What would make a phone call about wine investment to a non-client acceptable?

Following a meeting before Easter with some members of the WIA and two members of the National Fraud Intelligence Bureau, here is in draft form (comments and suggestions are greatly welcomed) the conditions that I think would make a call to a non-client call acceptable.

A cold call is one to a stranger who does not anticipate a call and has not expressed an interest in wine investment. Such calls are not acceptable for the purposes of investment and are a high-pressure sales technique.

Calls can be made to non-clients who have expressed an interest in wine investment and who are aware that having expressed such an interest they can reasonably expect a follow up call. Increasingly this interest is likely to be expressed through a website. Companies should keep records of these leads to show that they were properly established leads and be able to produce them if challenged. If adopted by the WIA, these records should form part of the annual monitoring process.   

Obviously there have to be the necessary safeguards in place to ensure that potential client is not subject to inappropriate and high-pressure sales. At the start of the call the potential client must be given the opportunity to end the call. If calls are monitored then those called must be made aware that the calls are monitored. The threshold of high-pressure sales should be lower for the elderly and vulnerable.  

When a client places an order over the phone they must be made aware of their right to cancel as in line with the Distance Selling Regulations’ legislation.

This draft of acceptable conditions will have to take cognisance of any proposals and changes that are made by the new The Financial Conduct Authority (FCA), which has now taken over from the Financial Services Authority.  

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Hugo Rose MW, chairman of the WIA, has called on the fine wine trade to support self-regulation and the WIA here in Harpers. A prerequisite of getting such support should be ruling out cold calls – ie those to strangers who have no reason to expect a call about wine wine investment.

Good news: Action Fraud is working

I had a meeting last Friday with a couple of members of the National Fraud Intelligence Bureau. They reported on how well Action Fraud is working. They were very pleased with the leads and sometimes unexpected links this new system is now providing.

So it is very important that if you have concerns about your wine investments or about a wine investment company you should submit a complaint through Action Fraud.

Wine Investment Association: why I can no longer support this initiative

WIA – not currently fit for purpose or deserving investors' support

I was aksed today my view on the recently launched WIA and its Code of Practice.  

The WIA and its ‘Code of Practice’ purportedly aims to satisfy a public demand for 'higher professional standards in the promotion of fine wine as an investment asset class..' Unfortunately it does nothing of the kind.

I am very disappointed that the WIA  have decided to permit cold calling despite the clear view of the FSA (Financial Services Authority). Equally I'm disappointed that National Fraud Intelligence Bureau is apparently prepared to offer support to the WIA that allows cold calling for investment purposes. See news story in Harpers (8.2.2013). This is especially surprising as a search on cold calls the National Fraud Intelligence Bureau website – http://www.actionfraud.police.uk/ produces 16 entries. Here to give a flavour are the first two:

‘Cold calling and high pressure sale tactics were put into play to target and then bully people into buying into their scheme. ‘

http://www.actionfraud.police.uk/land-banking-fraudsters-jailed-dec12.

Share sale and investment fraud
Share sale, boiler room, hedge fund or bond fraud involves bogus stockbrokers, usually based overseas, cold calling people to pressure them into buying shares that promise high returns. In reality, the shares are either worthless or non-existent.

You are usually contacted out of the blue by a professional-sounding stockbroker who offers you investment opportunities that seem too good to be true. You are also promised free research reports, special discounts and ‘secret’ stock tips.

In reality, the fraudsters are cold calling as many people as possible, persuading them to invest in shares that are either non-existent, or so worthless they are impossible to sell.

http://www.actionfraud.police.uk/fraud-az-sharesale-fraud

It is interesting and very revealing to compare the FSA's definition of acceptable cold calling with that adopted by the WIA:

FSA:
'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;

(The other two scenarios are not relevant here.)'

WIA definition of cold calling:
'The Association defines a cold-contact as a telephone call (or other communication) made to a private individual where there has been no previous communication with that individual, and where the individual has not provided his telephone number and/or given prior permission for the telephone call.'

Significantly different! The WIA's definition is a charter to pester people who have expressed no interest whatsoever in wine investment with the elderly and vulnerable being protected as the calls will be recorded!! 

The WIA claims in its ‘Aims of The Association’: 

‘1. To seek to safeguard the general public against fraud, malpractice and misrepresentation.5. To encourage high ethical standards of competitive practice amongst wine investment businesses.

6. To do such things as are necessary or expedient to sustain or raise the status of wine investment and the Members of the Association.’

If the WIA were serious about these three laudable aims they would have banned cold calling as they were urged to do so during their consultation period. Cold calling for investment purposes is both malpractice and is per se a high-pressure sales tactic. The companies who have signed up to the WIA have chosen to ignore the clear guidance given by the FSA for their own narrow commercial advantage. Claims of 'Higher professional standards' are pure window dressing. 

Although I have previously welcomed the initiative in principle, I will not support an association that ‘purports’ to protect the public yet allows its members to cold call. In my experience, shared by the FSA, the vast majority of investors who have been scammed or persuaded to buy unsuitable or overpriced wine investments have been lured by an initial cold call. 

Until the WIA comes into line with the FSA on cold calling I cannot support this initiative. I see no reason why the public should have any confidence in the WIA as it currently stands.

I am, however, in favour of a self-regulatory body for wine investment if it can provide confidence to the public that it is safe to invest with a member of WIA as well as providing protection for legitimate companies offering wine investment. Unfortunately the WIA is currently a wasted opportunity. 

Two articles on Cold Calling:
Jancis Robinson MW:  Cold Calling – a serious warning 

Tom Lewis: The Cambridge Wine Blogger: Cold Calling and the Data Protection Act 1998