View more on these topics

&#39Tis the Isa season to be jolly?

While the Isa season has by no means started in terms of sales or even advertising, the fund management community has spent the last few weeks talking of nothing else.

In case you missed it, the story so far goes something like this: M&G has declared that the season will not start until March. Jupiter&#39s Andrew Watkins says it might not start at all.

Aberdeen is not sure but has slashed its marketing budget by 80 per cent and Threadneedle says that it does not believe in Isa seasons anyway (because you should be buying your Isas all year round, not just between January and March).

This week, then, it was Fidelity&#39s turn to give its opinion. However, this was fortunately a lot more optimistic and carried an important message for IFAs. In short, it strongly believes that there will be an Isa season this year and that if IFAs do not seize the opportunity, they will simply lose their market share to the banks and building societies.

Fidelity marketing director David Cowdell says: “There is a danger that the mutual fund industry is getting out of step with investor sentiment. And as an industry, there is a risk that we could talk ourselves into a bad Isa season. Fund companies need to do all the work they can at the moment to stimulate the Isa market and facilitate sales for IFAs.

“We believe there will be an Isa season this year. It is not going to be as big as last year but there are a group of investors out there that invest every year and they be looking to do that in the same way this year. As the markets rec-over, investor sentiment is picking up.”

Using historical sales data, Fidelity is predicting that this tax year&#39s Isa sales will total between £7.6bn and £8.5bn. This equates to a reduction on last year of between 15 per cent and 24 per cent.

This would be a respectable result given the hammering that sales took in September and October.

Autif figures show that IFA market share in the Pep and Isa market has increased to 41 per cent this year from 33 per cent in 1996.

Fidelity believes this trend will continue but points out that IFA market share has started to fall away slightly since August – a possible sign that advisers are turning to other products such as with-profits bonds.

In 1999, when Isas were first introduced, Fidelity points out that IFAs lost out heavily to the banks on market share. IFAs were sceptical about the new products while the banks were quick to start selling. It now warns of a similar picture this winter.

IFA sentiment is certainly slightly depressed at the mom-ent. A recent straw poll by Money Marketing revealed that while most IFAs do believe there will be an Isa season,they generally believe it will be smaller and will not start until later. In Fidelity&#39s eyes, IFAs should start working to get business in January – not wait until the last minute.

Credit Suisse Asset Management managing director Ian Chimes says that, six weeks ago, he shared the pessimism of much of the industry. However, with markets having picked up, he now shares Fidelity&#39s optimism.

He says: “We are feeling a lot more optimistic than we were a couple of weeks ago. We braced ourselves when the Isa valuations went out at the end of October. But it was incredible how few calls we had and pretty much no redemptions. It surprised us.

“We do think there is going to be an Isa season this year. But when a lot of people talk about the Isa season, they talk of the direct mail Isa season and I think that will suffer. But in terms of face-to-face advice, I think Isa sales will still be positive.”

Discount brokers are ind-eed likely to be the hardest hit this Isa season.

Last week, Hargreaves Lansdown and Chelsea Financial Services both announced that they do not intend to do Isa guides this year – but these are businesses which can survive without large volumes of discount business.

Others which rely on Isa guides are by all accounts set for a cold and much harder winter. These businesses will suffer not just from the loss of new business this year but will be feeling the bite on their trail commission payments after the falling markets of the past 18 months.

The conjecture of the past few weeks has brought the industry close to talking itself into a bad Isa season. With markets as they are, however, IFAs have a strong investment story to sell to clients and it is clear that investor sentiment is in a position to be turned.

While it may be true that the upturn in sales does not come until as late as March, many IFAs believe providers should start to make some noise as quickly as possible rather than wait. If the industry is proactive, the signs are that 2002 could in fact be a reasonable year.

Hargreaves Lansdown inv-estment manager Ben Yearsley says: “I think there will be an Isa season. As to the size – we will see. But if investors are nervous, they can always put it in cash for a while and phase it in. There is no reason to waste your Isa allowance.”

Recommended

Schroders takes triple approach to Isa

Schroders is giving investors access to three UK funds within its Schroder UK select Isa.The Isa will invest 50 per cent in the Schroder UK equity fund, 30 per cent in the Schroder UK mid 250 fund and 20 per cent in the Schroder UK smaller companies fund,The Schroder UK equity fund invests in a […]

SEI rethinks Dublin arm as bond is put on hold

Scottish Equitable Intern-ational is considering its options for its Dublin-based offshoot after having to put its with-profits bond on ice. SEI opened offices in Dub-lin with the intention of offering the with-profits bond. But following the events of September 11, the launch was delayed, with the company claiming that the climate was now too unfavourable, […]

Bristol & West – 6 Year Income & Growth Bond

Monday, December 10, 2001.Type: Guaranteed equity bond and high interest account.GUARANTEED EQUITY BONDAim: Growth linked to the FTSE 100, Eurostoxx 50 and Nikkei 225indices.Minimum-maximum investment: £5,000-£1m.Term: Six years.Guarantee: Capital returned in full at end of term regardless ofmovement in indices.Return: Capital returned in full along with up to 80 per cent of growthin indices.Closing date: […]

Canadian firm eyes UK market with legal fund offer

Canadian investment house Alpha Toronto is moving into the UK IFA market with an innovative new legal fund investing in “no win no fee” litigation. The fund offers a yield of up to 11.25 per cent a year over three years or 10.75 per cent a year over 18 months. Quarterly and monthly inc-ome options […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment