What are Chinese walls made of ?

chinese wall

Darren Jefferson asks just how robust are these Chinese Walls


 

I made a point of counting how many times during a typical week, the term ‘Chinese Walls’ was used by a variety of advisers.

I got to eight so I thought I better find out more about them, what they’re made of and who builds them.

It’s topical following the recent issue with Capita Group where the CEO has confirmed they have created ‘too complex a business model’ having diversified into many different markets.

During the week where I came across the term eight times it was predominantly from advisers and business development people who were explaining their propositions and because they had ‘Chinese Walls’ in place they could advise both sides or undertake this project without any conflict.

Clearly the corporate message was to diversify and get the work in. Presumably they are not blurring the lines and they genuinely can get comfortable or are they running a longer term risk for short term gain?

Earlier in my career I made a decision to move organisation because amongst other things I could not get comfortable with this ‘we aren’t conflicted and we will run it from another office’.

For me this was too close for comfort and regardless of whether it was right or wrong I felt uncomfortable. Whether firms are diversifying themselves too wide is a matter of debate and only time will tell.

One thing I can say is that different organisations have built their walls out of different materials. Some have used bricks that will withstand a hurricane and others have taken advice from the first little pig..


darren10

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, pensions and tagged , , , . Bookmark the permalink.

One Response to What are Chinese walls made of ?

  1. Bob Ward DipPFS says:

    You could be just as likely be speaking about the legal profession here. They are at pains to assure that a different partner in a different office is safe and they often stand against each other, solicitors and barristers alike.
    I know of cases where there are three or more parties involved, all using the same firm albeit different offices. Each seem comfortable with the professional assurances for the time being. But at what level would the relationship, and in my mind, conflict in interest (putting client before senior partner for instance) become intolerable?
    There will be some reciprocal arrangements where a referral to another firm is expedient and there are Codes of Practice to adhere to but I’ve found it hard to establish at what point that becomes essential. From early on, one side may delay action or recommend a wait and see policy when all along the other team could be going hell for leather in preparing their case and suddenly the former find it too late to press harder and have to jump ship to another firm with consequent duplicate efforts and costs.
    There needs to be clearer lines drawn at the earliest point, or perhaps an absolute ban as soon as a potential conflict exists such as a Trustee, say, has to declare.

    Like

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