When the Financial Planning Association (FPA) publishes its 2019-20 annual report it will likely confirm a decline in membership. The Association of Financial Advisers (AFA) will likely register a similar decline. For both organisations, the only thing in question is the level of that decline.
Each month, data derived from the Australian Securities and Investments Commission (ASIC) Financial Adviser Register (FAR) has pointed to advisers continuing to exit the industry with, at this stage, only a modest number of replacements in the form of graduates and others.
The exit of financial planners allied to the exit of the major banks has also generated a significant consolidation of financial planning businesses – something evidenced by
IOOF’s current acquisition of MLC Wealth, the continuing restructuring occurring with AMP Limited and the growth of mid-sized licensees such as CountPlus and Centrepoint Alliance.
It ought to therefore be regarded as significant that a recent survey conducted by Money Management found a significant majority of respondents believed that there should also be consolidation in the organisations representing financial advisers.
In short, 80% of respondents to the survey said they believed there should be a merger of the FPA and the AFA with 74% of respondents believing there are currently too many organisations seeking to represent the interests of financial planners.
Just as importantly, more than 60% of respondents to the Money Management survey said they were members of the FPA.
There are, of course, four or five organisations which claim to represent financial advisers not least the SMSF Association and the Association of Independent Financial Professionals, but the two organisations boasting the largest memberships and the most significant infrastructure are the FPA and the AFA.
And it is worth reflecting upon the fact that the FPA and the AFA have been working more closely together on policy issues for most of the past three years in large measure because of their efforts over 18 months alongside the SMSF Association to establish a code monitoring body.
It was widely expected that if the FPA, AFA and SMSF Association consortium had succeeded in having their code monitoring body approved by ASIC then this might have served to form the foundation of an over-arching body representing the interests of financial advisers and overseeing their behaviour.
But it was not to be. The recommendations of the Hayne Royal Commission derailed the Government’s plans for industry-based code monitoring bodies and replaced them with the establishment of another Government agency – a single disciplinary body which is likely to have little or no industry input.
So the bottom line is that code monitoring will not be the catalyst for a consolidation of financial planning organisations meaning that any merger activity will have to be generated by the organisations themselves – something which neither have acknowledged as being formally on the table, at this stage.
There is also the reality that the messaging being received by financial planning organisations from Canberra is that the Government would actually welcome a single representative voice from the financial planning industry.
This has not been the first occasion on which a merger of the FPA and AFA has been canvassed, with a number of attempts having been made over the past decade to start a formal process between the two organisations. What makes 2020-21 different is that many of personalities which have been seen as opposing the prospects of a successful merger have either exited the industry or have indicated they are likely to do so.
What is also important is that with the exodus of financial planners, the underlying commercial models of the FPA and the AFA have been placed under pressure not the least the revenue generated for the FPA from its Certified Financial Planner designation amid the increased focus on the Financial Adviser Standards and Ethics Authority (FASEA) exam process.
The question is: Will political and commercial reality be enough to generate the merger so many planners have made clear they think is justified?
