WIA (Wine Investment Association): a cold callers' charter

 WIA: currently not fit for purpose or investors' support 

Post on my investdrinks blog here explaining why I can no longer support the Wine Association Initiative as it supports cold calling for investment purposes. This is contrary to the very clear view expressed by the FSA (Financial Services Authority). It is evident that if wine investment involving the buying of individual cases of wine by individual investors was regulated, cold calling as defined by the WIA would certainly be banned.

I would not consider buying from any company that signed up to the WIA Code of Conduct as it currently stands. 

Wine Investment Association (WIA) must be in line with FSA on banning cold calling

Logo of the Wine Investment Association 

The Financial Services Authority (FSA) has very clear rules regarding cold calling and the selling of investments: they ban cold calling. They certainly ban cold calling to strangers. They do, however, permit cold calling to existing customers if certain rules are met. (See details of the FSA's One-minute guide – Cold Calling below) 

Unfortunately the WIA is not banning cold calling to strangers citing the guidelines and standards of the Direct Marketing Association and the Direct Selling Association. The WIA proclaims that its members sell wine as an investment and have set out to provide standards to protect the investor. As they are selling an investment, it is the FSA rules that count.  

If the WIA is to be taken seriously as providing credible and robust protection for investors, then they will have to adopt the FSA rules and guidelines on cold calling. It cannot be out of step with the FSA. 

The WIA should have no need of a consultation period to see that claiming the right to pester strangers with cold calls promoting wine investment is a non-starter.  

'FSA: One-minute guide - Cold calling

Cold calling can expose consumers to high-pressure sales tactics which mean they can end up with an inappropriate or over-expensive product or service.

Our investment and mortgage financial promotion rules therefore ban cold calling (which is called unsolicited real-time promotions in our Handbook and legislation) unless certain conditions are met.

How do we define cold calling?

Cold calling is where a financial promotion is made during any dealings with a customer, which the customer did not begin.

However customers can be approached if they expressly request it. Failing to tick a box to say that they do not want to be contacted, or relying on standard terms that you may contact them again is not sufficient to allow you to cold call a customer.

What are the specific rules for investment business?

Investment rules allow for three scenarios where cold calls could be made:

the promotion is to an existing customer who anticipates receiving a cold call; (my bold)

the promotion relates to packaged products that do not contain higher volatility funds, or to life policies not connected to higher volatility funds; or

the promotion only relates to readily realisable securities (but not warrants) or generally marketable non-geared packaged products.

Apart from the type of product being promoted, we also have rules about how the call must be conducted. Regardless of whether a call is a ‘cold call’ or expected by the customer, the caller must:

only make contact at an appropriate time of day;

identify themselves and the firm they represent at the start and make clear why they are calling;

ask whether the client would like to continue or terminate the call, ending the call if asked to do so; and

give a contact point to any client who they arrange an appointment with.

What are the specific rules for mortgage business?

A firm cannot make a cold call unless it is to an existing customer who anticipates receiving a cold call, unless the information is limited to only the name of the firm, a contact point and/or a brief factual statement of the firm’s main business.'

http://www.fsa.gov.uk/smallfirms/resources/one_minute_guides/advice_sales/cold_calling.shtml

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Hugo Rose MW: chairman of WIA

I sense that the founders of the WIA have not fully thought through the implications of launching an investment association as well as calling for transparency and good practice. Yesterday I asked Hugo Rose MW, chairman of the WIA, whether Culver Street (Trading) used cold calling. His reponse: 

'My Friday afternoon position is that the Code does not require Members to declare publicly commercially sensitive matters of this sort.'

Although I can understand that Rose might well feel that knowledge of uninvited cold calls might not be commercially advantegeous, he ought to have been aware that this is just the sort of question he and other founder members of the WIA would be quite properly asked.   

 

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See Robert Joseph's thoughts on the WIA and regulation here and here.

The Wine Investment Association (WIA) – reflections before today's launch

Entrance to Château Léoville Las Cases

Update: 19.50 – The WIA site is now live: http://wineinvestmentassociation.org unfortunately a number of crucial elements of the site are not yet live including all important the Code of Conduct. I hope that as full a version of the site as possible is up with the minimum of delay. I will shortly be posting my initial reactions to the launch of the WIA.   

The Wine Investment Association will be launched in London this afternoon. Here are some pre-launch thoughts about the initiative that were first posted on Les 5 du Vin yesterday.

'This new initiative will be launched on Wednesday afternoon at the offices of Mazars, who specialise in audit, tax and advisory services.  It will be interesting to see not only the proposals from this new association but also to see how it will be run and to what level of independence the new body will have from its founders. Will the founder companies – Vin-X, Culver Street, Provenance Wines and Albany Portfolio Management – have to apply to an independent body for admission to the WIA or, as founders, is membership automatic?

Will cold calls be permitted by the WIA and what about upfront commissions? If investors and other fine wine companies are to have confidence in the initiative, which is potentially welcome and could be very useful for investors, then the WIA should set its face against both practices. There may be a place for a portfolio management fee providing investors are paying extra for something of value and the fee is properly explained and transparent but not if it is a disguised ‘up front commission’. This initiative moves wine investment towards regulation, albeit self-regulation. If all wine investment rather than just wine funds were to come under the remit of the FSA, then I am sure that cold-calling would be banned as it is for wine funds (classified as a collective investment) and for the selling of mortgages.

One of the most unpleasant aspects of the wine investment scams has been the hounding of elderly and vulnerable people by commission driven spivs only interested in maximising their wages to spend on flash cars, clothes etc.. Cold calling is part of that culture. I know that Albany Portfolio Management, for one, does not use cold calling as they believe that the practice is self-defeating. Surely all companies concerned about their reputations ought to come to the same conclusion?

The advice given or stance taken about storage, performance claims made, valuations, tax liabilities will also be crucial as will any proposals for policing the association.

The WIA proposals will be out for consultation until some time in January. Will they be joined by other companies? What is sure is that a group of recently formed companies have certainly thrown down the gauntlet to the rest of the UK's fine wine brokers and companies. It would have been better if this could have come from more established fine wine companies but they have hitherto be reluctant to put something like this in place.'

         

Reflections on the net and blogging

Interesting reflections on wine blogging and why do it by Hervé Lalau here on Chroniques Vineuses. Hervé's site is now averaging 500 visitors a day, which is 15,000 a month and around 180,000 a year. There are plenty of wine trade magazines that would be delighted with such a readership.

I have Jim's Loire for many of the same reasons as Hervé cites, especially as it allows me to cover much more and more regularly about La Loire than I have ever been able to do in print. Furthermore the opportunities in the specialist print media in the UK have shrunk as magazines has disappeared or been amalgamated. Jim's Loire allows me to visit producers and for me to be reasonably confident that I will be able to write about them on this blog, although I have to acknowledge that it can be some time after the visit that I have time to write it up. Indeed I'm aware that I have still have to write a number of reports on visits to producers like Pascal Potaire (to be completed), the Puzelats, the Lamberts at Domaine Saint-Just (Saumur) and Antoine Simoneau (Saint-Georges-sur-Cher). Unfortunately (or fortunately) other work gets in the way.

Visits to Jim's Loire average out at around 180 a day over the past four months, which is encouraging as it is still less than 11 months since we launched it.

I have always been amazed by the number of messages I have received and continue to receive from my first website – www.investdrinks.org. I haven't averaged it out but I probably get three or four messages a week at least from people who have been cold called by wine investment companies, emailing me to ask whether the company is legitimate and whether they are being offered a good deal. My advice is never to buy from any wine investment company that calls you out of the blue. If you live in the UK you can block unsolicited cold calls by registering with the Telephone Preference Service, which is a free service.

I'm also staggered by the success of some of these wine investment cold callers, managing to persuade people to write five-figure and, occasionally, six-figure cheques to companies they know little or nothing about and for wines they have sometimes only vaguely heard of and for which they are quite often paying well over the going rate. From time to time there are examples when the cold calling company doesn't even bother to buy the wine – just pockets the money and disappears.

Robert Beynat

Like Hervé I'm convinced by the significance of the net not just for communication but for commerce as well, unlike Robert Beynat, le grand fromage of Vinexpo, who at the press conference at the end of Vinexpo dismissed internet wine sales saying that the net will 'never be anything other than a marginal circuit for sales.' I don't know if this is what Robert really meant to say but it provoked considerable, often biting, comment at the end of this Decanter news story.

This comment gives a flavour
‘Coming from the country that invented the Maginot Line and whose most interesting wine trade group is the quasi-terrorist KRAV, comments like Mr. Beynat's do not surprise me. When French wine production is surpassed by Argentina or Hungary maybe they will start getting it.'
Brendan Chudik, San Francsico’