5 Key Findings From Investment Week’s Inducement Study


Once upon a time, corporate hospitality roamed free over the UK’s financial services landscape. But over the last decade, that’s all changed, with MiFID, The UK Bribery Act and the Retail Distribution Review all placing heavier restrictions on the entertainments that adviser firms are allowed to accept.

With MiFID II – the most restrictive regulation yet in this area – set to come into force in January 2018, Investment Week conducted a piece of research into how the industry has adapted to recent regulatory changes, and what product providers can do to stop their hospitality from becoming an endangered species.

These are our top five takeaway points from the study.


1. The hospitality market is still open for business, for now

Our research finds that almost 80% of financial advisers still accept corporate hospitality, with 34% say that they’re under no restrictions at all on the invitations they can accept.

So, if you’re a product provider looking to create a corporate hospitality event, these findings should prove that there is still a market out there.

There is one caveat, though. When MiFID II comes into force on 3 January 2018 (and particularly when FCA enforcement actions start), it is very likely that adviser firms will become more conservative in what they accept.


2. Educate advisers on inducements

As we’ve seen, a third of advisers have no restrictions on the corporate hospitality they accept, and of those who have partial restrictions, around half allow personal feelings to inform their choices to some extent. Advisers are taking a big risk by adopting such a relaxed approach to compliance, particularly with MiFID II and the prospect of FCA enforcement action both on the horizon, as Patricia Barratt and Caroline Dawson of Clifford Chance explain.

“When the FCA conducts a thematic review on something then, if you haven’t been paying attention up to that point, that is definitely the time to be focusing on it, because that’s the point when they’re really crystallising exactly what they’re going to focus on when they come to take enforcement action…Yes, MiFID II won’t take full effect until next January, but nevertheless if you don’t have effective controls in place at the moment then you’re exposed.”

Adviser firms need to know how to establish rigorous internal compliance controls, and product providers are well placed to deliver this thought leadership.

Better education would empower all sides. Without it, adviser firms won’t feel comfortable evaluating the compliance risk of the corporate hospitality invitations they receive, and are more likely to reject them outright as regulations tighten up.

But if you can address this educational need, you could benefit not only the adviser community, but also your own business. For example, teaching adviser firms how to draft a reliable internal compliance policy empowers them to evaluate the invitations they receive with greater confidence, and improves the odds of your firm’s event getting its foot in the door rather than having it slammed shut in your face.

In other words, it’s good for your business to have more compliance-literate advisers.


3. Future focus on conferences

When we asked advisers to name their favourite type of corporate hospitality (assuming that compliance was no object), sports matches emerged, somewhat unsurprisingly, as their most popular choice.

But, according to our research, this is also the type of corporate hospitality that advisers are backing away from the most.

Q: Compared to 5 years ago, what practical difference have inducement regulations made to the way you run your business?
“The number of these we attend has… “

Although all types of corporate hospitality listed in the above table have taken a hit over the past five years, conferences appear to be weathering the storm best.

Product providers would therefore be well advised to focus on conference events going forwards.


4. Not all CPD is good CPD

If you think that having a professional development component to your event automatically removes any compliance risk, think again.

Under MiFID, an adviser could only attend a corporate hospitality event if (amongst other things) it was designed to enhance the quality of their service to the end client. And so product providers would sometimes use the CPD component of a corporate hospitality event as a fig leaf for other aspects which were of more dubious benefit. For example, an event might have a lecture from a top investment manager and then attendees would go on to watch a sports game afterwards.

But last year’s thematic review signalled that the FCA was cracking down on the use of this loophole, and MiFID II will introduce stricter provisions still on what constitutes an enhancement to the quality of service provided to the end client.

Product providers should remain aware of these changes, and ensure – particularly if they are putting on more entertainment-based corporate hospitality that – a) the benefit to the advisers’ end clients are easily provable for delegates and b) the CPD and entertainment elements are sufficiently integrated.


5. Ticket price limits for entertainment

Those advisers who are under partial restrictions on what they can accept returned the following average price limits for a ticket to the types of corporate hospitality listed below.

• Lunch or dinner at a restaurant – no more than £79.04 per ticket
• Awards dinner/evening – no more than £119.77 per ticket
• Theatre show/Musical concert/Art exhibition – no more than £82.83 per ticket
• Sporting match – no more than £106.67 per ticket
• Conference – no more than £165.81 per ticket

Remember, according to our study, 34% of advisers will be willing to accept your event without any qualms on price. But, if you want to attract as many as possible of the 44% of advisers who do have partial restrictions, then these are the limits you should observe.


To discuss the research results further, or for more information, please contact:

Mitchell Tulloch
Senior Research Analyst
[email protected]
+44 (0) 20 7316 9557|


The material contained on this website is for general information purposes only and is not intended as, and does not constitute, legal or other professional advice.