Fund managers told to stop playing golf

Martyn Clapham
By Martyn Clapham June 16, 2016 12:38

The Financial Conduct Authority (FCA) has told fund managers that they are spending too much time on golf courses.

The UK regulator has reviewed ‘conflicts of interest’ in asset management and has found that industry bosses were spending too much money wooing clients with hospitality in an attempt to win business.

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Two years ago the FCA cracked down on offering gifts or hospitality that are of ‘unreasonable value’. But this recent report found that fund managers were still offering social events that were not directly helpful for business — in particular, playing golf.

“Hospitality provided or received did not always appear to be designed to enhance the quality of service to the client,” it said.

“Individuals from firms had participated in sporting or social events such as golf.

“There were instances of sporting activities like playing golf or attending rugby games provided after participation in training events.

“When providing or receiving a non-monetary benefit we expect firms to consider and assess whether all aspects of the benefit are designed to enhance the quality of the service to the client including the location and nature of the venue, and those activities which are not conducive or required for business discussions, such as sporting and social events and activities.

“These benefits did not appear capable of enhancing the quality of service to clients as they were either not conducive to business discussions or the discussions could better take place without these activities.”

Some fund managers have responded by saying that golf days are an integral part of their business strategy.

“I am saddened by the idea that we can no longer be hospitable to clients,” said Justin Urquhart Stewart, chief executive of Seven Investment Management. “Soon we will be having a golf day without golf balls!”

Andrew McNally, chief executive of boutique fund house Equitile, acknowledged that although corporate hospitality was frowned upon by the regulator, entertainment still went on.

“People go to events and play golf,” he said. “I’ve not necessarily seen it on a grand scale and it’s not something that is completely out of control.”

Nonetheless Mr McNally thinks the heyday of corporate entertainment jollies is over — and will continue to be on the decline in the coming years given growing financial pressures on the industry.

“I would frown on [providing that kind of entertainment for advisers or clients] more because it’s very bad economics.”

 

Martyn Clapham
By Martyn Clapham June 16, 2016 12:38
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