The full spectrum – an interview with Advisor.com
With a dozen offices dotted around Western Europe and a flourishing profit ownership scheme under its belt, Spectrum IFA Group certainly shows no signs of slowing down as it now enters into its 12th year.
The firm’s founders might continually roam between six countries, but the UK appears to be at the heart of the business, with the vast majority of Spectrum’s advisers and clients born and bred in the British Isles. Speaking to International Adviser from France, one of the firm’s three founders, Michael Lodhi, mentions he is holding out for Scotsman Andy Murray to perform well this summer, particularly as the warm weather is said to be the prime climate for the tennis player. Climate, however, seems to be no obstacle for Spectrum, having survived the global financial crisis while maintaining a solid number of IFAs, many of whom have been with the firm for an ample number of years.
The 45 advisers might be peppered around the Continent, working with clients based in France, Spain, Luxembourg, the Netherlands, Portugal, and Switzerland, yet Lodhi maintains that this is a close-knit army of financial planners. “There is a certain atmosphere and a strong bond between the advisers within Spectrum and that’s very clear. Obviously that’s a good thing, but what’s more important is that we do our jobs properly,” he says. “We are very careful with how we guide clients with their investments and their financial planning; if we do that correctly and properly then our clients will do well and be able to sleep at night, as will our advisers.”
The core members of the company – including founders Anne Ollerenshaw, Michael Lodhi, and the now semi-retired David Holmes – have known each other for over a decade, but no doubt Spectrum’s profit share system also plays a key role in its collaborative vibe, particularly as the last four years have seen the firm build up enough reserves to ensure its advisers all get a substantial piece of the pie.
By insisting that IFAs use daily-traded EU-compliant UCITS funds from large brands, the firm also avoids some of the issues, like suspended funds, which brokers can frequently be faced with. But Spectrum is not only strict with the underlying investments advisers use within tax wrappers. “Our criteria for selecting advisers is quite tough and that is why we have grown nice and steadily,” says Lodhi.
What is notable is that most of Spectrum’s advisers are in the same boat as their clients, living and working as expatriates. “We seem to have built the business partly on the virtue of the fact that our advisers are expats who are living locally in these areas themselves,” he says, before emphasising that financial advice is still very much about the relationship between an adviser and their client. “Though behind the scenes the IT side can be very valuable and helpful, people buy people, and I think the personal service and face-to-face meetings with an adviser remain very important in our market.” “If we hear criticisms of other financial institutions, it’s usually because the client has gone into the bank to ask for some advice and they want it to be like the old days where you went in to see your bank manager.
The banks obviously don’t do that anymore, but the financial advisory business is still there to provide that kind of hand-holding and personal level of service. “I believe that makes good business sense for the adviser because the closer you are to the client the more likely you are to do business with them,” says Lodhi. Local banks are the firm’s biggest competitor, but far from being daunted by rival businesses, Lodhi acknowledges that competition is healthy, and in fact the multi-currency tax wrappers the company offers are more suited to the niche expat market Spectrum serves.
Not better or worse
Despite the abundance of regulatory changes around the world forcing firms to restructure their remuneration models, Europe has not yet implemented any new RDR-like changes. Meanwhile, Lodhi has no reservations about his advisers using a commission-based model to receive payment. “It is not better or worse for the clients either way,” he says, comparing a commission-based structure to those firms which receive payment through fees. “I have looked at some UK IFAs and worked out what the bottom-line cost for the clients is going to be over a five to 10-year period and there is nothing much in it. It’s just another way of getting paid. “Clients look at the bottom-line cost and they also look at the level of service they are going to get. That’s certainly important to them, and we make sure we are transparent with how much everything costs when we sit down with clients.”
Prepared for change
Though the firm’s founders have not yet been tempted to take the plunge and move towards a fee-based payment model, that’s not to say Lodhi and Ollerenshaw are not keeping an eye on the ball and their minds open to changes. “You never know what these regulators and politicians are going to do until the time comes,” he says. “Obviously we are aware of various changes coming out of Brussels and in the future we might change our business model.
We have certainly been thinking about it and how we would do it. “But at the moment the regulations haven’t changed, so we will just have to wait and see and be prepared as best we can for any changes we think are coming.” One of the ways Spectrum keeps up-to-date with these changes is through its membership with associations like the Federation of European IFAs (FEIFA) and the European Federation of Financial Advisers and Financial Intermediaries (FECIF), which help to shine a light on any issues in the industry, while also giving firms the opportunity to voice concerns.
One of the biggest bugbears for Lodhi is the lack of fresh products in the market, particularly tax wrappers which are an integral part of Spectrum’s business. “All of the wrappers are quite similar and, having been in the European advisory industry for 24 years, there has been nothing much new out there,” he says. “There needs to be change in respect of some product structures, particularly in the area of regular savings. “The providers know they need to change, and we are just hoping this change comes sooner rather than later.”
But one thing Lodhi hopes won’t come to fruition is a decision by the UK to cut ties with the European Union, a decision which is looming on the horizon as the British Government plans the date for a referendum. “Some of our clients do express their concerns about the UK’s membership with the EU. It’s definitely a worry for people living and working in Europe who are British, of which there are substantial numbers. “Having lived in Western Europe for a long time I personally feel like a European, and I think it would be very sad if the UK did leave the EU.”
The striking thing about Spectrum is the firm’s resounding focus on building and nurturing relationships. The term ‘family’ has often been used by those outside the business to describe the connection between its IFAs, and though Spectrum’s offices might be miles apart, it’s this European togetherness which is rooted in the way its advisers do business.