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.
Same boat
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.
