Panacea comment for Financial Advisers and Paraplanners

26 Apr 2016


Financial advisers that accept invitations to sporting events, concerts or social events from product providers may be breaking conflict of interest rules, the FCA has warned.

It reckons that those accepting invitations to golf days, concerts, a day at the races or other hospitality events that “did not appear capable of enhancing the quality of service to clients” would be in trouble as such ‘largesse’ was “not conducive to business discussions” and that any dialogue with advisers “could better take place without these activities”.

COBS guidance on inducements states, amongst many things, that there is an “ obligation of a firm to act honestly, fairly and professionally in accordance with the best interests of its clients”.

Although I have not been an adviser for over 10 years, there are a number of factors that trouble me with this latest ‘guidance’.

  • I find it inconceivable that any adviser, especially in a post RDR world would be influenced by a ‘day at the races’. To suggest otherwise is grossly maligning the professional, ethical status of advisers.
  • Financial services companies put vast amounts of money into sport. They do it for many reasons, brand awareness mostly, without the sums involved many sports would not survive and as a result the participants and the fans would suffer.
  • If, as part of that ‘sponsorship’, those firms wish to ask some advisers along as a way of demonstrating appreciation of a business relationship, what is so toxic about that?
  • Firms like Standard Life (Ryder Cup) AEGON (LTA tennis) Aberdeen (Cowes Week- expired 2015) Investec (the Derby & Test Cricket) Vitality (athletics) Royal London (Cricket) LV= (Cricket) Aviva (athletics) M&G (Chelsea Flower Show) have generously supported these events. To do so, they have to commit for many years and some very large sums of money are involved. If these rules mean that the very people who ‘distribute’ their products can no longer attend, part of that sponsorship value has been diluted yet the sponsorship money paid cannot be refunded to reflect that fact.

If hospitality is considered a no-go area for advisers, it may be of interest to know something of the hospitality and gifts that has been lavished upon- and accepted, by the Chairman and Executive Members of the FCA’s Board.

In the interest of fairness, FCA rules at January 2016 state that any gift with a value of £30 or more must be declared and surrendered so that it can be used within the FCA or charitably disposed of.

FCA records from April 2013 onwards show gift and hospitality summaries, all strangely without an exact cost. We cannot see any information relating to the FSA, pre April 2013.

Gifts include £450 worth of Aspinall Black Leather document case in June 2013 given to Martin Wheatley, a dinner and private viewing of an exhibition (courtesy of Ernst & Young) for Lesley Titcombe, 6 bottles of Bollinger given to Tracey ‘make mine Bolly’ McDermott by Slaughter & May on the 26th November 2014.

I have no doubt that all FCA staff “act honestly, fairly and professionally but why would such gifts be given let alone accepted when they clearly cannot or should not be for personal consumption?

Now for the dinners, again no value disclosed. The sheer number involved  would seriously reduce weekly grocery and wine bills for many, possibly excepting Mr. Creosote.

John Griffith-Jones comes out the clear winner. In fact I would be quite surprised if John Griffith Jones has any need for a kitchen given the massive roster of lunch and dinner engagements he has fitted in over the years. Still as they say, somebody has to do it.

I am particularly amused by the notation attaching to a gift declaration given to Mr Griffith-Jones on the 29th May 2014 by the Indonesian Financial Services Authority simply stating, “Glass box containing a silver ship (1 sail damaged)”. 

I can only assume it must still be worth over £30 even in scrap value.

Perhaps any vital dialogue with any of the above “could better take place without these activities”.

Hospitality is not a dirty word yet the FCA seems intent on making it one when it apples to those they regulate. It is in their eyes a temptation rather than applying some adult thinking around personal responsibilities and the  obligation of that firm to “act honestly, fairly and professionally in accordance with the best interests of its clients”.

While acknowledging that there will always be times when accusatory fingers can and will be pointed (rather like mine is above) some element of what many would consider normal commercial practices should be encouraged.

If the FCA pursue this route, where will it end in the interest of fairness? Will we see ALL corporate entertainment be declared illegal by parliamentary statute?

Perhaps the FCA should ‘relax’ a bit and borrow some corporate entertainment inspiration and encouragement from the late Victoria Wood for its rulebook on the subject:

“Go do it, let’s do it,

Do it while the mood is right

I’m feeling appealing,

I’ve really got an appetite 

Businesses have been given three months to comply with the new guidance.

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