There is now debate between those that believe their vote is vital and those that do not want the risk of reputational damage, as epitomised by the Storm Financial example.
Bashford says that the removal of the Principal category is highly worrying.
“We do have issues with the way it’s been proposed,” he says.“The fact that we’re members paying fairly significant membership dollars with no vote and no real say is a bit of a concern.”
Kelly says their main concern at Futuro is having some kind of representation and keeping their entitlement to be heard.
“We did have a talk to the FPA about it,” he says.
‘This is a decision the FPA had to take and we were obviously consulted about it’
“Quite frankly, we’ll be voting against that proposal to scrap the Principal members category, because in the end … there needs to be some kind of representation where the licensees have some voting rights in relation to policies and procedures.
“We have to remember we only have one vote just like everybody else. So why take the one vote away? That doesn’t ring true for us.”
If the vote passes, Bashford will be taking a closer look at whether to stay an FPA member.
“We will certainly be reviewing and not automatically renewing our membership whereas previously, [it] was automatic and we hadn’t questioned it, we just paid the money. So we’ll have a look a lot more closely at what we’re going to get for our dollars,” Bashford says.
On the other hand, Lakomy says that she has not heard any negative comments from small businesses about the removal of the Principal category, citing that such a change will give businesses an advantage.
“We’re covered in the Professional Practice arena and most of them like that label a lot bet- ter for public awareness,” she says.
“It’s more simplistic and it says something. I think that it’s a positive step and I don’t see the removal as negative because it’s about financial planners; and whether you’re in a small or large business, at the end of the day if we can have one voice that moves forward with Government, that is a great step forward.
“Yes, they’re removing the small principal designation, but what’s the outcome? We’re going to become very accountable.”
Roan refers to the “Storm Financial” collapse to emphasise the problems created by the Principal member category.
“When you look at Storm, it was a Principal member, but how many advisers were actual FPA members?” Roan asks.
“I, as a practitioner member, get measured against that and this was one of the problems of the Principal membership – it inadvertently gave all advisers a tie to the FPA that they could promote, but they weren’t really [a] part of it. I think the changes, if anything, should draw more people that weren’t members into the profession.”
Lakomy agrees that the changes to qualify as a Professional Practice are reasonable and compensate for the elimination of voting rights.
“They’ve removed the Principal membership; yes, we can’t vote at that level,” she says.
“However, the Professional Practice is now what we’re changing to, which to me makes more sense to the community.
“This way, we’ve got financial planners at the core face of dealing with clients, putting their hand up and saying,‘I’m going to be abiding by the code of ethics, I’m going to be abiding by professional conduct, I will be abiding by all these rules and regulations when I see clients.’
“A Principal member meant nothing to the community, whereas if I can put the banner on the door and say, ‘I’m a Professional Practice’, I think that’s very positive for the business.”
“In a Professional Practice you only [need] 50 per cent CFPs, so those smaller businesses that don’t have CFPs won’t miss out. The FPA are saying that the CFP is a designation – like the chartered accounting, like doctors, like all professionals. There is a designation the community understands as the highest acumen that each professional aspires to. Fifty per cent need that aspiration; the other 50 per cent don’t necessarily – so they’re not going to be left behind, because the FPA are not asking for 100 per cent.”
Lakomy also sees value in the FPA symbol if it means current and prospective clients can differentiate between authentic financial planning businesses and non-professionals.
“If more of my colleagues are saying they’re a Professional Practice and I’m not, well then it’s really about public perception,” she says.
“The more businesses that become Professional Practices, the better, because from a marketing perspective, it will [increase] consumer confidence.”
There will be a three-year transition period for businesses to allow their representatives to become CFPs – which is more than enough time, according to Lakomy. However, she can see that for larger businesses it could be an issue getting their practitioners to reach the 50 per cent CFP measure.
Les Batchelor, general manager of Sinclair Wilson Investment Services, says that despite the lenient 50 per cent criteria, it will still result in significant implications for smaller principals and their planners.
“For example, where they might have five financial planners, two of them might already be CFPs. Then they might have two or three others that are quite senior and have been in the industry for a long, long time and these guys may not be in a position to get the CFP qualification,” he says.
“The end result of that is they’re singled out as being the 11 out of 12 non-professionals that are not placing their clients first. It also means that the practice cannot use the FPA brand.”
Attaining the CFP certification itself has become a topic for discussion, putting its value under the spotlight with people wondering whether it should be made obligatory for every financial planner to hold one.
Gillett says that the power of the CFP qualification is in its world-recognised value.
“The CFP is the big central pot of gold that the FPA holds,” he says.
“It’s been around for 20 years, it’s worldwide and the only worldwide designation. They’re going out boldly and grabbing the whole heart of financial planning, grabbing professionalism and attaching it to the FPA and attaching it to the CFP mark.
“New designations fracture this.
“So I think this has been a masterstroke by the FPA. [By] focusing on the professional financial planner, we’re going to grab the heartland of financial planning. They’re getting rid of distractions like the Principal category. I believe that they’ve moved at the right time. This could be the start of the way to bring the industry back under a single umbrella, with the professional planner holding the CFP designation being at the heart of it all.”
But there are opposing views about CFP certification under the FPA’s changes. Although Batchelor feels that the FPA are on the right track, he doesn’t believe the changes are 100 per cent right.
“I’m still a bit confused, and I’ve read the paper a number of times as to whether they’re selling this CFP designation as a qualification of professional standard or as a brand,” he says.
“It came across fairly strongly at the FPA conference as a brand … so I took the liberty of ringing a few of my peers and that seems to be the general consensus; at least in the circles in which I move.”
Batchelor expresses concern over financial planners being alienated if they do not become aCFP.
“There’s a lot of financial planning professionals who hold post graduate qualification and unless they then go on and attain their CFP designation and subscribe on an annual basis, they’re going to be singled out as one of the 11 non-professionals in the FPA’s marketing campaign,” he says.
“I’m not sure about insisting that my firm has 50 per cent CFPs and 75 per cent FPA members in order to be an FPA Professional Practice. I’m not sure that’s going to change a lot, except we’ll be paying a lot more in fees.”
Paul Barrett, general manager of advice business at Colonial First State, has firm ideas about what the FPA must do before people vote on the consultation paper.
“The FPA have got a large number of constituents from different perspectives. What the FPA needs to work out is what are the handful of things they need to stand for and do well and clearly,” he says.
