The Spectrum IFA Group

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With Care, You Prosper

Michael LodhiCEO The Spectrum IFA Group

Board Member of FECIFFédération Européenne des Conseils et

Intermédiaires FinanciersVice Chairman FEIFA

Federation of European IndependentFinancial Advisers

The Future of IFAS

Why IFAs are now more importantthan ever for the European

Consumer

What is an IFA?• Independent – wide choice of product• Financial Adviser• Investment Adviser• Financial Planner• Insurance Broker• Distributor of Financial Products• SME (Small or Medium Enterprise)

New EU & National Regulation• Does the European Commission understand

the impact of more regulation on SMEs?• The cost of regulation and of changes to

business models• The time spent• Do National Politicians?• Do European Politicians?

New EU & National Regulation• Do the Commission & Politicians understand

the importance of European Citizens investingfor retirement?

• Any reduction in advice and services willimpact EU member state’s budgets.

• Citizens will need more financial support inretirement from those budgets.

• Citizens living longer = costing more!

The Consumer• Are they proactive?

– Retirement Planning• DIY investing?

– 1990’s to March 2000 – Day traders• Education?

– What next? DIY Doctors?

UK Financial Services Authority (FSA)study of UK Bank advice (mystery shopper)

• Complex risk profiling resulting in poor riskassessments and client understanding

• Failure to consider client needs andcircumstances – poor quality fact finding

• Failure to consider client’s investmenttimeframe

* Source – Seven Deadly Sins of Bank Advice

UK Financial Services Authority (FSA)study of Bank advice (mystery shopper)

• Failure to give clients correct information(unacceptable in 42% of cases)

• Inappropriate use of Sales Aids• Inappropriate use of Financial Incentives

for sales staff• Weakness in internal controls

Result of UK RDR – Commission Ban• Banks – Many closing advisory serviceIncreased Training Costs - QualificationsIncreased Regulatory Costs & FinesIncreased Internal Compliance Costs• ConsumersWill the majority pay for advice? NoWill they get advice? NoWill they rely on the state for Pensions? YesCan the state afford to pay? NO

Initial costs for an IFA SME• Cost of qualifications and continuous

professional development• Cost of Licensing and Regulation• Cost of Professional Indemnity Insurance• Market and Product research• Cost of Client Acquisition• Who Pays?

Quality IFAs & Financial Planners• Know and Understand clients• Understand Client’s goals and objectives• Understand Client’s attitude to risk• Truly match Client’s needs to solution(s)• Explain all costs and penalties in detail• Involve clients in the decision• See clients regularly to review

Can fee based advice work?• Consultation and Planning Report, should

the client pay? Why not a free “test drive”?• Initial Fees will restrict consumer choice• Plan implementation and transactions• On-going monitoring of plans• Personal After Sales Service• Can an IFA make a living?

The Future• Banks withdrawing from advice market

– Will “product sell” without advice• Product providers looking outside EU

– Withdrawing due to lack of distribution– Or “product sell”

• Few new IFAs or start up businesses• Citizens need IFAs for proactivity & choice

The Future• Independent advice & consumer choice

– Dying out• IFAs & Financial Services SMEs

– A dying breed• Regulators & Legislators

– Nothing to regulate• Result

– No growth and more budgetary stress

The Spectrum IFA Group

Amsterdam Luxembourg Lausanne Paris Cote d’AzurBarcelona Madrid Costa Blanca Costa del Sol Rome

With Care, You Prosper