FPA/AFA – merger a preferable outcome
EDITORIAL
The best interests of financial advisers as part of an evolving profession will be served if the merger of the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) proceeds.
Objectively, an orderly merger is preferable to the slow demise and exit of one of the two organisations.
There are around 15,800 people registered on the Financial Adviser Register (FAR) of whom around 95% are actively delivering advice in one form or another. This is almost half the number of a decade ago and not nearly enough to financially sustain multiple representative organisations.
If financial advisers wish to compare themselves to other professionals and other professional representative organisations they can look to the Australian Medical Association (AMA) which boasts around 30,000 members and revenue of close to $22 million.
Then, too, there is major accounting body, CPA Australia which lays claim to 170,826 members and revenue of $162 million, according to its 2021 accounts.
Running a professional association is both costly and complex and any pragmatic assessment of the balance sheets of the FPA and AFA tells you that the FPA has more members and deeper pockets. On that basis, the agreed terms of the merger represent a dignified outcome for the AFA which has done its best in difficult circumstances.
In the end, financial advisers need a well-resourced and capable professional body capable of strongly representing their interests in Canberra at the same time as delivering the professional services and support that will enhance an evolving profession including, eventually, an element of further self-regulation.
The reality is, of course, that the FPA and the AFA have spent much of the past half-decade working more closely together to deliver a more united voice to Canberra and that many of the differences of the past evaporated in line with the decline in overall adviser numbers, largely as a result of the Life Insurance Framework (LIF) and the Financial Adviser Standards and Ethics Authority (FASEA) regime.
If the requisite number of FPA and AFA members vote in favour of a merger later this month then it is likely that a number of advisers may choose to head for the exit and join the Association of Independently Owned Financial Professionals (AIOFP). That has always been their option.
The AIOFP’s executive director, Peter Johnston has always charted a course very different to that of the FPA and AFA and will undoubtedly continue to do so.
In the end, financial advisers who are members of the FPA and AFA must make a choice but the balance sheets speak for themselves.
Good coverage of the issue and comparisons with other professions. Incidentally, does anyone know/wonder how the AIOFP manages to survive with just a few hundred members. I would love to see their financial statements to see where the money comes from.
Agree with your sentiment Mike, however there is another crucial element to being an effective representative body besides resources and capability. It’s credibility.
The FPA’s success in lobbying on behalf of members’ interests has been abysmal. But I don’t think it’s due to a lack of resources or capability. I’ve seen a few of FPA’s lobbyists in action over the years, and they all seem like very capable, hard working people. But they have all been hamstrung by FPA’s credibility problems.
The FPA espouses professionalism, education, and independence, but their own actions are inconsistent with this. They allow large product companies to pay for their employee’s membership in bulk, which creates the perception those large companies have financial leverage over FPA policy making. They also allow defacto corporate membership and influence via the so called “Professional Practice” program. And they persist in upholding the greatest education rort in financial advice, grandfathered CFPs.
All these things undermine FPA’s credibility, and mean that much of their lobbying resources are wasted. If the merger vote is successful, the new association must immediately act to address credibility issues by getting rid of these hypocritical practices that shouldn’t exist in a true professional association.
I think the big concern is how much the FPA currently spends on employee and director remuneration – 5 million per annum, which is more than two thirds of their annual income. There is a perception that the FPA has been ineffectual in delivering its stated outcomes, and that there is a focus on diddling about, spending the members money, while people reap exorbitant salaries to sit around doing not much all year.
Now that the gravy train is delivering less membership fees, they want to absorb the AFA, and I’d rather see them address the dozens of employees who squander our money on ridiculous, unnecessary, self absorbed largesse.
Agreed. A quick win on all counts would be to ditch the corporate membership “Professional Practice” program, and all the FPA staff associated with administering it. A professional association should not have corporate members, regardless of how much revenue it brings in.