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‘Next 10 years will see shift from XO back to advice’

John Spiers, CEO of EQ Investors, tells ABR editor Rob Kingsbury that he believes the next 10 years will see savers move away from execution-only services and back to seeking advice and how he’s positioned EQ Investors to benefit from that trend

John Spiers’ return to the financial advisory market was predicated, he says, on his strong belief that increasingly people will want advice and be willing to pay for it.

After two decades where growth in the investment has been driven by execution-only service, primarily because they offered attractive pricing, he says transparent charges under RDR will see savers question the value of XO services when they are making all the decisions themselves. This will be strengthened, he says, by the growing complexity around pension freedoms and the fact that “we’re in a new era where it’s never been so hard to make money.”

Spiers says: “It seemed to me that what most clients would be looking for was a discretionary managed facility for their savings.

“If you look at other walks of life, having a car serviced, visiting the dentist, etc, people consider that they are complicated things to do themselves and they are prepared to pay for them.

“In the same way, the majority of people are not comfortable making their own savings and investment decisions without access to advice. It’s too important a subject and the variables are too complicated.

“Over the next 10 years or more
there will be a shift back to discretionary advice”

“My fundamental view is that over the next 10 years or more there will be a shift back to discretionary advice. This is not just for HNWs – now we have model portfolios available for modest sums of money the barrier that said you had to have £100,000s to use a discretionary solution is gone. When people get a chance to think about that, I think they’ll say ‘that’s what I want’.”

Spiers is not just aiming at investors wanting a full discretionary service; he both sees and has seized the opportunity to position EQ Investors to serve a range of savers. His thinking is long-term, believing auto enrolment (AE) also will begin bringing more people into the advised space.

“What’s happening around AE is that it is forcing people to invest for the first time in their lives. People are beginning to ask questions and as a firm we’re getting requests from company’s to go in and provide financial education to their employees.

“So we’re beginning to get people who are starting to dip their toe in the water through AE who are thinking they should be looking at an ISA as well. That is going to lead to a lot of new people coming into the market,” Spiers says.

Positioning across the advised market

Hence, since buying the financial planning arm of Truestone Asset Management in October 2014 and changing the name to EQ Investors Spiers has been has positioning the firm to taking advantage of the opportunities ahead.

The firm now offers a range of services for private clients:

• EQ Bespoke, a full discretionary service for HNWS (+£750,000 in assets)

• EQ Wealth, combining investment management with financial planning (+£300,000)

• Simply EQ, an online service offering telephone advice, aimed at lower end investors, launched in November 2015 (£10,000 lump sum and/or £500.00 per month).

A service “for over 90%
of the savers
and investors out there”

The firm is now geared to offer a service “for over 90% of the savers and investors out there,” Spiers says. “I’ve never only wanted to offer a service that is of interest to rich people. That’s why we wanted to launch Simply EQ as well as at the top end EQ Bespoke. We now have the full range of services and we’re very pleased with that.”

The firm has also set out stalls giving advice to businesses and charities.

We won’t pigeonhole clients

Spiers stresses, however, they are not going to pigeonhole wealthy clients into the bespoke service.

“If a client comes to us with £1million and wants to use Simply EQ, because it offers low cost portfolios, we’re not going to try to push them into the bespoke service, even though they are eligible for it. It’s about giving the customer what they want.”

This could see the firm make less money, he admits, “but we’re in this game for the long term and we want to give people a service they are paying a fair price for and with which they are comfortable.”

He continues: “We don’t have any ambition to be the biggest in the business – our aim is to be the best. That gives us a completely different mindset to some firms that are owned by private equity companies, for example, where there is very clearly a game plan to make as much money as possible over a relatively short timescale.

“We don’t have those pressures, we’re trying to run a great business. We’re not looking to sell, we can look long term and try to keep the business at a decent size,” he says.

So what is the optimal size?

Spiers argues that adviser firms don’t have to grow huge to be successful.

The firm has 55 staff at the moment and Spiers does not intend to take the headcount over 75, which has a lot to do with the culture of the firm and the kind of business he wants to run.

 ‘Not while I’m CEO’

“There is a lot of evidence that organisations change over that size – they can become cliquey. Certainly it won’t happen while I’m CEO,” he says. “Around 75 people will take us up to £2bn – and that’s a decent size.”

The arguments that there are huge benefits to seeking scale have been overstated he believes. “You might be able to get slightly better deals with some fund managers if you’ve got more money; you can spread your investment research and your marketing budget over a bigger base and your IT but as the business gets bigger it tends to become more complicated.

“As far as the clients are concerned there are quite a few disadvantages. Most clients like to deal on a person-to-person basis with an individual. So, many are happier dealing with someone working for a relatively small organisation who has a decent say in what’s going on there, rather than with someone who is just a number on a payroll.

“I’m not convinced by the scale argument. As long as you’ve got really good systems and really good people I think you can make it work at the size we’re at.”

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