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

Cult Wines Ltd rejects WIA

   

Cult Wines Ltd were invited to be one of the founder members of the WIA. In this statement the co-directors explain why for the moment they have rejected membership:

Statement provided from Tom Gearing & Philip Gearing – Co-Directors of Cult Wines Ltd:

The Wine Investment Association

Cult Wines Ltd would like to recognise the WIA and applaud the founding members for their efforts in launching the introduction of regulation into the fine wine market.

Cult Wines were initially invited to participate as founding members but felt however that there were two key areas that would need to be addressed before we could consider membership;

-          The issue of cold calling is currently approved by the WIA and whilst the members may adhere to certain guidelines we firmly believe that this practice should be not be acceptable under any circumstances.

-          We would prefer to see this type of regulation managed by a completely independent body supported by the members rather than a form of self-regulation.

••

Cult Wines Ltd are not alone in finding cold calling an unacceptable practice. The Financial Services Authority (FSA) bans cold calling to strangers for investments that come under its remit. Companies may cold call existing customers but only if they are anticipating a call. 

The Wine Investment Association cannot expect to be taken seriously until it bans cold calling to strangers and comes into line with the FSA rules and guidelines. See here.   

FSA proposals on wine investments etc. miss real target

In August the FSA (Financial Services Authority) issued a consultation paper how how Unregulated collective investment schemes (UCIS) are promoted and sold with a view to tightening up procedures and providing more protection to consumers by limiting their promotion to sophisticated and wealthy investors.

Unregulated collective investment schemes (UCIS)

We have seen a significant increase in sales of UCIS to retail consumers and are aware of a number of risks in this market. We highlighted our concerns in our Retail Conduct Risk Outlooks in 2011 and 2012.

CP12/19 - Restrictions on the retail distribution of UCIS and close substitutes

We have published a consultation paper proposing rule changes aimed at improving retail consumer outcomes by limiting the promotion of UCIS and close substitutes, and ensuring that they are recognised as specialised products unsuitable for general promotion in the UK retail market. As providing financial advice generally includes making a financial promotion, by limiting the promotion of UCIS we aim to limit the number of retail clients being wrongly advised to invest in UCIS.

For full details of our proposals please read the consultation paper.'

Wine is mentioned in the consultation paper as one of the areas that have concerned the FSA: 'Our work has identified situations where members of the general public have been invited to invest in pooled investments based on the performance of unusual assets such as traded life policy investments (TLPIs), fine wines, crops and timber.' 

Unfortunately, although in a Decanter news story on the FSA proposals, Chris Hamilton is quoted: 'FSA spokesman Chris Hamilton told Decanter.com there were numerous examples of unsuitable wine investments being sold, and pointed to an investigation earlier this year which estimated fine wine investors had lost £100m over four years by entrusting their savings to failed wine companies' the FSA proposals miss what ought to be their target completely. 

The FSA proposals cover wine funds, which are collective investments.  I cannot remember the last time I had a complaint involving a wine fund. They do not cover the widespread miselling of individual cases to individual investors as investments. The £100 million loss quoted by Hamilton was suffered by investors buying individual cases as an 'investment'. Even though they are clearly promoted as investments, these transactions are outside the remit of the FSA. So anyone can set up a wine investment company and make all sorts of far fetched and outlandish claims about wine investment returns often based on out of date statistics and the FSA can say nothing. 

The only possible exception to this might be the selling of en primeur. which might be deemed as a 'collective investment' as an individual's wine cannot be identified until it has been bottled.

In the meantime more and more 'wine investment' companies disappear with investors' hard earned savings. Those investors are now likely to endure a long-term financial mugging.      

Warning from FSA about unauthorised investments

Interesting article in City Wire here.

The Premier Bordeaux Wine Company

Enquiry:

'I have been contacted by this Company (The Premier Bordeaux Wine Company) and sent a somewhat impressive brochure. Wine is not an area I have invested in, so could you kindly give me advice on this Company.'

*

My response:

The Premier Bordeaux Wine Company was incorporated on 3rd December 2009 and its registered office is 788-790 Finchley Road, London NW11 7TI.

Its trading address from its website: www.tpbwc.com is

111 Buckingham Palace Road,Victoria, London, SW1W 0SR. Telephone: 08000 114 219
Email: : info@TPBWC.com
The website was registered on 24th June 2009

(On 2nd December 2009 Premier Bordeaux Wines Ltd, believed also to offer wine investments, was incorporated with a registered office also at 788-790 Finchley Road, London NW11 7TI. Its website is 'undergoing total redevelopment'.

Clients are directing to their trading address: Premier Bordeaux Wines, 145-157 St John’s Street London EC1V 4PY
Tel: 0800 0114 219
Fax: 0845 226 4624
Email: info@premierbordeauxwines.com)

The Premier Bordeaux Wine Company's brochure suggests that the company has been around for rather longer than public records show:

Some extracts from the The Premier Bordeaux Wine Company brochure:

'The Premier Bordeaux Wine Company are passionate about the fine wine market and we are delighted with the tax free returns that we have achieved and continue to achieve on behalf of our clients. Our global network of contacts and strategic partners allow us to source the rarest and most sought after wines on behalf of our clients and puts us in the perfect position to sell their wine at any time.’

‘The Premier Bordeaux Wine Company is keen to secure large amounts of en primeur wines so that we have access to as many of the world’s greatest wines to sell at a future date. Securing wines at this stage provides us with the best opportunity to fulfil future orders.

Of equal importance, purchasing en primeur in significant quantities affords us significant purchasing power in the market meaning we can purchase wines at the best possible price.’

Their 'Income Investment Model that Yields 8.9%+ per annum':

• ‘Up to 500 clients enter agreements with us on current and future en primeur campaigns by purchasing wine futures (each client is the legal owner of the wine he/she has purchased)
• By buying en primeur wines in substantial quantities, TPBWC can obtain the most competitive price. Price differentials can vary by up to 10%.
• TPBWC pays participating clients 8.9% of the total purchase price* (standards charges) in order to repurchase the wine at the same total purchase price in three years time (similar to a Repo transaction in the money markets).
• After three years, TPBWC buys the wine back at the original purchase price.
• The wine is independently valued.
• If the wine’s value has increased from the total purchase price then TPBWC pays the client/seller a further 60% of any upward price movement from the (purchase price plus standard charges). TPBWC retains 40% share of capital growth.
• If the wine’s value has remained the same as or decreased from the purchase price, then no further payment is made. The client has already received an 8.9% return on his/her investment.
• TPBWC either holds or sells this wine to a third party.
• The process is repeated for subsequent en primeur campaigns.

(Elsewhere in brochure TPBWC gives an example of how the scheme works and undertakes to pay clients 8.9% of their purchase price 'within 30 days of receipt of payment' and a further 8.9% 'within 1 year and 30 days of the purchase date'. Then a further 8.9% a year later and three years after the original purchase date TPBWC buys back the wine at the original purchase price and within 30 days of buy-back a further cheque – 60% of the increase in value.)

From public records The Premier Bordeaux Wine Company has no track record. Although each client is the legal owner of wine purchased, there are elements of their Income Investment Model that might be construed by the FSA as a collective investment and therefore require FSA authorisation, which they do not currently have. If this was an FSA approved scheme it is unlikely that TPBWC would be permitted to make the 8.9% guaranteed claim.

In the FAQ section of the brochure is the question: 'What if TPBWC goes bust?'
Answer: 'The Premier Bordeaux Wine Company is run on solid business principles and is not indebted to banks or third parties. Overheads are kept to a minimum and our focus is always long term. However, even if the worst case scenario materialised and TPBWC did 'go bust' clients funds are secure. All wines are allocated by the case to individual clients at the time of purchase and would be easily distinguished by the official receiver.'

Unfortunately as TPBWC was only founded at the beginning of December 2009 the company has naturally not yet been required to file any accounts. Furthermore experience shows that it can often be far from straightforward identifying an individual's wine when they are kept in a company's umbrella account if the company has gone bankrupt.

For en primeur purchases this becomes a nightmare because it is impossible to identify a client's wine when it is part of a barrel of still maturing wine. In a number of cases when en primeur companies have gone bust, their clients have lost all or most of their money.

My advice
I would not consider buying wine, especially en primeur, from The Premier Bordeaux Wine Company nor signing up to their Income Investment Model.

Cult Wines Ltd: Tom Gearing's requests

Yesterday in a comment on this blog Tom Gearing made two requests – he says three but it looks like two to me.  

'I just have three requests:

1. Please can you remove/retract your blog.

2. Apologise for the use of confidential material in a public forum.'

The answer to both of these requests is no. 

Please can you remove/retract your blog.

My posting on this investdrinks blog related to a carelessly worded press release issued by Cult Wines Ltd on 22nd January 2010. If you don't want press comment don't issue press releases – period. If all drinks investment and not just collective wine funds were under the aegis of the FSA, such claims of guaranteed returns would not be allowed as one FSA authorised wine fund manager remarks:

"It is not possible to guarantee returns and therefore no sane fund manager would ever do so.  Most investment managers whether running regulated or unregulated schemes will publish health warnings (e.g. past performance is no guarantee of future performance, shares can go down as well as up etc etc) but will also highlight why they think they will be able to create value for the investor.

The FSA has extensive rules on financial promotions and the degree of information and inducement you can put into your marketing depends on what level of authorization and regulation you have as the investment manager. This also dictates who you can market to."   

Apologise for the use of confidential material in a public forum.

When I posted the initial response from Cult Wines Ltd to my questions following up on the press release (22.1.10) I was totally unaware that there was a confidentiality signature tacked onto the end of the email. Unaware for the very good reason that I cannot imagine why anyone would put such a clause on a response to a known journalist following up a press release issued by the company. It is not as though I had asked for the code to the company safe or the pin number for the company credit card.

A subsequent email stated: 'You do realise that printing this without permission is 100% against the law.'

Frankly I think it is highly unlikely that the law is at all clear cut on this. This might be of interest. I suspect in law much would depend upon the content of the email and whether the recipient had indicated that they would abide by the confidentiality signature.  

Templar Vintners Ltd

I had an enquiry yesterday about Templar Vintners Ltd from AB.

The enquiry
I wonder if you have any information about Templar Vintners?

They contacted me in November about buying Bordeaux Wines. I have a portfolio of wine that is held under an umbrella by the Bordeaux Wine Company. I am at a stage where I wish to offload some of my wine and was looking for a competitive price. Templar contacted me around that time - not sure how, in retrospect. Web site up and running, other references online but no figures at Companies House - I haven’t visited their premises yet.

I have already bought a case of Ausone 2008 for £7,700 - and have a Certificate from them but realise this is no guarantee that the wine exists.

My response
The registered office of Templar Vintners Ltd is at Hamilton House, 1 Temple Avenue, London EC4Y 0HA.

Their website (http://www.templarvintners.com/) claims that:
'Templar Vintners is one of the leading fine and rare wine merchants. We hold some of the greatest and rarest vintage wines; many of the wines we hold are increasingly unavailable elsewhere. We also frequently offer more recent vintages, at very competitive prices, which gives customers excellent opportunities for capital growth. Our clients benefit directly from our immense buying power, amassed through years of experience, and strong allegiances with a wide-variety of industry experts. Over 70 per cent of Templar Vintners’ customers are high net-worth individuals and seasoned investors. The remaining 30 per cent are a collection of British and international merchants , wine brokers and institutional investors.'

If this claim 'to be one the leading fine and rare wine merchants' is correct then this is a truly remarkable and probably unprecedented achievement. The company was incorporated on 8th August 2008 when it was called 888 Finance Ltd. On 30th June 2009 the registered office was changed from www.buy-this-company-name.com, Suite B, 29 Harley Street, London W1G 9QR to the current address at Hamilton House. On the same day Andrew Griffiths was appointed as director and James Allie as company secretary and on 3rd July 2009 the company name was changed from 888 Finance Ltd to Templar Vintners Ltd. The company's first accounts are due to be filed on 8th May 2010. Thus Templar Vintners Ltd did not start trading until early July last year.

Because of the nature of en primeur (see here) it is impossible at this stage to verify whether Templar Vintners has indeed placed on order for and paid for your case of 2008 Ausone. To be certain you would need to see their order and payment records and ideally details of the transactions all the way down the chain to the négociants in Bordeaux. I suspect that most companies would decline to release these records on the grounds of commercial confidentiality. You will not be sure whether the case of 2008 Ausone for which you have paid exists and is yours until it arrives in this country either at the end of this year or in the early part of 2011.

This is why it is always crucial to carry out as much due diligence on a company before buying en primeur from them and to buy only from established companies who have a solid track record.

The company's website is registered with Philip Lane Ltd, 2nd Floor 145-157 St John St, London EC1V 4PY.

It is interesting to download the selection of articles on wine investment from the Templar site and do a compare and contrast.

First up is an article from the Independent on Sunday (22nd June 2008) by Kate Hughes and Julian Knight. Here is the second paragraph (page 2) from the Templar's version:

For a private investor, there are three main avenues into the wine world. A specialist fund pools investors' money to buy wine to trade, but that doesn't mean you will get to drink your returns, just as investing a stake in a racehorse won't get you into the saddle. Wine Asset Managers (Templar Vintners), for example, offers the Fine Wine Fund, requiring a minimum 15 per cent of the fund's annual performance growth.

This is original version of the article as it appeared in The Independent on Sunday:

'For a private investor, there are three main avenues into the wine world. A specialist fund pools investors' money to buy wine to trade, but that doesn't mean you will get to drink your returns, just as investing a stake in a racehorse won't get you into the saddle. Wine Asset Managers (wamllp.com), for example, offers the Fine Wine Fund, requiring a minimum investment of £50,000. The annual management fee is 2 per cent, plus a further 15 per cent of the fund's annual performance growth.'

Wine Asset Managers (WAM) was founded in December 2005 by William Beck and Miles Davis. It is authorised by the Financial Services Authority (FSA) – 448941 - Wine Asset Managers LLP, authorised 25.5.2006 They run two wine funds The Fine Wine Fund and The Fine Wine Investment Fund. Wine expert Steven Spurrier is the advisor to the fund.

Templar Vintners Ltd are not authorised by the FSA. Any company in the UK running a wine fund as opposed to offering cases of wine for investment is very likely to be judged to be running a collective investment scheme as will need to be authorised by a financial services authority. In most cases in the UK this will be the FSA.

When I contacted Miles Davis about Templar Vintners he was very surprised. "I have never heard of Templar Vintners," he said. His business partner, Will Beck, was equally surprised. 'We have never heard of Templar Vintners and it certainly appears that something underhand is going on. In the first article they have clearly tried to associate themselves with us, but it looks very amateurish. They appear to have a makeshift website.'

'The second article is the one we wrote in the FT (with my name next to it) for the wine investment supplement in June 2008, and the ad at the bottom was placed by Vinum Fine Wine Fund (we have a hard copy here in our office). They have clearly replaced Vinum’s name with their own.'

As William Beck points out, this is exactly what Templar Vintners Ltd appear to have done as shown here:

The original ad in the FT (20th May 2008)

The amended/or doctored ad from Templar Vintners Ltd

The full page from Templar Vintners showing the ad in the bottom, left hand corner

Templar Vintners Ltd appear to just have changed the name and the logo leaving in the details about the authorisation by the GFSC (Guernsey Financial Services Commission: 'Class B Collective Investment Scheme under the Protection of Investors (Baillwick of Guernsey) Law 1987, authorised by the GFSC'.

The Vinum Wine Fund is authorised by the GFSC as their records show: 'Vinum Wine Fund 1033646 Vinum Fine Wine Fund PCC Limited, The Class B'. There is no mention of Templar Vintners Ltd in the GFSC records. The claim by Templar Vintners of GFSC authoristion is thus entirely false – I imagine the Guernsey authorities will not be amused. I have forwarded details to the GFSC.

AB agreed with Templar Vintners to swop his 2003s for 2008s and asked Templar to contact the Bordeaux Wine Company. They declined, so AB talked to the Bordeaux Wine Company direct. They told him that they thought they were a re-incarnation of the Bordeaux Wine Trading Company/International Wine Commodities. I have no evidence to support this claim, although BWC may be in a position to know as some of the people involved in running Bordeaux Wine Trading Company/International Wine Commodities previously worked for BWC. Any connection with these two companies has been denied by Andrew Griffiths: 'We have no knowledge of Bordeaux Wine Trading Company/International Wine Commodities, nor have we had or do we have any association or dealings with them.'

My advice
I would not do business with Templar Vintners Ltd under any circumstances.

I have invited Andrew Griffiths, director of Templar Vintners Ltd, to respond to this post. 25.1.2010: Andrew Griffiths has responded – see his comments below.