Wine Name:

Sunday 29 December 2013

The memoirs of a 'wine-broker': an insider tells his story

London's Canary Wharf becoming a favoured address for scams

(Although Daniel Smith, the author of this contribution, worked for a wine investment company, his experience could I believe be replicated in a number of other dubious investment companies. Their modus operandi is similar whether they happen to sell wine, biofuels, carbon credits, coloured diamonds, etc.

Smith provides a fascinating insight into this highly competitive, masculine world. It shows how important cold calling is to this style of investment scam and equally how important it is never to accept any investment offer proposed by a cold caller.

It is standard practice for these telesales ‘brokers’ to use false names.

Of course, the fact that Daniel Smith did not see any wine during his employment does not mean that no wine was bought. Wine for investment should be kept in a bonded warehouse, so you wouldn’t expect to see cases of wine in the company’s offices. It is, however, an illustration of how sketchy the training given by this style of company is that a wine broker thought it was strange to see no wine during his time at Snake Oil Investments Ltd.

Parts of South London, especially Bromley and Croydon, have unfortunately become a magnet for dubious investment companies. They also seem to be increasingly attracted to Canary Wharf – London’s alternative financial centre.)    

Daniel Smith:
First of all, I'd rather you didn't refer to me by name. The principal reason for this is that, far from just being a shady operation contractually and morally speaking, I also believe that Snake Oil Investments Ltd have genuine ‘muscle’ and could pose a criminal threat to anyone trying to denounce their activities. In any case I'm living in Peru now and it would be difficult for them to track me down.

When I first saw an advert to become a ‘wine broker’ on a recruitment website I was intrigued, because I have a degree, had previous sales experience and was attracted by the claim ‘earnings in excess of £80k/year’. After all, there's nothing wrong with being young and ambitious. They were accepting any candidates that were willing to show up to an open day.

I attended the interview day at Sofitel Gatwick Airport. This day was the recruitment process. It consisted of a man giving an introductory talk on the world of wine broking whereby he made clear that it was not a world to get into if you were interested in "knowing about wine and appreciating wine", it was more about trading the commodity of wine. My understanding prior to this, albeit limited, was that you accessed the world of brokering fine wines through exceptionally good knowledge of wines/estates/domains because fine wines are a rare form of diminishing asset. Snake Oil Investments Ltd put more emphasis on the investment potential of wine at this initial stage than the wine itself and where the return was actually coming from. Then they made us do exercises, which tested our confidence, speaking in front of a room full of strangers, selling things like ‘invisible paint’ and ‘calculators without buttons’. In hindsight, this should have been a sign. Honest selling relies on the benefit of a product or service to a company. These exercises had nothing to do with selling, they were to do with manipulation.

Halfway through a broker from the firm showed up and the number of applicants was dramatically pared down. We had a further talk, this time about the ‘hunger to succeed’ that is essential to all brokers. The latter part of the day, curiously, was about testing this hunger; what did we want to buy if we had £500k, how much money would we ideally make in a day, etc. Whilst it is important to be highly motivated financially in a high-pressure sales environment I should have been dubious as to whether this needed testing as rigorously as it did in the interview process. I now realise that it was because Snake Oil Investments Ltd (as well other wine brokerages, no doubt) wanted people who were financially motivated to the point of desperation, because these people were more likely to pick up the phone and sell.

Eventually I reached the end of the day and a number of us got an ‘offer’ from the broker that had showed up. He was looking for people to start (on an almost fortnightly basis) at their offices in Croydon. The advert had said ‘Canary Wharf’ which was right near where I lived at the time, so this came as a shock and disappointment. No contract was offered and no explanation given as to why the location was different from the one advertised. At this point I sensed something wasn't quite right. I learned much later from a recruiter that it was illegal to post false information in job adverts and to advertise jobs that didn't actually exist or that hadn't been signed off on a budgetary level.

I stayed in contact with the broker about the opportunity and went to see the offices in Croydon and meet him further. Quite out of the blue he announced that he had "something to clear up about the job" and launched into a defence of Snake Oil Investments Ltd, saying that "I may have heard a thing or two about the world of wine brokering and that's not at all the way we operate", etc. He made clear that what wine brokers were offering was essentially a financial service that was unregulated by the FSA because wine is a consumable good (which I'm not even sure is strictly true). He said he was still happy to take me on but again offered no contract. I was partially assuaged by his assurances that SOI were a reputable brokerage, but also intrigued by the alleged bad press on this industry.

Eventually, after not quite getting through some other interviews and badly needing the money, I put aside these concerns and decided to join Snake Oil Investments Ltd. I was in a desperate situation myself and, in any case, I had a passion for wine and wanted to get into trading it. I thereafter began a training period. Still no contract. In the training period I was told why this was. Their stance was that, because of the high earnings in that job they chose to work with ‘consultants’ who were ‘self-employed’ but received a monthly fee by cheque. This lowered their tax-bill. Tax evasion (? avoidance?) was never far from their thoughts, as you have blogged about yourself. Basically they paid their staff cash in hand, all 40 or so of them! The lack of contract allowed them to fire people at will and impose unfair holiday restrictions, i.e. once a year at Christmas (a fortnight). This seems unfair and most people would want out at this stage, but then they would invoke a notion of 'sacrifices must be made if you're to earn the big bucks'.

They also explained their methods of selling. The telesales pitch was given to us in script form, we were instructed to learn it and make it our own in whatever way we could. We were told that attitude counted for 60%, ability on the phone 30% and investment/product knowledge 10% – which was almost laughable. The main focus was on handling the objections of the customer and making us into ‘talented brokers’ the instructions being to ‘bang the phone’ Boiler Room style. They focused intensely on hard work, meritocracy and the ‘go-hard or go-home’ mentality. I had been through training for sales before – even telesales. Those sessions differed dramatically. At SOI there was no focus on how to develop a pipeline of business. This, we were told, was taken care of for us through a company from whom they purchased leads for us to call. Nothing was revealed about who this company was. I found it bizarre that the they didn't go into much more detail about the economics of wine trading but instead offered up that ‘the simpler we make it sound the more likely people were to invest’. In reality on the phone, the opposite very much seemed to be the case with people demanding an explanation as to how and why they were investing.

Other inspirational training techniques were ‘watch Glengarry Glen Ross or Boiler Room and see what you can pick up’ – honestly! We were brainwashed with motivational twoddle like: ‘Learn the three principals: 1. 'I have to earn it', 2. 'I am always responsible', 3. 'I always pay'’. The principal reason they had to go over things like this was because the majority of their workers had come from very poor backgrounds, had no qualifications and as such didn't have the kind of self discipline that comes from independent study (the cornerstone of the most companies' hiring criteria). The workers were however willing to work hard and driven financially.

Something I found very strange was that SOI encouraged us to take on a ‘persona’ (I would call it a false name). Their reasons for this were that you could have a lot of baggage to leave behind at home and having a persona encouraged you to become that successful persona you choose for yourself through hard work. I actually had done quite well for myself before I had gone there and I found this particularly insulting. Why would I not want to be me? Why should I do well under a different name, didn't I want people to know I had achieved good things? Obviously this was their linchpin: it made it immensely difficult to find out who was actually working at SOI especially since they had no contracts or no real names.

People stayed there because it was indeed possible to earn plenty of money, but the Snake Oil Investments Ltd commission scheme was far from fair: earn your own monthly fee in commission before you get a penny, gain five clients in a month for a 3k bonus... In truth there were some quite staggering incentives. So you would have a retainer of £1250/month plus the same amount in commission plus a bonus (you also got a Rolex or something similar for being one of the first three ‘employees’ to achieve this in any given month). However, telesales are far from easy when you're talking about thousands of pounds per sale and these targets were hard to achieve. Curiously if you didn't achieve them you were rarely fired. They obviously needed as many people as possible to man the phones and found it hard to employ people given the lack of a proper contract.

This pay structure achieved two things: people ringing absolutely anyone they could whenever they could in order to get the five client monthly target and an attitude among staff that no better opportunity could possibly exist for people of their means – after all what companies do you know giving out Rolexes on a monthly basis? This was underlined in training when they talked about the director Tito Pepe. We were told (I paraphrase):

‘Tito a great guy. He's rich and he just wants people around him to be rich. There's absolutely nothing to stop you from getting to where he is now if you work hard and apply yourself. It's hard to start off with but the longer you stay, the more clients you get and the more they add to their portfolios the more it all adds up and after year two things really get good.’

Tito would hold daily motivational talks urging people to push the billings. He seemed to do very little himself, often swanning off in his Lamborghini around 3pm. My overwhelming impression of him was that he was amusing bloke, clever, driven and ruthless. After his talks we would often role play our pitches in front of the room, practising the best way to handle objections (according to them this was to ignore it completely first time it came up, then rephrase it as a question in order to make the client say yes, then handle it somehow). 

The actual sales structure was what I found really odd and was my biggest clue that the whole organisation was one very elaborate and lucrative scam – at least if it wasn’t they ran the company in a very peculiar way. Essentially, the initial call to a prospect was placed by an ‘opener’ who was ringing to introduce the investment proposition and send over a company brochure. This was all an ‘opener’ did. The prospect then received a follow-up call from the ‘closer’ who got the prospect’s thoughts on the brochure (obviously the brochure exuded the image of an immensely reputable company) and closed the sale. The ‘closers’ got a lesser percentage of the original commission on that sale (they plucked the prices out of thin air, anyway) and more for any subsequent purchases from that client. Often clients would 'invest' about 5k initially to see if it was worth it, then add lots more once they had seen a good return. They always saw a good return, because the ‘closers’ no doubt lied through their teeth about not only what they had purchased for the client, but also the return it had made. Obviously the only career progression possible at SOI was from ‘opener’ to ‘closer’ where earnings could be up to £100k a month sometimes according to the board which showed what business we were doing (a simple whiteboard, wiped clean every day). I imagine Tito selected the closers personally. Were they privy to more intimate information about the company? Is that why they get such a better deal?

We worked from 1pm till 8pm and were constantly on the phone. At the end of the day a group of older employers would get into their various hyper cars and drive home. We were encouraged to buy expensive things, save nothing and keep our hunger alive – which I just thought needlessly frivolous. We were instructed to put pictures of material objects around our desks to reinforce this notion. 

Academic learning was almost actively discouraged. The only thing they wanted us to work on was our phone pitch and sales skills through listening to motivational speakers such as Brian Tracy. Any questions about the actual purchasing of the wine were ducked or handled with responses like ‘all the wine is kept in the London City Bond where the Queen keeps her wine’. I once asked one of the senior brokers to tell me more about the process. He looked away awkwardly and said that an opening account form for the LCB was posted out after clients had sent the cheque, they subsequently filled it in and sent it back to us and we allocated the wine to them in the bond through our account. Surely if nothing weird was going on at this firm they would have been more forthcoming with this, even clarifying it on day one.

SOI were also more than happy to lie on your behalf and say you were earning enormous sums in order to get a mortgage on a house or something similar, because this tied in with their philosophy of keeping the earnings high (also because it presumably kept people on their side). They presented themselves as the ideal employer. Tough but fair, generous but not a free ride. This allowed them to get away with forcing people to come in to work even if they felt sick on the pretence that if you looked sick then you would be sent home. Absences were not tolerated in any way. Ccuriously, though, the top earner disappeared for a week and came back after SOI had announced that he wouldn't – for some reason no one on the sales floor seemed to notice or care. Obviously the more money you brought in for them the more leniency you could afford. It made me wonder whether there was an inner circle of people who were in the know who genuinely made all the decisions and got a share of the profits of what I had come to see as an enormous Ponzi scheme. The high earnings then afforded them status at the firm, although obviously these were false.

Reading your blog about how much Tito drew through dividends really opened my eyes. He was preying not only on innocent investors, but also on his own staff. To make things worse some of these investors were pensioners and suchlike, it is true. Yet actually, the majority of people working at SOI had sufficient conscience to put notes on the system not to bother these people. I genuinely got the idea that the majority of them had been hoodwinked into working there because they had no better option. Some of them deserved better and were good sales people, who believed they were just doing well in an unregulated industry. The world of investment cold calling seems to be an intricate network of conmen; people use the same skills in carbon credit investment selling, land and precious stones as well. Tito Pepe even learned these skills from some other company where all the other dodgy brokers seem to have originated from. It’s just slightly disappointing for me as I genuinely have an interest in wine and would have quite liked to be a broker somewhere reputable such as Berry Brothers or Fine and Rare.

It's funny, they mentioned you when I was there! They were less than complimentary... But I have to say I think you're doing a great job, particularly as I had nearly convinced some of my friends and family to invest. I think wine is and can be a great investment, but it requires care and attention and above all for investors to actually lay eyes on what they’re buying. The entire time I was at SOI I never saw one bottle!

(NB The names of people and company have been changed – those used are entirely fictitious.)


  1. he has described the typical sales process from double glazing to Goldman Sachs. Lets hope he pays back all the stolen money he enjoyed to prove he is genuinely a good guy and not just a smart salesman trying to pass the blame. Salesman are generally weak egotistical survivors who will do anything to help themselves. This character sounds exactly like that. The fraud is not committed in the sales process, it is committed by the people who control where the money goes, if all the wine was purchased then there is no fraud, maybe overpricing, but thats buyer beware, not fraud. Wine fraud is no different to any other fraud, follow the money, thats all there is to it. I have very little sympathy for the victims of wine fraud, their greed for exceptional profits is why they didn't ask enough questions.

  2. Anon. I largely agree and we could add Lloyds Bank to the list. Doubtless some victims are greed but others, especially the elderly, are pressurised into making unwise investments.

  3. If the point is to bring awareness why conceal the name of these crooks?

    1. bachardeau – a fair point. It was mainly for protection against any accusations of libel. The company concerned has been closed in the public interest and has been listed for some time as a company from whom I would not buy wine.