The Isa season swung into gear late this year and brought big rises in business for many fund firms and brokers.
The difficulty is that, with fund supermarkets exerting an ever tighter grip on sales, groups cannot tell what is Isa business and what is not. The figures are based partly on guesswork but they provide encouraging evidence that despite the Government stripping away tax benefits, Isas are still popular.
Fidelity and Schroders are among the biggest beneficiaries of this unexpected support, with sales outstripping even their most optimistic projections.
Schroders, buoyed by its UK alpha plus, Mid 250 and income funds, reports a 250 per cent rise in sales in the year to April 6, a staggering improvement given the gloom that has engulfed the industry in recent years. Like many groups, it will not disclose figures, which makes it difficult to quantify how much of a boost this is in balance sheet terms, but head of retail Robin Stoakley says they are “serious” numbers driven by the upturn in the market.
He says: “Sentiment has improved in certain areas. Anyone who has held UK equities has seen their investments go up 30 per cent or so. We have been fortunate in a sense that we have a very strong offering in the UK and we also have a lot of distribution links.”
Schroders calculated its percentage rise in sales by combining its direct Isa business with fund supermarket sales, the bulk of which it believes are Isas.
Fidelity is hailing 2003/04 year as its best ever. It has worked it out in a slightly different way. Although its total Isa sales topped £1.4bn through all distribution channels – a 35 per cent increase on the previous year – Fidelity acknowledges that 54 per cent of this is accounted for by its supermarket FundsNetwork. Over £220m came through re-registration on the platform and although this is not new inflows to the industry, it is new money to Fidelity.
Managing director Richard Wastcoat says: “Fund supermarkets are delivering the benefits promised to investors and their advisers and are now firmly established as the medium of choice for accessing funds. We believe this trend will continue and expect that fund supermarkets will take an ever-growing portion of Isa business in the years to come.”
Many other groups were only able to provide Money Marketing with overall sales figures, with no indication of the split between Isa and non-Isa business. Threadneedle, for instance, reports that its total sales rose by 39 per cent between Q1 2003 and Q1 2004 but could not break this down any further.
Brokers have a clearer picture of the Isa season, with many seeing last-ditch applications come through their online systems with minutes – or in some cases seconds – to spare. Discount broker Chelsea Financial Services says its Isa sales were up by 300 per cent in March from the same time last year, a huge increase which suggests that direct mailings – at least in the very short term – remain effective.
But CFS's experience is not necessarily universal. Its sales in March were double February but some brokers saw an unseasonal mini-slump.
One was Hargreaves Lansdown which, after a highly encouraging January, saw sales fall off before picking up again in mid-March. Its Isa sales in Q1 were still double the same period last year. The company believes that world events prevented this Isa season from being even better.
Senior analyst Meera Patel says: “We think that if the Madrid bombings had not happened we would have done more business. Our stockbroking side is in touch with market makers who say their business has halved. It has been a mixed year so far.”
The Money Portal saw sales surge at its subsidiary Willis Owen, with business up by 300 per cent from March 2003 to March 2004. The firm believes that investors are coming to terms with the fact that they cannot predict or control terrorist activities.
Head of communications Kerry Nelson says: “Clients have resigned themselves to the fact that there is a unresolved problem with terrorism. Nothing is going to be sorted out overnight and the people who have been sitting on cash for a couple of years have realised they cannot put off making decisions any longer.”
Nelson believes another driver has been the impending lowering of the limit on Isas, which has left investors with la last chance to use the £7,000 ceiling. She also cites Willis Owen's policy of continuing mailings, offering not only favoured funds but additional services, which she thinks reassured and encouraged nervous investors.
Until the IMA publishes its statistics in several weeks, it will be impossible to say for sure whether the Isa season has really been a success. But early indications certainly suggest that it has been a major improvement on last year's unmitigated disaster.