John Spiers comes across as one of the good guys of the financial services industry. He set up Bestinvest in 1986, and helped turn it into the giant it is today.
He was chief executive until 2007, when the company was taken over by private equity group 3i, then came back in 2008 to help the firm out, and left again in 2010.
He was until recently a non-executive director, but the memory of his executive departure – both times – is still fresh.
He said: “It was very, very upsetting, not least in the way in which it was done. I was told that my services were no longer required. I’ve been associated with the firm since 1986 – I have very strong links with the staff.”
Now, launching his new business, EQ Investors – the EQ stands for emotional quotient – he has had nothing to do with Bestinvest since its merger with Tilney, to form Tilney Bestinvest. Of this merger he will only say: “When you put together two businesses of broadly equal size and different cultures it would be surprising if there weren’t some challenges for management.”
This latest deal was backed by private equity as well, and experience of this kind of backer has left a bad taste for Mr Spiers in terms of where the industry is going, as more and more firms get bought up.
He said: “These external shareholders are motivated by reasonably short-term financial gain. The people who are delivering the advice and services to the clients are no longer in control of the strategy of the firms.
“That can lead to significant conflicts of interest. It means the shareholders are focused on maximising short-term growth, and it makes it very difficult to make a long-term investment and keep up service standards to clients.
“If you look after 100 clients, a private equity firm will say, ‘Why don’t you look after 150 clients?’ After a while, the service standards slip, and it takes a long time to play out. But after a while the client realises they’re not getting the services that they need.
He added: “I think it’s widespread and growing.”
Mr Spiers has decided to strike out again with the new business, which he has bought with his own money from Truestone Asset Management.
He has created EQ Wealth and EQ Direct out of the wealth management business of Truestone, which wanted to focus on the product side of the company. The idea is that EQ will be run on an ethical basis, without the pressures of external shareholders, which is owned by the staff.
Mr Spiers said: “We don’t have external shareholders, and never will have; and we are not going to sell the business – we don’t have a requirement to sell the business at some point in the future. It’s about thinking long-term.”
What this means, said Mr Spiers, is that the company can take all sorts of decisions about its future direction, if it is in the best interests of the client, as long as it does not adversely affect the running of the business.