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Investment View

Live phone-in programmes, even those on television hold no terrors for me.

The Money Channel&#39s consumer phone-in programme last week was nothing new

but it was certainly interesting, not least for the conversation I held

with Anne McMeehan of Autif in the taxi afterwards.

Anne was fresh from having gathered the latest bunch of statistics on

investment fund sales and, in particular, what percentage of the Isa

take-up flowed to Autif members. It sounded respectably high but apparently

was way down on the corresponding ratio with Peps. This suggests one of two

things, either people are investing directly in their Isas or the

Government&#39s statistics are wrong. I am more inclined to believe the


When Peps were introduced, I made the point that Peps were not really a

product. They were simply a wrapper into which you could drop other

investment products or, indeed, managed direct investments in a

tax-efficient way. Isas are no different. Much of the business conducted in

this arena by private-client stockbrokers will not involve buying

investment funds. Instead, the Isa will be an extension of a portfolio

which may include Peps and taxable funds as well. There are plenty of

sophisticated systems around allowing you to manage portfolios of this

nature on an integrated basis while still keeping the component parts

administratively isolated.

Yet Peps had rules which complicated the inclusion of some investment

funds and also allowed specific investments for part of the annual

contribution only in individual companies. For that reason, I consider it

highly unlikely that the percentage of Pep funds invested directly rather

than through collective investments, would be less than in Isas. Government

statistics do not suggest this to be the case, though.

You need to be realistic over the position of Isas in the marketplace. The

number of investors presently running portfolios directly invested in

individual shares is a minority. There are arguments suggesting that,

because of the tax advantages enjoyed within a unit trust or investment

trust, almost any domestic investor would be better off following this

route rather than picking individual stocks but that ignores some of the

cost implications and the fact that a carefully managed portfolio of

individual stocks can deliver good returns. But there is no doubt that you

need to have more money to take this approach than if you invest through

collective investment schemes. Directly invested options exist to immunise

clients against competing providers. Still, Isas would have been stillborn

if direct investment was the only distribution channel available to the


The collective investment industry has performed a great service in

marketing Isas, even though in so doing they have convinced the majority of

investors that Isas are truly separate from, say, unit trusts. You would be

amazed at how often I am asked whether a private investor should purchase

an Isa or a unit trust as if they were competing products rather than

simply different tax treatments of the same investment.

The reason to bang on about Isas reflects the way in which they seem to

have taken over financial advisers&#39 lives over recent weeks. It never

ceases to amaze me how people leave their financial planning to the last

minute? Surely the time to take out a tax-efficient investment is the

beginning of the tax year so you achieve maximum benefit.

It remains to be seen whether the end of Isa buying will hasten the

correction that seems to be taking place in technology stocks. It is

happening in a restrained way but the profit-taking (assuming you were in

early enough, of course) that has been occurring has still been enough to

drive the UK market lower, demonstrating the importance of TMT in the index

at present. I fear technology can never be far from any investment column

these days.


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