An inconvenient truth

The Parliamentary Joint Committee (PJC) view that "professional ethics should be a driver of the behaviour of financial advisers" leaves no one in any doubt the role recognised professional associations will play in financial planning if the Government implements the PJC recommendations.

The mechanism through which you will be allowed to call yourself a financial planner or financial adviser will be the Australian Securities and Investment Commission (ASIC) adviser register. To be on this register you will need to be a member of an approved professional association. Planners may choose to be a member of more than one professional association but only one association (nominated by the planner) will oversee professional obligations and advise ASIC on the initial and ongoing fitness of an individual for registration.

Further, if a financial adviser wishes to change the nominated association to oversee their professional and education standards, they must meet the professional year (with recognised prior learning provisions) and registration exam requirements for that body and not have any censures or limitations outstanding from the previous professional association or ASIC.

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This limiting of planners to nominate one professional association is intended to reduce the risk of "gaming" of professional standards.

Looking at the myriad of acronyms that make up the association landscape a few thoughts come to mind. Some associations will struggle for survival, some will struggle for relevance and there will be a growing momentum for mergers.

In my opinion, the Association of Independently Owned Financial Planners (AIOFP) will become increasingly marginal under its current leadership and business model. It is difficult to see the place of the AIOFP in this new environment in 2015.

The Financial Services Counsel (FSC)corporate membership means it cannot by definition become a recognised professional association. Its plan in October 2014 to launch a standards body controlled by licensees was clearly rejected and the powerful FSC Advice Board Committee should consider whether it over reached.

Independent Financial Advisers Association (IFAA) currently has 15 members and with so few members will fail key tests to become a recognised professional association. The Boutique Financial Planning Principals Group has the same issue with only around 80 members.

SPAA will need to demonstrate that SMSF is a profession in its own right and not a subset of both Financial Planning and Accounting. It may take some time for Andrea Slattery and SPAA to make this case, but knowing the tenacity of Andrea Slattery it is more likely a question of when and not if.

FINSIA has lost money every year since selling their education business in 2007. In 2013 it reported a loss of almost $3 million. Given it has a very small footprint in financial planning and is predominately bankers and financial markets focussed it is hard to see how it can reinvent itself as a professional association for financial planners and deliver an operating surplus by 2017.

The ICAA, CPA and IPA are the only currently PSC recognised professional associations operating in the financial services space. When you look at their respective membership revenues (in 2013 CPA Australia alone had 150,000 members and revenue of $157M) financial planners could be forgiven for viewing these Accounting Associations as the 700 pound gorillas in the room.

Whilst recognising there is significant overlap in the Accounting and Financial Planning space, most Financial Planners will likely seek membership of a dedicated financial planning association that recognises planning's unique requirements as a standalone profession.


This leaves the AFA and the FPA whom under the PJC recommendations would have until 1 January 2017 to be operating under a Professional Standards Scheme if they wish to become a recognised professional association.

Let's review a few key facts from these respective organisations published financial statements and websites;

The AFA have stated that 73 per cent of their practitioner members are aged 50 or older, less likely to have a university degree and much less likely to agree to undertake additional higher education. The AFA member demographics and earlier refusal to move to a degree requirement for membership may now work against them.

Financial Planners will need to make some very considered and careful decisions about membership of a recognised professional association within the next two years. Given what is at stake, the size of the task ahead to be a PSC recognised professional association, the financial resources needed to build the required infrastructure I would suggest we may see a respectful takeover — not a merger — in 2015.

Matthew Rowe is a former chairman of the Financial Planning Association of Australia.

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