View more on these topics

Figuring out the shock &#39plunge&#39 in fund sales

The Investment Management Association caused jaws to drop last week when it published figures showing that industry net retail sales plummeted by 83 per cent in September.

According to the IMA&#39s monthly statistics, net sales were down to £97.3m last month from £557.5m in August while net intermediary sales – accounting for two-thirds of unit trust and Oeic purchases – slid to £79.3m from £457.1m.

But not everyone believes the figures are accurate. Several major IFAs have compared their recent sales experience with the story being painted by the figures and have come to the conclusion that the IMA may be getting it wrong.

Hargreaves Lansdown head of research Mark Dampier says: “Why should sales suddenly drop now? Ask any IFA and they will tell you that business has been bad since June, when things really began to slide.

“But the IMA is claiming that sales fell off a cliff in September, when, in our experience – and we are quite a good barometer in my view – things have not got any worse.

“I do not know how the IMA comes up with its figures but I think that they are inaccurate.”

Other IFAs, including Bates Investment and Plan Invest, are equally bemused, with both saying they have not seen a significant drop in business over the past month.

With the IMA figures saying intermediaries accounted for two-thirds of unit trust and Oeic sales last month, brokers such as Bates and Hargreaves would have registered big falls if the IMA is correct.

The IMA, however, says it is not surprised by September&#39s results. Head of statistics Dorian Carrell, who says he has double-checked the findings, comments: “It is the fund managers rather than IFAs that have experienced the downturn, which you can see across the board. A lot of people repurchase directly, which drags down the direct-channel figures. The scale of the fall is large but might be partly explained by the number of fund manager moves, possibly prompting investors to leave their funds.”

But the IMA&#39s own figures do not appear to bear out Carrell&#39s argument. In September, retail repurchases were £1.76bn – significantly higher than August, when they stood at £1.5bn. But in July, this figure was £1.74bn and in June it was £1.7bn. In May it reached £1.9bn.

In addition, the last major fund manager to move – one that could reasonably expect a host of investors to follow wherever his or her place of employment – was Tim Russell, who left HSBC for Cazenove in early September. But he was the only star to move in that time and only HSBC would have been affected, which does not explain the across-the-board falls that the IMA has identified.

Even some fund managers, many of which admit to small sales falls in Sept-ember, say they are at a loss to explain the scale of the findings.

One senior source says: “It is bizarre. In September, we were down by 10 or maybe 15 per cent but nothing like the 80 per cent the IMA found. What could have happened is that one or two major discretionary managers pulled out of the market and invested in cash but I do not think that is the case because someone would have been aware of it. But it is also difficult to believe that the IMA has made such a huge statistical error.”

In fact, although not alone in expressing doubts, he says that, with investor sentiment as it is, he could believe the figures are accurate – especially as he considers the summer sales figures to be overstated. But he finds it strange that the IMA believes intermediary sales have fallen by almost 83 per cent when sales through all other channels have been affected nowhere near as badly.

Nevertheless, some IFAs are happy to accept the findings despite the fact that many of them have not experienced falls that relate to the figures.

Chelsea Financial Services managing director Darius McDermott says: “We have not fallen by anything like 80 per cent but investor sentiment does tend to drag behind events. I think the figures are just the culmination of that, more than anything else.”

One major fund manager agrees, saying that the advice cycle – initial client meeting, report, recommendation and execution – effectively stopped in June and July, meaning there was no pipeline of new business for IFAs in September.

He says: “There is no reason to dispute the figures. The public wants to get out of investing, the discount brokers are not promoting Isas and IFAs are not selling anything new and are not switching many clients either. It is not only a buyers&#39 strike but a sellers&#39 strike as well.”

The fund manager, which is currently net-positive but believes most rival houses are not, also points out that the figures do not include sales through fund supermarkets, which account for up to 40 per cent of IFA sales.

Take those in account and the sales figures look better – but are still atrocious compared with most other recent months. Whether they are the manifestation of almost three years of falling markets or, as Hargreaves claims, a statistical error is at this stage unclear.


Property matters

A client who has recently sold his property consultancy business in order to take an employed position wants to additionally fund for his retirement. He is nervous of the current stockmarket and states that he is looking for reduced volatility from his holdings. He does not know when he will start to drawdown the fund […]

No compulsory Amicus redundancies

Prudential has averted threatened strike action by promising Amicus there will be no compulsory redundancies at its Reading call centre. This follows Pru&#39s decision to move its call centre to India which threatened 850 jobs. The union is recommending acceptance of the offer.

The Equitable Life crisis

Open letter to Ruth Kelly, Financial Secretary to the Treasury I was concerned to read newspaper reports that the Treasury may not have been co-operating fully with the investigation of the Parliamentary Ombudsman into matters at Equitable Life.The Treasury must be open and honest about its role in the Equitable Life crises.If Treasury ministers were […]

Buckles deal takes Zurich RI signings to 200

Zurich Advice Network is continuing to lure IFAs over to its side of the fence with the signing of IFA Buckles, which claims independence is no longer viable.The North Wales firm has an annual turnover of £3m. Nineteen advisers are currently being trained by Zurich. Zan has also signed North London IFA Chenkin James Associates, […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm