Just as the Isa season looked like it could not get any worse, world stockmarkets plummeted again last week. With the FTSE 100 back to 1998 levels and the Nasdaq down by 60 per cent from its March 2000 peak, the chances of a last-minute recovery for Isa sales seem increasingly slim.
This has come just a fortnight after Autif predicted Isa sales could finish down by as much as 30 per cent this tax year.
Fund managers are in a difficult position. With 40 per cent of fund sales coming in the last two months of the tax year, they cannot afford to sit back for the last two weeks of the Isa season. But finding convincing arguments to tempt investors is increasingly difficult.
While some fund managers have decided to ride out the season without further action, others are squeezing the last drops from the market.
Zurich Scudder Investments, formerly Threadneedle, is diverting nervous Isa investors towards its less risky funds with a view to giving them a free switch when markets are looking more positive.
Communications director Richard Eats says: “In the long term, people will be better off in our Global Select or similar sorts of funds. But a lot of IFAs will have clients who are not in the mood to listen to the long-term argument at the moment.
“So we are recommending our cautious managed fund to those who are feeling nervous. Then they can switch for free later when they feel more confident.”
London-based IFA Best Invest is taking a slightly different approach. Deputy managing director Jason Hollands is trying to persuade investors to consider using a fund supermarket or provider which allows them to phase their money into their selected investments over the next six months.
Hollands says: “It is quite clear that a great many investors are ignoring their 2000/01 Isa allowances because of doom and gloom over stockmarket losses since last March.
“However, Isas are not one-year investments and history suggests that buying into weak markets with the indices at low levels is attractive. Our view is that investors should be bold and use their Isa allowances. That said, if it helps investors sleep at night, then phasing makes sense. It would be wrong to forgo a long-term tax allowance on the basis of short-term sentiment.”
Hargreaves Lansdown's Isa is allowing clients to hold their entire £163.7,000 stocks and shares allowance in cash indefinitely. So investors can use their entire maxi Isa allowance for the tax year without exposing themselves to the market until they are ready. The cash earns gross interest of 5.5 per cent but this is taxable.
Head of research Mark Dampier concedes that such measures are necessary at the moment. Investors are understandably becoming increasingly nervous as media coverage of poor markets intensifies.
He says: “Clients do not look at the market screens every day but the problem is it has now started to appear on the News at Ten. The City never gets a mention until something goes wrong and this does affect people's view.”
Dampier is not convinced the hype surrounding low Isa sales is completely justified, however. He says: “People are comparing this year with the last two years but they were both fairly extraordinary years. In 1998, you had the last Pep year and then you had what people thought was going to be the last year of the £163.7,000 Isa limit.”
Perhaps the most interesting of the other strategies is that of Jupiter which is selling its Isas via lastminute.com. For now, it has only signed up until the end of the Isa season but it will consider a longer-term contract in April.
However, sceptics have questioned the merits of encouraging investors to buy their Isas impulsively at the last minute.
With only days to go until the end of the tax year, it is uncertain whether or not the investment industry will manage to stir up an 11th-hour Isa frenzy this year. Nevertheless, emergency collection points are being set up around the country, staff are being primed for a scramble and fund managers are lighting candles and getting out their prayer mats.