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Outside edge

Some of us hark back to the long, hot summers of yesteryear and remember fondly those glorious Pep/Isa seasons when IFAs would deliver applications to hotels.

Alas, there were no pictures of helicopters delivering last-minute Isa applications this time round.

The Investment Management Association has reported Isa sales 40 per cent down in January on the same period last year. We should not be surprised, given two very disappointing calendar year equity returns and the dreadful corporate news, making people more reluctant to invest.

Pep and Isa statements falling through letterboxes have instilled the same fear into the reader as an Inland Revenue letter.

This year, the industry presented a confusing marketing message, with some companies slashing their budgets so much that they were not even at the races. Other companies started their adverts: “It is not easy deciding on this year&#39s Isa” – not a typical marketing approach.

Some groups looked towards bonds while others stuck by equities and there was no obvious theme.

The Ima pointed to corporate bonds and UK all companies as being the best sectors while Cofunds reported heavy interest in equity income funds. Equity income funds have always been a very good home for Isas and, as market returns decline, it is inevitable that funds where income is one of the components of the overall return will prosper.

I believe that sales will have increased in the last few weeks of the tax year but it have been a vastly watered-down version of the traditional Isa season. Many professionals are still cautious on the UK market, so we can hardly expect investors to return in droves when they are getting the message that annual returns from equities may move more towards 6 to 8 per cent in future.

IFAs will have stressed that this is a decent real return and, of course, will have trotted out the usual statement that this a good time to be buying equities but this Isa season will have seen a number of investors sitting on the sidelines.

The experienced investors who know the value of building up a tax-free pot will have continued to utilise their allowance. We might just see a market rally in early April but I will not hold my breath.

At this time of year, however, IFAs have a superb opportunity to instil confidence in their clients. This is a time to give them added value by making sure that their portfolios are balanced with the right degree of risk to meet their objectives.

Fund supermarkets are a positive step forward, allowing the creation of multi-fund Isas, and IFAs have the opportunity to white-label.

There are two aspects of the Isa season that I would quite happily say good riddance to. It made some investors buy at the last minute a stand-alone-type product such as an Isa rather than look at their overall financial circumstances properly. It also meant that they would often buy at the top and how many investors have we lost for ever that bought the likes of Aberdeen technology or Invesco European?

Thankfully, there is also likely to be a vast reduction in the number of so-called Isa guides. As an industry, we really do shoot ourselves in the foot sometimes and these guides attracted the attention of the FSA eventually.

Where in these guides did you ever see mentions of mini cash Isas, which are suitable for some people, investment trust Isas and so on?

Isas are still a valuable product and, hopefully, the good times will return but, in the meantime, we can still use this period very profitably for the benefit of our clients.

Anne McMeehan is director of Cauldron Consulting

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