Summer is approaching, so you may be invited to clients’ weddings and parties. But do you know your firm’s rules around gift giving?
Turns out, you should never offer cash gifts, say experts. And, you should only gift occasionally and nominally. The two main reasons are:
- cash can’t easily be tracked through receipts and paperwork, which could get you in trouble with compliance; and
- since you’re a professional, giving cash could appear as if you’re attempting to buy business.
So even if a top client is getting married and requests a monetary gift, stick to your firm’s rules (see “Breakdown of the rules,” below).
Read: Gifts for new retirees
Tips for giving gifts
Todd Peters’s firm has strict rules around gift-giving, so he doesn’t “give people cheques or cash for occasions such as weddings.” Peters, an independent advisor with IPC Investment Corporation in Winnipeg, says he gives gift cards instead because his firm permits that. Plus, he can expense gift cards on his income tax return; they’re easy to track via their receipts.
Still, “I have to fill in the appropriate paperwork if the value of the gift will exceed $150,” he adds. That’s the amount his compliance department considers nominal for non-monetary gifts.
As for how much to spend, “It’s the same as when [you] go to any other wedding. You decide what to spend depending on whether it’s a lavish affair or not.”
You’d do that even if a client turns into a friend or vice versa. “You always have to carry yourself as a licensed individual. You can’t treat them as a friend in some instances and a client in others. [To your firm], they’re always a client. A lot of advisors get in trouble in this area because you build relationships in this business, and it can be tough to draw the line.”
The good news, says Peters, is you have more flexibility when deciding on the type of present or gift card you want to give. He chooses gifts that are meaningful and timely. For example, “If I’m attending the wedding of a young couple that I know is buying a home, I might buy a Home Depot gift card. Or, if they’re going on a [honeymoon] to Europe, I might buy a [euro-denominated] pre-paid Visa card.”
But be wary of how often you offer gifts—Peters’ firm says once per quarter, per client, is acceptable. “And that’s a lot,” he says, adding you should only offer gifts for special occasions. Aside from holidays and major events such as weddings and anniversaries, he’ll offer small gifts to clients who give referrals. In these instances, he prefers to send thank you notes along with items or gift cards based on people’s interests (e.g., a gift card for a greenhouse if a client loves gardening), but won’t spend more than $50 on these items.
Also, even though it’s happened rarely, he’s given gifts to make up for mistakes that have cost clients, such as tech glitches or delays that have impacted transactions.
“The whole point of [gift-giving] rules is to ensure the public is protected and that you’re not going out there to buy business,” says Peters. “I’m not going to say, ‘Hey, I noticed you opened an RRSP. Here’s a gift card.’”
Breakdown of the rules
Regulators haven’t offered much guidance on how often or valuable client gifts should be, says Jonathan Heymann, president of Wychcrest Compliance Services in Toronto. But, both MFDA and IIROC have stated in multiple notices that gifts and other incentives shouldn’t prompt questions about whether you’ve created a conflict of interest. Instead, gifts should be non-monetary, of minimal value and infrequent.
So firms should draw up compliance procedures to control gifting, adds Heymann.