A thing that persuades or leads someone to do something – the Dictionary definition of an "inducement" is easy to follow. The same cannot perhaps be said of the provisions of the incoming MiFID II Regulations regarding the restriction on advisers from receiving non-monetary benefits.

Regular readers of our blogs will have seen our earlier update on the FCA's key new conduct requirements arising from MiFID II and how this is likely to impact upon advisers when it is introduced in January 2018.

One of the key topics will be the impact the stricter rules as set out in MiFID II will have upon advisers' ability to accept inducements. The issue of firms accepting "excessive" inducements is clearly on the FCA's radar given their proposal in their third Consultation Paper to prohibit acceptance of hospitality benefits in their entirety apart from minor "non-monetary benefits". Some commentators have suggested that once MiFID II is up and running the "low hanging fruit" will be those firms which are falling short of the current guidance on inducements.

In broad terms under the new provisions a firm will only be permitted to receive an inducement in relation to the provision of investment advice where it is intended to improve the relevant service to a client, it will not prejudice a firm's requirement to act in the best interests of its clients and the firms will have to disclose any benefit provided.

Advisers have previously identified to the Regulator in the Consultation Response FG14/1 that there is an absence of tangible "examples of good and poor practice" in the current guidance. However, the FCA appears unwilling to provide examples of what would be an acceptable "non-monetary benefit" and instead they "consider the rules and Handbook guidance, together with our finalised guidance are enough for firms to understand our requirements".

The suggestion that the current rules provide clear guidance is perhaps undermined by a recent study that identified that of the 89 advisers asked 50% of those advisers considered the rules on inducements to be unclear.

The uncertainty regarding the permissible level of inducements is perhaps illustrated in the same recent study which showed that over a fifth of advisers rejected all hospitality events. The concern of some advisers to attend such events may create an unintended barrier for those smaller firms to grow both their professional development and their client networks in fear of breaching rules on inducements. Some respondents to the FCA's FG14/1 consultation indicated that this could also result in, "an unfair competitive advantage for those firms prepared to take a more liberal approach to their interpretation of the rules and guidance".

Advisers will need to keep a close eye on how the Regulator seeks to implement the forthcoming rules on inducements and will want to avoid becoming a soft target for falling short of the existing guidance.