Here I stand in my glass house contemplating lobbing a stone in your direction.
Financial journalists probably enjoy more than our fair share of corporate hospitality. I love a visit to the Chelsea Flower Show. I have been to prestige football matches, Ascot, Wimbledon, Ashes Tests, and taken the odd overseas excursion. No rugby though – I cannot stand it.
Many of my friends who work in other industries have been astounded because they would not be allowed to accept such offers.
But one of the key aspects of being a financial journalist is to meet and mix with people. Without gossip we are severely diminished.
If you meet someone in a relaxing environment, you can build trust, talk on an informal basis and learn things that might never be discussed in an office.
You can meet more people in a single hit than you would meet in two or three days of running round offices – and they cannot dodge you as they can a phone call.
So there is a clear benefit – even as I am taking in the Dahlias or watching Arsenal’s season collapse in the middle of March.
But can the same be said of financial advisers enjoying a day on a golf course paid for by an insurance company or fund manager?
On one level it is your business and your time. But the costs all come out of the firm’s marketing budget – and we know who pays for that in the long run.
The key question is, does this cosy relationship amount to a conflict of interest when you are supposed to be representing your client?
Does this cosy relationship amount to a conflict of interest when you are supposed to be representing your client?It is all very well if you get the chance to bend the chief executive’s ear about an issue. But it is far more likely that it will be your ear bent by a marketing specialist promoting their latest product.
It really is no surprise that the Financial Conduct Authority (FCA) has chosen to target corporate hospitality for criticism.
It argues that the activities are not conducive to business discussions, or the discussions could have better taken place without these activities.
I have checked the FCA hospitality and gifts logs over the past three years in search of a whiff of hypocrisy.
Aside from the odd bottle of Bollinger, some wine and, bizarrely, a jewellery box from Korea, there is little to see other than a string of dinner engagements, many of which sound so dull I would rather be at home watching Game of Thrones.
Certainly, I have never stumbled on a senior person from the FCA at Lords or Wimbledon. Please enlighten me if you have.
Of course, we all enjoy these activities. We have grown up with them and regard them as part and parcel of the financial world.
But are they creating a cosy relationship that undermines the scepticism and caution you should always exercise when caring for your clients’ money?
Search your conscience and you will know the answer.
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How to solve the income outgoers
How do you solve a problem like equity income? Rathbone is about to join the likes of Invesco Perpetual and Schroder in having income funds ejected from the Investment Association’s Equity Income sector.
It is difficult to see how this helps investors.
Clearly there needs to be some criteria for deciding what constitutes income other than a fund manager sticking on a label. But the current system, using historic yield based on current price, appears to work against funds that have achieved a decent overall return for investors.
In its proposed changes, the IA appears to be thinking with a fund manager’s cap on rather than putting themselves in investors’ shoes.
While some advisers might want more in-depth statistics, most investors would simply be bamboozled by them.
Lower the income bar, and you begin to wonder whether it is worth having a specialist sector at all.
Hargreaves Lansdown has suggested basing the yield on the price at the start of the investment period, so funds whose value increase are not disadvantaged.
That sounds like a sensible option. It is simple, clear for investors and will not disadvantage funds which deliver good growth as well as income.
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Make the best of a bad market
The second-hand annuity market will happen whether you like it or not. So your choice as advisers is to refuse to be involved with its development and live with the consequences – or to engage and try to make the best of what many of you see as a bad job.
It seems many advisers are taking the former option. Just do not complain later if things turn out even worse than you feared.
Tony Hazell writes for the Daily Mail’s Money Mail section. He can be contacted at t.hazell@gmail.com
