Two years ago the Financial Conduct Authority published guidelines on corporate entertainment.
It warned that advisers risked conflicts of interest when enjoying the hospitality of providers.
The FCA is referring to invites for sporting or social events, such as golf, rugby, tennis and concerts. Events that in the past have been used by providers – whether right or wrong – to either reward or entice adviser loyalty.
Last week, the regulator said research it had carried out among investment advisers had shown conclusively that many of these hospitality benefits had little benefit to the end user, ie the client.
It also reiterated its statement two years ago that these outings might even be to the detriment of clients, by going against Principle 8 of the FCA’s Principles for Businesses; which states firms must be “mindful of conflicts of interest between itself and its customers, and between a customer and another client”.
The FCA said it had also found instances where advisers were potentially profiting from training materials provided by providers and that advisers were not keeping adequate records of the hospitality they did receive.
By cracking down on hospitality the regulator is embarking on a mission to crack down on one of the last bastions of the pre-regulated world of financial services, the world of the free lunch.
Of course the industry is not the only one to attempt to wine and dine its way to greater profits, and it won’t be the last.
The days of long lunches are long gone, and as much as many advisers would probably long to kick back with the odd round of golf, paid for by a willing provider contact, the brutal truth is - if it is of no benefit to a client, then surely an adviser would be hard pushed to find time for it anyway.
