Off on a Christmas jolly? How to keep on the safe side of industry hospitality

But perhaps in scale rather than in principle. The typical image of the investment manager schmoozing the pension fund – perhaps an appropriate time to use the term 'asset owner' – or their consultant will still exist, but on a different order.

This is partly a result of cultural change, but cultural change driven by a strengthening regulatory imperative, especially the Bribery Act, that came into force in 2011. "Post-Bribery Act it has tightened up somewhat," said David Felder, a director at professional trustee provider Law Debenture.

We’re confident that most trustees, pensions managers, and ultimately scheme members would prefer lower fees above a free Christmas lunch

Helen Forrest, NAPF

The pensions industry has not had serious problems in this area, Felder added, but many pension funds have instituted a £250 or £500 cut-off, meaning any hospitality worth more than that has to get signed off by the chair of trustees or other designated representative of the scheme.

"A day at Chelsea or Wimbledon or something would be viewed as routine, but boat trips down the Rhine would not," said Felder. “You would balk at going to events that are a lot more expensive. A three or four-day drip to Europe would not be within the spirit of this.”

Helen Forrest, defined benefit policy lead at the National Association of Pension Funds said trustees should be familiar with the Pensions Regulator'sguidelineson addressing conflicts of interest, in addition to standard best practice in the wake of the Bribery Act.

“Clearly it’s in pension scheme beneficiaries’ best interests that all providers are chosen based on the quality and value of their service, not any hospitality that trustees and pensions managers may receive," she said.

"And we’re confident that most trustees, pensions managers, and ultimately scheme members would prefer lower fees above a free Christmas lunch.”

On the other side of the fence, investment managers have had to improve their processes to make sure they are not doing anything to inappropriately influence intermediaries.

The Investment Management Association issued guidelines in September, to demonstrate the impact on the sector of the Financial Conduct Authority's guidelines on inducements and conflicts of interest.

One common area is where a manager gets tickets as a result of its sponsorship of an event. The fund association told its members that it is the market value to the recipient, rather than the cost to the organisation, that is the relevant measure.

"To the extent that sponsorship packages have hospitality benefits bundled with them, members will need to consider in what circumstances and to whom these can be offered," it said.

Events outside the UK are seen as off-limits, while vague reasons such as 'business purposes' given for what is more obviously a social rather than educational event are given short shrift:

"Similarly, whilst business purposes is a wide term, embracing many relational activities, the more social in nature an event (or part of an event), in contrast to an event more ostensibly and immediately identifiable as training or education, the more a firm must be assured that it can articulate the appropriateness of that event in terms of consumer outcomes and proportionality."

Barry Parr, co-chair of the Association of Member Nominated Trustees, said the financial services industry had moderated itself, with such hospitality being "extremely well controlled these days by the City", with financial services providers aware of the scrutiny under which they are held. 

But it is, once again, the larger schemes with the bigger governance budgets that are better able to introduce a register of hospitality, as well as the set sign-off process to defend against abuses. "It is probably a bit more difficult in smaller schemes to even have the time to consider it."