The Financial Planning Association has outlined a radical agenda in its attempt to evolve into a professional association but, as Mike Taylor reports, the ultimate transformation is likely to prove very costly.
The Financial Planning Association (FPA) has taken a huge gamble by not only determining that it will become a professional association, but also imposing serious barriers to entry capable of alienating significant segments of its existing constituency.
In the immediate aftermath of the announcements made by FPA chair Julie Berry, chief executive Mark Rantall and head of professionalism Deen Sanders to the FPA national conference on the Gold Coast, the other bodies representative of financial planners must have been rubbing their hands together with glee.
The key take-outs from the FPA announcement are:
- if you are not appropriately degree qualified you cannot be a fully-fledged member of the FPA; and
- financial planning businesses cannot be voting members of the FPA.
The inevitable fallout from the FPA announcement will be both physical and monetary, involving:
- a migration of non-degree qualified planners to other representative bodies; and
- questioning within financial planning firms about whether membership of the FPA is any longer justified.
Whether history judges the FPA strategy to have been bold or foolish will depend entirely upon whether it results in the public and the major stakeholders regarding members of the FPA as professionals, and therefore placing a higher value on the FPA and Certified Financial Planner (CFP) brands.
Looked at from the perspective of a practicing financial planner, voting membership of the FPA will require that you are either a ‘professional’ CFP or an Associate Financial Planner (AFP) — but it is clear that the organisation ultimately wants everyone to be a financial planner.
According to the underlying discussion paper distributed to members following the announcements at the FPA conference, the changes outlined by Berry and Rantall are intended to “emphasise financial planning as a profession and the FPA as an association of professionals”.
The discussion paper then, strikingly, adds: “Only practitioner members will be eligible to be elected to the Board of the FPA.”
Underpinning the entire strategy is the FPA’s embrace of an educational standard and the declaration that from July 2013, FPA membership will only be open to new members with approved degree (or higher) qualifications.
However, the organisation goes further by not only seeking to impose a degree-level entry qualification, but by seeking to determine which degrees will count via the auspices of an independent panel — the Financial Planning Education Council — which will have the power to approve higher education programs at degree level or higher.
It is clear from the FPA’s approach that it has closely examined the models pursued by other professions and determined that it needs to place a premium on the use of particular descriptors — in this case the CFP and the title FPA itself.
The move, if it is signed off by members, will be followed by a five-year consumer advertising campaign budgeted at $2-$3 million a year designed “to promote the higher standards of FPA professionals, especially CFP professionals”.
The FPA said the campaign’s aim was “to differentiate FPA professionals and increase consumers’ trust in them”.
Explaining the rationale behind the advertising campaign, the FPA said that it was intended to “differentiate FPA members from other financial planners who did not share the same values and standards”.
It claimed the “FPA brand will become a seal of quality when it comes to choosing a professional financial planner”.
Perhaps more revealing, however, is where the FPA believes it will gather the funding for such a campaign in circumstances where it will arguably have created a gap between itself and some of the more traditional funding sources.
Thus, it says that it is proposed that from 2011-12 each AFP and CFP member pay an advertising levy of $220 a year, with FPA subscribers and paraprofessionals paying a levy of $100.
The FPA might choose to share notes with the Association of Financial Advisers (AFA) on the costs of running an advertising campaign in circumstances where, without being too shy to ask the major institutions for support for its own pro-advice advertising campaign, it believes it is likely to raise in the order of $2.5 million a year.
When Money Management earlier this year published a story suggesting that some people maintained their membership of the FPA simply to ensure they could continue to use their CFP designation, the response from many participants to the website’s comments section was that this was indeed the case — with few other justifications for maintaining their membership.
It is also worth noting that in an interview with Money Management prior to last week’s FPA national conference, Berry acknowledged that any push towards professionalism would carry with it a cost in terms of the ultimate size of the membership of the FPA.
She suggested, however, that planners might see the benefit of belonging to the FPA as well as other organisations.
There is little doubt organisations like the AFA and the Financial Services Council would be in violent agreement.
