Could it ever be allowed for auctioneers to knock down a property below the reserve price and then negotiate a sale with that bidder? Strettons auctioneer Philip Waterfield posed this question here last week and correctly went on to say that this would not be regarded as “cricket” or, in my words, would be “unprofessional conduct”.
Professionalism must be at the heart of an auctioneers’ work and indeed it is what should give RICS auctioneers an advantage in the market.
The professional standards that RICS professionals uphold are vital to build trust with clients, markets and the general public, as is our role in upholding them. It is therefore important for RICS to assess standards of professionalism and what this means for the reputation and commercial value of RICS.
This was the theme for my session at the RICS 2017 Real Estate Auctioneering Conference.
What professionalism means
RICS recently commissioned Ipsos MORI to research what “professionalism” means to RICS’s different stakeholders. It was a global study with feedback from members, clients and the public.
Although the study looked at the profession as a whole, auctioneers should reflect on whether the findings could, or do, apply to their sector and, if so, what should RICS be doing about it. In the past, auctioneers in various parts of the world have been questioned about unethical behaviour.
I am not suggesting that the vast majority of sales conducted by auctioneers are handled in anything but an ethical, honest, proper and fair manner; just as most live bid calling by auctioneers is handled in an ethical, honest, proper and fair manner. However, are we convinced that everything is rosy – or could professionalism be questioned?
The Ipsos MORI research showed that, overall, RICS professionals are seen to act professionally and have a similar status to accountants, engineers and other professions, with a good reputation both in and outside the UK. However, there is no guarantee this will always be the case, so it is important to be vigilant about future risks. The question is, “what could fundamentally undermine the professional reputation of RICS members”?
Ipsos MORI highlighted the following potential risks:
■ Commercial pressures: The need to deliver for clients with ever-tighter time pressures and budgets.
■ The rise of multidisciplinary global consultancy practices: This brings with it a tougher commercial environment and risk of conflicts of interest.
■ The range of services provided by RICS professionals: These can often change from being first qualified. The challenge is to make sure individuals have the right skills.
■ The limits of competence: Examples include being aware of when it is appropriate to send junior staff on jobs, and when more supervision is needed.
■ Technology is making services more widely available: relying on technology means we can lose professional judgment.
■ Global expansion: As RICS develops globally, it can be difficult to maintain standards across different cultures – we need to be globally and locally relevant at the same time.
■ Continuing professional development: There needs to be a clearer understanding and monitoring of CPD requirements to help RICS professionals keep learning throughout their careers.
Following this research, at a global level, RICS intends to produce new professional statements on professionalism, including competence, ethics and conduct, and on major areas of risk including clients’ money, money laundering, and data handling/cybercrime, which will, after due consultation, become mandatory for all members and firms. These will sit alongside the new professional statement on conflicts of interest, published in March.
For the auction sector, we have completed consulting on an updated professional statement for auctioneers selling real estate. Responses will now be reviewed and the final document published in the coming months.
However, having a set of standards is only one side of the equation. On the other is the need for market adoption and effective regulation.
The value of being regulated is the increased confidence that the public derives from knowing that they are dealing with a professional who will work to defined standards. In order to maintain that value, RICS seeks to enforce those standards in a way that is proportionate, risk based and focused on the right regulatory outcomes.
RICS receives only a small number of complaints from the public about real estate auctioneering, which is good news. However, firms that undertake this work will often be exposed to two of the regulatory risks on which we focus.
The first is ensuring that clients’ money is held safely. We pro-actively monitor this area of risk, with accountants visiting firms to monitor their compliance with best practice. Our accountants have also developed a webinar, available through our website.
The other area of risk to which real estate auctioneers are exposed is money laundering.
The new regulations implementing the Fourth Money Laundering Directive, which came into force on 26 June, place additional requirements on estate agencies to document and risk assess their procedures and training for staff on performing due diligence on clients and prospective clients, and reporting suspicious activity.
Although HMRC is the regulator for firms in the estate agency sector for money laundering, RICS can take disciplinary action for failures to have and follow the correct procedures, and we will be publishing a new professional statement in this area in the future.
Peter Bolton-King is global property standards director at RICS