as soon as possible.

"Additionally, I think a short-term Tory-Liberal Democrat government lasting between six and 12 months could come up with a credible cost-cutting plan. Of course, the stumbling block to such a coalition is electoral reform.

"In terms of what we are telling our clients, until we know what Government is formed it is difficult to form an opinion. The only issue for me - considering the debt crisis in Greece - is ending up with a strong Government that can improve the budget deficit."

Simon Webster, managing director, Facts & Figures

"I'm a Tory so I am a bit disappointed [with the result], although not entirely surprised.

"My own view is that what we need is clear leadership and a hung parliament is the worst possible result - the reaction of the markets certainly seems to reflect that.

"The fact that Gordon Brown is still hanging on is bad because I think he is useless - a Labour and Lib Dem coalition would be a disaster.

"Getting out of the markets would probably be a bad thing to do because I expect there to be a bit of a bounce in the next week. My advice to clients is sit tight and don't panic."

Brian Dennehy, managing director, Dennehy Weller & Co

"From an investment perspective and taking a long-term view, today's result is largely irrelevant.

"Whatever the outcome, taxes will go up, spending will be cut, the scope for policy error will be very high, and as a small country on the fringe of Europe, the UK remains much more vulnerable to global politics than parochial matters."

Adam Young, managing director at Dragonfly Financial Planning

"In my opinion, the Greek crisis is much more severe but how the UK is governed and steered through this choppy environment is also extremely important.

"We are seeing a lot of our outsourced discretionary teams suggesting clients take advantage of the weaknesses in the markets.

"They are proposing their clients put about a quarter or so of their cash element into the market, predominantly UK but elsewhere also. They are seeing a partial buy signal but the general consensus remains cautious."

Nigel Speirs, CEO, Buckles 

"I am disappointed with the result - we need clear leadership and we have not got it. It is now all about compromise and short-term deals.

"Although it is a huge disappointment our sovereign debt crisis is bigger issue. A coalition will ultimately mean the decisions that have to be made over cutting our debt will likely be fudged.

"A coalition government will not be able to tackle our sovereign debt as well as a majority government would.

"In terms of how the election result will impact the advice we give our clients, we take the view investment is for the long-term. If you try and second guess the market you almost always get it wrong. Ultimately, you need a well-managed portfolio that looks to the longterm. Our clients will be nervous of investing but we aim to reassure them.

"With regards to a coalition, I think the eventual outcome will almost certainly involve a form of proportional representation."