Supplementary memorandum by Arlingclose
(LAI 09E)
Arlingclose believes that local authorities
should be confident about the independence and integrity of the
advice that they receive from their treasury management advisers.
Arlingclose has developed a business model that assures its clients
of this independence, free from conflicts of interest.
Arlingclose's treasury advisory fees are clear
and unambiguous. Arlingclose avoids conflicts of interest by deliberately
not taking fees from brokers or financial institutions—its
treasury advisory fees are paid by clients for advice and for
advice only. Arlingclose's founding partners consciously took
the decision to develop this business model after having worked
in the industry for many years, observing practices which they
did not and still do not believe are in local authority clients'
best interests.
Arlingclose clearly states in its tender documents
that: "In contrast with other providers, our definition of
independence is that we have no commission sharing relationships
with money brokers, investment counterparties and fund managers.
Fees are earned solely from independent treasury advice and there
are no conflicts of interest. We believe this is the only way
to ensure best advice" so that from the very beginning of
its relationships with clients, they are clear about the level
and kinds of services they will receive from Arlingclose.
Since Arlingclose developed its treasury advisory
services in 2004 there have been occasions when it has been
approached by financial institutions with offers to pay Arlingclose
fees on a range of investment and debt products. These institutions
have offered to pay Arlingclose a fee of between two and five
basis points. On each occasion Arlingclose has declined these
offers in order to demonstrably maintain its independence. In
Arlingclose's opinion and experience, third party relationships
and transactions can be poorly disclosed in Standard Terms of
Business (STOB), meaning that local authority clients are not
fully aware of the scale of commissions that can be obtained.
Nor are clients aware that commissions received as a result of
these kinds of arrangements can easily exceed the fees that are
charged by the treasury management advisers to their clients.
The decision to run a business model that precludes
fees obtained from third parties restricts Arlingclose's income
stream solely to that received from its clients. This means that
fees are often higher than some of Arlingclose's competitors.
The advantage of this for local authority clients is the assurance
that Arlingclose's advice comes with an explicit guarantee of
independence.
Arlingclose is committed to delivering high
quality independent advice to its clients, free from any potential
or perception of a conflict of interest. It is unique in this
regard and is alone in offering its clients this clarity of commitment
and service.
18 March 2009
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