The current work reports an unprecedented multifunctional material with optical activity and a modified magnetic response by a unique combination of doping with P and Fe into the spinel LiMn2O4. Through inductively coupled plasma – optical emission spectroscopy, X-ray absorption near-edge spectroscopy, X-ray diffraction and scanning transmission electron microscopy, the chemical composition, oxidation state and the crystalline structure are determined. Solid-state UV-Vis spectroscopy, magnetic susceptibility and electronic conductivity reveal the critical importance of the interaction between iron and phosphorus when simultaneously doping the crystalline structure of LiMn2O4. The presence of Fe and P considerably increases charge carrier concentration as a mechanism for enhancing electronic conductivity. Fe and P doping also creates Fe-Fe spin interactions that allow double electron optical excitations. This opens a pathway to create multifunctional materials for light-assisted charging lithium-ion batteries. P doping also induces the formation of magnetic clusters arising from the Fe-O-Fe, Fe-O-Mn and Mn-O-Mn spin exchange interactions. The magnetic response of the materials is strongly influenced by the relative amount of Fe in octahedral or tetrahedral sites of the spinel structure. Such ferrimagnetic behaviour has not been reported before LiMn2O4 doped with Fe or P separately. The potential applicability of this newly identified magnetic feature was demonstrated by a significant capacity gain when a lithium-ion cell is exposed to a static external magnetic field.