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Winter of discontent made glorious by rising sales

The Isa season appears to have started early. Despite poor fund performance over the last few months, Isa sales have been growing steadily since the start of September.

Historically, investment sales have tended to fall off after the end-of-tax-year boom, with a recovery not kicking in until October or November.

In both 1998 and 1997, Pep sales did not begin to turn around until November. But this year has already seen stron g inv estment sales and industry predictions are that the retail market is set to double within the next four years.

Hargreaves Lansdown inv estment manager Ben Years ley says: “I think people are perceiving October and Nov ember as a really good buying opportunity. They have seen the drops in technology and are trying to call the bottom of the market. There have also been a lot of stories in the press saying this is a good time of year to invest.”

However, trying to predict the bottom of the market is risky. IFAs and direct inves tors who elected to take out an Isa in September have seen markets continue to fall.

The average unit trust return for the year to Nov ember 27 was just 0.17 per cent. The last time the average annual ret urn fell below even 10 per cent was in July.

But most IFAs still insist now is the best time to invest. Michael Philips partner Mich ael Both says: “I think the market could keep falling but does that mean you should not buy an Isa? Not necessarily.

“For people who are making regular contributions, I can see no point in waiting. The only people who might benefit from waiting are those who are investing cash. But if you go for a decently spread investment, on balance, now is not a bad time to invest.”

Both believes the increa sed success of Isas can be attributed largely to a growing disillusionment with pensions by IFAs. He says: “Everyone is petrified of selling pensions. IFAs do not want to advise people to invest in pensions bec ause it is such a lottery at the moment so they are selling Isas instead.

“IFAs are not going to forgive this Government for its meddlings with pensions. It has proved to be unreasonable and unfair to IFAs.”

But others believe the inc rease in sales is due in part to a concerted drive from the industry. There have been 27 unit trust and Oeic launches in the past three months, taking the total number to over 1,900.

Newspaper personal fin ance sections have continued to grow on the back of bigger advertising volumes and most investment companies are off ering discounts on a range of funds until the end of the year.

Plan Invest director Mich ael Owen says: “I think people are generally trying to do their Isas earlier. There has been a lot of marketing input going into Isas at the moment. Also, some of the new sexy funds that have been launched – such as Aberdeen&#39s global champions fund – have taken a lot of Isa money.

“We have been ticking over steadily in September and October but have noti ced that a lot of our clients have done their Isas early this year.”

Fidelity, which sells the greatest amount of Isas in the UK, says it has seen a marked increase in sales over the past few months. Marketing director David Cowdell says: “Our Isa sales are up 30 per cent on last year already and last year was a record year. I think a lot of it is to do with IFAs doing a good job of advising their clients to invest earlier in the year rather than wait until March. Investing online has also had an impact.

“Last tax year, we did £40m of Isa sales online. This year we have already surpassed that and we are not even into the key selling season.”

Cowdell says a further reason for increased Isa sales has been their attraction to a youn ger audience. Recent research by Fidelity shows 42 per cent of its Isa clients are under age 40 compared with just 19 per cent of Pepholders.

Cowdell believes the more relaxed geographical restrictions on Isas have also been a key factor in attracting the younger audience.

He says: “Another good thing about Isas as opposed to Peps is that they are attracting people into global funds, which has definitely attracted more younger investors.”

The Government&#39s decision to relax the geographical res trictions on Pep transfers is expected to be a further boost to investment sales. Indeed, this year&#39s pre-Budget report was a strong boost to the inv estment industry as a whole, with the future of Isas being secured for the next five years.

An increased push by both IFAs and tied salesforces to encourage investment all year round may well iron out the traditional first-quarter Isa boom even more in the future.

However, after the Christ mas slowdown, January, Feb ruary and March are still set to produce the biggest Isa season so far.


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