The Financial Planning Association of Australia is set to radically overhaul its membership structure, aiming to put its focus squarely on individual members. These changes must remove the perceptions of institutional influence that have dogged the FPA, but there may be implications. Krystine Lumanta reports.
InApril, members of the Financial Planning Association of Australia (FPA) will vote on changes to the structure of the association that would require businesses to meet new criteria to be FPA-affiliated.
The blueprints for a new, improved FPA were unveiled at its national conference on the Gold Coast in November last year. The changes to the association’s membership structure promise to support individual members in their quest to attain professional status.
As the principal industry body, the FPA has battled perceptions of unfavourable links to large institutions, creating the impression that it is unduly influenced by the big end of town, often at the expense of individual members’ and smaller planning groups’ interests.
But the cornerstone of the FPA’s plan for structural change is to focus squarely on individual members.
The changes propose that the Principal member category be removed so that only Certified Financial Planners (CFPs) and Associate Financial Planners (AFPs) will have the right to vote.
‘Some of the principals, particularly the bigger ones, bring a fair bit to the table’
In addition, a financial planning practice that meets the new membership criteria will be referred to as a “Professional Practice” and will be licensed to use the FPA brand. The new category needs 75 per cent FPA membership and 50 per cent of the practice’s planners must be CFPs.
Australian Financial Services Licence (AFSL) holders who have achieved 25 per cent FPA membership among their practitioners will be given the opportunity to become“FPA Professional Partners” and to continue working with the FPA on industry issues.
Lastly, the Affiliate category will replace the General member category to allow for additional sub-categories, including paraprofessionals and subscribers.
The possibility of such major restructuring has garnered an assortment of responses, varying from full support to strong opposition, and even indecision among some.
Tony Gillett, director of Retirewell Financial Planning, says that during the past three to seven years, there has been a lot of “antipathy toward the FPA”.
“The FPA, with its current and old guys, was trying to represent too many interests,” he says.
“They tried to represent the planners and the dealers, and there were natural antagonisms between the small dealer, which was the large majority in the membership, and the small number of very large dealers. I really believe that [people’s assessment of ] the FPA as only repre- senting the big end of town is just rubbish. These changes really cut those criticisms of the FPA off at the knee.”
Peter Roan, principal of Roan Financial, believes that the FPA is finally shifting its focus on to individual financial planners and bringing personal accountability to the forefront.
“I’m very positive about the changes,” Roan says.“It was always going to be inevitable that to be seen and perceived as a professional organisation, you had to be member-based and individually-based.
“If you had to look for some minuses, I suppose logically some of the principals, particularly the bigger ones, bring a fair bit to the table … [and they] might be upset by the changes.”
Fair and accurate member representation has always been an issue for the FPA, according to Dennis Bashford, managing director of Futuro.
“I think generally speaking, the FPA membership is not exactly happy with the way the FPA has represented it,” he says.
“Certainly the numbers suggest it – that they’re walking with their feet and they have a much better alternative now available to them through the Association of Financial Advisers [AFA].”
Paul Kelly, a founding director and director of network services for Futuro, supports Bashford’s view.
“There’s no doubt that the AFA has been getting a number of planners across and I think it’s probably an indication of the way people feel about the FPA,” he says.
“A fair majority of our planners are still with the FPA but largely that has to do with them being CFPs, so there’s no choice in that one.”
Bashford says financial planners across the board voice this concern to him regularly – not just those that work in his business. They’ve told him that the main reason they remain FPA members is because they want to keep the CFP designation.
“In terms of the FPA no longer being relevant, that’s a pretty harsh call,” Bashford says.
“I think that they are trying to become more relevant and some of those proposed changes are designed to address that perception.
“What the industry needs is a true professional association that only represents the individual, authorised [representatives] and it should be compulsory for them to be members of that association,” Bashford says.
According to Kelly, setting compulsory membership to the industry association is imperative and he believes it is a key issue that needs to be addressed.
“There are a lot of planners out there who aren’t a member of anything,” he says.
“The reality is if you’re a teacher, if you’re a doctor, a lawyer, it’s not an option. You have to be a member of the professional body. The question has to be asked,‘Why isn’t this the case for financial planners?’ We brought it up with the FPA and it’s a government issue. But the Government won’t bite the bullet on that one.”
For those at the other end of town, Richard Nunn, executive general manager of advice at MLC, says they’ve been one of the first to sign on as a Professional Partner.
“I’m quite relaxed about institutions and large dealer principals not being in their previous capacity,” Nunn says.
“If this is about focusing on the planners themselves and their businesses, then I think this is a decision the FPA had to take and we were obviously consulted about it. The FPA is the peak professional body, so it would be in the best interest of all planners that have done the education to be deemed professional [to] get on board with these changes.”
If the changes are approved, Louise Lakomy, CFP at Yellow Brick Road and member of the FPA Small Principals’ Forum, predicts that the challenge will be to ensure everyone is taken care of, particularly boutique businesses.
“There are different nuances between large and small and at the end of the day it should be one voice about financial planners,” she says.
“But I hope going forward that there is still assistance that the FPA provides … [to] better assist small businesses. As long as we have that support, I think it will be very valuable for us.
“What they’re also recognising is that even though you might be under a large dealer, you’re running a small business; so a lot of the financial planners under the big guys are affected the same way as those in my business,” Lakomy says.
Perhaps the most considerable change recommended by the FPA’s consultation paper is the discontinuation of the Principal member category of membership.
The current arrangement gives small, medium and large principals a right to vote at general and annual meetings, allowing them to influence policy development and constitutional amendments.
However, the FPA believes that this is no longer necessary as it promotes an inaccurate perception. Currently, the Principal member brand can be used irrespective of the number of FPA members and CFP qualified professionals within their financial planning business.
The FPA will be removing the category altogether so that Principal members will be replaced with the title of either a Professional Practice or a Professional Partner.
A financial planning practice will be labelled a Professional Practice and be authorised to use the FPA brand if it holds 75 per cent of its staff as FPA practitioner members and 50 per cent as CFP qualified. A Professional Practice will not have any voting rights.
Professional Partners will include those AFSL licensees who hold at least 25 per cent FPA practitioner membership. They will continue to be affiliated with the FPA but will not be able to use the FPA brand or represent themselves on the board; and their vote will also be removed.
