Hidden Commission & the Myth of Free Venue Find

HIDDENcommission & the MYTH of Free Venue Find

Thank you FSA (Financial Services Authority) for launching the ‘Retail Distribution Review” (RDR) on 31st December 2011. The RDR consists of a set of guidelines which aims to enhance consumer trust in the pricing of financial advice.  Anyone who seeks financial advice will feel its impact, in a positive way.  The RDR is a key part of the FSA’s consumer protection strategy – and it’s worth reading.

Consequently, I feel supported as a consumer and proud of YOURgb’s pricing methodology, of which makes costing transparent, and adds value to the services I offer.  I would like to expel the myth of the recognised event service “Free Venue Find” and tell you why I agree with the FSA RDR. I believe that the Event Industry should follow in the footsteps of the FSA and I hope that in time, it will.

The FSA has drawn up these guidelines to protect its consumers. Amongst other things, this review is in place to help ensure that its consumers, seeking financial advice, are sheltered from the minefield of commission.

When Mrs Bloggs visits her Financial Advisor in 2012, she is now safe in the knowledge that the recommendations being given to her are based on genuine consideration and professional opinion. Her financial advice, in 2012, is no longer influenced by an evil temptress  - hidden commission.

When it comes to costs the FSA, like YOURgb, is ensuring its advisors now strip off and bare all. 

And I say “Hoorah!” to that, because:

• Consumers are now offered a transparent and fair charging system for the advice they receive.

• Consumers are clear about the service they receive.

• Advisory firms must explicitly disclose and separately charge clients for their services.

• Advisory firms must clearly describe their services.

• Individual advisers must adhere to consistent professional standards, including a code of ethics.

In my opinion, consumers who use professional venue finders/agencies/event managers should ask for, and expect, this same protection.

I also feel that this review highlights the deficiencies within the majority of event management degrees. There appears to be a lack of fundamental training, specifically in Costing Ethics and Professional Standards. At present an event management graduate will not learn how events are costed until they settle, bright eyed and bushy-tailed, into employment. This is because the costing procedures vary considerably across companies.

There are many reasons why I believe that the FSA want transparent and clear costing methods for its consumers, namely because hidden commission can:

• Produce unfair charging, confusion and lack of clarity regarding the service received versus how much has been paid for it.

• Hide costs from the end client, and inflate them.

• Sway recommendations away from the most suitable option and towards the option that offers the best ‘kick back’.

This is why I believe that ‘Free Venue Find’ is a myth, as it costs you more than you think. The end client may not have to physically part with cash to ask a ‘free venue finder’ to research and propose several options for their event, however it will be indirectly paid for. What ‘venue finders’ offer is a service, an excellent one. They do the leg work, save end clients’ time, allow them to review several event options clearly, provide professional advice and as such their service should be valued and paid for. At present it is often advertised as ‘free’ and is paid for via venue/supplier commission.

These venues/suppliers simply offer commission as an incentive to secure the business. The commissionable percentages offered to the venue finder/agent/event manager are often unpredictable and left undisclosed to the end client. These commissionable percentages change throughout the year and often fluctuate depending on the relationship held between the venue/supplier and the negotiating venue finder/agent/event manager. Commissionable rates offered to venue finders/agents/event managers can be higher than the rates available directly. Commission can also put hotels/suppliers in impractical situations. They may be forced to compete for business through the commissionable percentage they will offer, rather than the service they can provide.

The agreement may occasionally result in the venue finder/agent/event manager selling a venue more convincingly to their client (the end client) due to its commissionable value, rather than its actual suitability for the event in question. In large events the difference of 1% less commission can result in a vast loss of potential earnings for the venue finder/agent/event manager. Their service has value, and sadly in many cases the worth of this service exceeds the sum of the commission they receive.

Quite simply, if one venue was offering the Venue Finder 10% commission, and another venue was offering 8% commission.... which venue would they recommend?

Commission can also immediately put more expensive venues/suppliers in a better ‘kick back’ area. This is simply due to the fact that the more money spent, the more lucrative the commission. In turn this can result in ‘cheaper’ venues/suppliers having to offer a higher commissionable percentage than the ‘expensive’ venues/suppliers, in an effort to win business.

In my view the concealed world of commission is unfair, not only to the end client, but also to the service provider (venue finders/agencies/event managers) and the venues/suppliers tendering for the business. If commission was explicitly disclosed to the end client, and services were transparently and separately valued, I believe it would have a positive influence on all parties involved.

The Event Industry services have real value; we should follow in the footsteps of the FSA and cost with absolute clarity, transparency and honesty. We should unashamedly put the price, and the emphasis, on the services we offer.

Gilly Bain - www.YOURgb.co.uk