AFA’s $273,135 operating loss
The financial imperative behind the proposed merger of the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA) has been driven home by the AFA’s latest annual report revealing an organisation with an eroding balance sheet reflecting declining adviser numbers.
The AFA annual report reveals an operating loss of $273,135 and notes that this represented an improvement of $94,655 from the previous financial year. The organisation reported a net loss of $113,924.
The AFA’s operating loss compares to the $1.2 million deficit reported by the Financial Planning Association (FPA) for last financial year and news of the two organisations’ financial situation comes just ahead of their memberships being asked to vote to endorse a merger.
The dominance of the FPA in such a merger is explained by the fact that notwithstanding its recent deficit, it has a significantly larger membership and around $12 million in assets, well above those held by the AFA.
Seeking to explain the FPA’s position, its chief executive, Sarah Abood acknowledged the deficit but said that, overall, the association remained in a strong financial position with substantial reserves and net assets of $12 million.
“Looking at the underlying contributors to the deficit, revenue recorded for the year was down by almost 30% from the previous financial year, to $7.26m. There were three key reasons for this:
- COVID had a double-whammy impact on 2021/22: government support payments stopped (which had totalled almost $900k in the previous year), and we postponed many events – in particular, Congress – which would normally add revenue, while we still incurred much of the cost of this postponed event.
- The overall profession has been in structural decline, with adviser numbers reducing by over 14% in the year. While the FPA’s membership reduced by less (just over 7%), it still reduced, and membership subscriptions were commensurately down.
- Revenue from investments was also substantially down due to falls in markets, moving from positive revenue of almost $900k in the previous year, to a loss of $212k in 2021/22.
“Investment markets and COVID are of course beyond our control, and events are back strongly this year. We are also optimistic that the substantial reductions in adviser numbers of recent years will start to turn around in the current financial year, and that after the exam ‘cliff’ we saw in September 2022 with adviser numbers dropping to under 16,000, our profession will begin to grow again this year.
“Turning to expenses, overall these were down slightly (0.5%) on the previous year. There was a larger fall in operational expenses, however these were offset by a key one-off technology spend. This was a major upgrade to the FPA’s computer systems, to improve the member experience and security. It included a replacement of the FPA’s CRM, financial and other software systems. While fully expensed in the year at $563k in line with accounting policies, we expect these investments to deliver improvements for members over many years to come.”
This is what happens when you prioritise your own role (AFA and FPA) above that of the people (advisers) you’re supposed to represent.
Frydenberg learn’t this lesson himself recently.
Advisers will vote with their feet and leave…as appears to be the case in both these organisations. Yes, numbers have also dropped off because of ever increasing compliance, regulators who don’t understand what we really do (yes, we largely do not sell products but offer services (which is why it’s called fee for service, not fee for product), exams upon exams that we all have to pass, paying for ASIC to regulate us, paying for product failures (that we had nothing to do with), mental stress associated with all of these, etc…while these organisations sat by and agreed with everything Government imposed on us.
The recent ‘adviser’ focus is so reminiscent of political posturing designed to make us believe they have seen the light. I just don’t believe it. The light was shining brightly as all advisers begged our organisations to help before the horse bolted from the gates. Now it’s all just too little too late.
If they are losing money, maybe they should go see a good financial planner.
AFA sold us out years ago – they have been instrumental in the collapse of what has been an incredible industry – supporting poor and biased policy disadvantageous to it’s members. Now their precious membership dollars are drying up – wow… you guy’s didn’t see that train wreck unfolding?