Spiro Paule Profile: Technology the foundation of Findex Group journey
From small beginnings in a boutique financial planning firm, Findex Group Chief Executive Officer, Spiro Paule shares the key moments of his journey in an intimate profile with Financial Standard. Highlighting his passion for technology and his belief in holistic financial advice, Mr Paule openly discusses the history of Findex and his vision for the Group’s future.
You do not go from running a team of six to 3,000 and become Australia’s largest financial advice company in the space of 15 years without a solid business strategy. Yet for Findex chief executive Spiro Paule, a self-confessed entrepreneur, the strategy was not always concrete.
Born in Greece but raised in Australia since a young child, Paule graduated from university with a Bachelor of Jurisprudence from Monash. It didn’t take much convincing for him to move industries.
“Whilst I thought I wanted to be lawyer, I ended up in the financial services industry. I thought I wanted to be a senior corporate person but in the end what I really wanted to do is start my own business and build it. It’s been successful to date and we’re not about to change it,” he says.
The Findex Group formally started as Financial Index Australia in 1987 when Paule left a corporate management role with US insurance company, Aetna.
“At the time I’d had about four or five years in the role. It was pretty senior role – I had about 200 people reporting to me at the time and was still in my 20s,” Paule explains.
“I left that to join my brother Terry to start our own business and we didn’t have any clients or assets backing us up other than the idea.”
That idea was to create an integrated index of financial services for all kinds of companies. The plan was to merge the business with accountants and a legal solicitor and create a one-stop financial services business.
“It was difficult because you’re leaving behind the security of a job and kind of live off your wits as it were, and in the early years it was much like that. It was sort of hand-to-mouth and developing a client base,” Paule says.
“Clearly we changed that strategy at some point and went beyond that. The fact was it was very much transactional, it was very much to sell something to get a reward for it, and really it wasn’t a very sound basis on which to build the business but it got us started.”
Findex began and lived through what were considered some tough years early. Australia was heading for recession following the share market crash of 1987 and the property crash that soon followed. During this time Paule and his wife had a young baby in tow and were paying a mortgage, all adding to the risks of leaving a secure job. But by the early 1990s an effective business model was generating a surplus and profit.
“The turning point for us was to use some of that profitability to start digitising our process. We were probably one of the earliest to digitise our process in 1994 by mapping all of the processes of our little business,” Paule says.
The company started collating everything- from how you turn and unlock the door and turning on the lights to how you lock up at night and everything in between.
“We wrote our manual out of that and then we started to digitise that in to our desktop that was before we had email and internet. PCs were 10 years old in offices by then. But we put our business’s processes inside there so we could have them every working day. That gave us consistency and quality, and the ability to control our intellectual property.
“I think that put us in really good stead because we’ve had this whole case of digital innovation in our business which has allowed us to grow without falling over.”
Technology has been a passion of Paule’s throughout and it’s an area where he likes to take the lead.
Findex’s recent acquisitions of Crowe Horwath and Centric Wealth catapulted to prominence in the financial services industry. Paule says the way forward must be technology.
Crowe Horwath suffered a net loss after tax of $88.2 million, on sales of $394 million, in financial year 2014.
Eighteen partners also left during that period.
Findex Group bought the struggling company for $200 million in January this year with a backing from US private equity firm KKR & Co. Premerger, Findex alone generated $100 million in income with 300 staff. Crowe earns close to $400 million through 2,600 staff.
“People don’t realise in professional services that technology is going to be a huge disruptor. It already is but I’m not sure that people in our game understand it and where the market’s going.
“We’ll get away from commoditising or digitising services like tax returns and financial statements, which is the stuff computers do far better than people.”
His belief is to move up the value chain with more holistic, personal advice and goals based advice around helping people on their financial journey.
“So unless we take it [technology] to a higher plane and make it more complex and start applying it to [clients’] specific objectives around their affairs and show them how to use it to become better then I think we’re in deep danger I think all knowledge industries and professional services are in deep danger,” Paule says.
It is no secret there has been much discussion about changes to the financial services industry, namely the Trowbridge Report and FSI, potentially holding up the industry from getting back to core business.
“We’ve had a lot of regulation through FoFA already in the last three or four years and we’ve adopted that.
“I think to begin with we were FoFA friendly, so it wasn’t any stretch for us to be FoFA compliant,” Paule says.
He adds that the findings of the Trowbridge report are not particularly surprising.
“The industry has always been built on a flawed model as it’s been built by the insurance industry themselves. They built it on the system of high commissions and high commissions create behaviour that’s not always in the interests of the customer.
“It was very much a reform we needed to have to create the right behaviour and to make sure that clients’ interests are best looked after. We need fair remuneration for that work and make sure we’re not churning business for the benefit of the distributor but making sure it’s done for the client first.
“On the remuneration side of it I’d be happy to have a fee-for-service model and no commission whatsoever.”
Insurance is potentially the next sector Paule will weave Findex into but his recent tour of 40 Crowe Horwath offices in 40 days sent a clear message about reacting to a changing environment.
“The technology revolution, clearly they [Crowe] haven’t got ahead of the curve like we have and that’s why their performance has suffered but I’m here to help them change that,” Paule says, but he adds that he is excited about the extra market share the acquisition gives Findex, particularly in the managed accounts space.