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The Association of Independently Owned Financial Planners’ (AIOFP’s) status as an industry association is being questioned as it moves to establish an investment administration service that could deliver its directors substantial financial benefits.
The AIOFP is in the process of reviving its member-owned investment platform Personal Choice Management (PCM). While AIOFP executive director Peter Johnston said the association’s members would own the platform, he also acknowledged that there was an unapproved proposal for the AIOFP to have a 2 per cent shareholding in the platform that would “assist [the AIOFP’s] funding and possibly create a bonus pool for management”.
Johnston has previously stated that the association has a commitment of $20 billion from its members to support the platform, of which a 2 per cent shareholding would equate to $400 million.
Ownership of a product such as PCM is common among dealer groups, but not among industry associations. Another AIOFP document stated that the AIOFP does not have an Australian Financial Services Licence and “does not want one for political and logistical purposes”.
Last week Johnston said the AIOFP as an association had no commercial relationship with PCM in its current form. As Johnston pointed out, associations don’t pay income tax if they source their income solely from sponsorship and member fees.
“That is why commercial entities like PCM exist and they eventually sponsor the AIOFP after it starts generating revenue.”
Scrutiny of the AIOFP has increased as a result of some members’ exposure to the now defunct Astarra Strategic Fund, formerly issued by Trio Capital (previously known as Astarra Capital). In response to a series of questions from Money Management, Johnston confirmed that AIOFP members had received volume rebates from Astarra, but that the association received “no clip” of the rebate payments.
He did, however, confirm that the AIOFP received a payment from Astarra for the manager to present at an AIOFP conference, at which Astarra was a ‘gold’ sponsor. Johnston would not disclose the amount, saying it was commercially confident.
Johnston said neither he, nor any other companies associated with him, had received any form of payment for promoting Trio Capital products.
Johnston argued the association has never purported to be a traditional industry association, with its primary objective being to further the commercial interests of its members. However, the group does have similarities with other associations. For example, the group has created an alternative to the Financial Planning Association’s Certified Financial Planner designation in the Certified Financial Strategist.
The AIOFP arguably looks like a traditional industry association in the eyes of consumers. For example, while the association acknowledged the term “independently owned” relates to ownership of its members and not the advice given, it said “members are quite within their rights to advertise the fact that they are AIOFP members indirectly relaying the desired message” to consumers.
