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Isa lolly melts away

It was not supposed to be like this. For over a decade, we have thought of the Isa season, and the Pep season before it, as the time of year that put the fun into fund marketing.

The rules were simple. You spent a ton of money on advertising, direct marketing and so forth, which is good fun in itself, and then you collected large numbers of cheques, which is the best fun of all.

But this year&#39s Isa season does not feel much like fun. It feels like one of those horribly difficult multiple-choice exam questions to which all the available answers look like they may turn out to be wrong. Like all the hardest questions, it is deceptively simple. What should we do? But judging by what is going on in the market, there is a remarkable lack of consistency in the answers.

Quite a number of investment groups have gone for the hard-nosed option. This says: “The market is down, so our income is down, so we have to cut our costs and, when it comes to cost-cutting, the quickest, biggest and easiest win is the marketing budget.” These groups do not even need to think about what, if anything, might be achievable. They have decided not to play.

A larger number have taken the let&#39s-be-realistic option. This says: “This year, the only people in the market will be serious private investors and grown-up investment advisers. These people are relatively immune to marketing hype and glossy ad campaigns. Let&#39s save our money. There is nothing to be gained from big spending.”

A few have adopted the anything-but-equities strategy. This says: “Bonds are the answer. Fingers may have been burned on the stockmarket but bonds have a less scary story to tell and, with deposit interest rates at their current levels, even the most mainstream corporate bond fund&#39s yield makes for a pretty sexy bar chart.”

Finally, a small number of players are boldly maintaining the go-for-it mentality and spending a great deal of money on marketing and advertising. They are hoping that, even if the cake is depressingly small, they will be able to secure a bigger than average slice.

All these different approaches make sense but, equally, each has its own problems.

The hard-nosed option, savaging the marketing budget at the first sign of a downturn, does indeed protect the bottom line and helps keep the axe away from other parts of the business. But over the longer term, in an inevitably cyclical business like investment, it condemns providers to the kind of half-in, half-out approach to marketing which has had such a catastrophic effect on their ability to build strong, clear positions in investors&#39 and intermediaries&#39 minds.

It is probably true to say that only two major investment specialists, Fidelity and Jupiter, can look back on a sustained and consistent communications track record. There cannot be much doubt that, as a result, their market positions are gre-atly stronger than they would otherwise have been.

The let&#39s-be-realistic option leads to the same conclusion – cutting the marketing budget – but for a different reason. The argument is that there is very little hope that the expenditure can be cost-justified in sales terms, so why waste the money?

When it comes to activity that was only ever intended to achieve short-term sales – for example, Isa guide mailings – this position is sensible. Elsewhere, the position is a bit more complicated. The objectives of most Isa campaigns have been shrouded in a degree of mystery and confusion. Were they supposed to cost-justify themselves in terms of immediate sales? If so, how were they measured? Most important, how did they perform?

Very few groups can give clear answers to these questions. Most have had Isa sales targets but how the marketing effort has been supposed to help achieve these targets, and to what extent it has actually done so, has rarely been clear.

It is impossible to avoid the conclusion that large amounts of money have been spent on largely pointless Isa promotion that was never intended to achieve anything and, in the event, lived down to its potential. Against this background, there is nothing wrong with cutting back this year, except that those concerned would have saved more money if they had been realistic and cut back one, two, three, five or 10 years ago.

Turning to the anythingbut-equities tendency, it is easy to see why those with a strong fixed-income story to tell are strongly inclined to tell it. It will be interesting to see whether it works. There is obviously a danger that the equityphobia of many consumers will spill over into bondophobia as well.

If bond fund Isa sales are strong, we must cross our fingers and hope that nothing nasty happens in the bond markets in the near future. If this is the one part of the fund sales garden where growing conditions are still favourable, it would be a bit of a disaster if a deep frost was to set in.

Fourth – and fewest – are the brave souls in the go-for-it brigade. At the time of writing, it is not possible to be sure exactly who can be counted among this small band. Some players, hoping for a last-minute rush, may be keeping their powder dry for a major offensive in March. But one or two have already made big moves.

One is M&G, with a campaign that every copywriter would like to have written, even if some of those copywriters like to imagine they could have written the ads with a bit more edge. Another is Gartmore, which has closed the door forever on an affinity deal with the Goldfish credit card people by running a campaign that shows a small and inoffensive specimen seized in the beak of a hungry-looking kingfisher.

A third is New Star that perceives, probably rightly, that the best way to become the new Jupiter is to behave as similarly as possible to the old Jupiter.

It is too early to anticipate the outcomes of these activities. It would be nice to think that, after years of confusion, M&G has decided to pick up where it left off in the early 1990s, consistently behaving like the market leader and, indeed, opinion leader in investment funds. Of course, the difference is that, for a long time up to the early 1990s, M&G was indeed the market leader and now it is not.

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