The question of which association you belong to might be about to get a whole lot more important. Is the one you belong to a “first-level” professional association, comparable the Law Society, the Australian Medical Association (AMA), the Institute of Actuaries or the Australian Veterinary Association?
If the start of the Senate Economics Legislation Committee inquiry into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 is anything to go by, those are the sorts of bodies that the association you belong to will be judged against. It seems that composition of membership and sources of revenue will be among the factors in that assessment.
In a context where self-regulation or co-regulation of financial planning is being spoken about increasingly widely, the legislators’ views of the associations that represent financial planning practitioners takes on a new dimension. Which associations can the government have confidence in to self-regulate, or co-regulate? Fail to pick the right one, and you could find yourself on the outside looking in – a mere spectator.
Differences
Both the Association of Financial Advisers (AFA) and the Financial Planning Association of Australia (FPA) were questioned on membership composition, revenue, licensing partnerships and commercial arrangements that generate fee income. The responses revealed some significant structural differences.
According to the uncorrected Hansard proof of last Thursday’s events, the chief executive officer of the AFA, Brad Fox, told the inquiry that the AFA represents “50 per cent of the personal financial advice given in Australia”.
Questioned on this, Fox said the AFA has “approximately 2300 individual paying members” and a range of “licensee partners”.
Licensee partners
Fox said individual members collectively contribute about $1.3 million of the association’s approximately $4 million annual turnover. Licensee partners fall into two categories: bank-aligned licensees; and small, independent non-institutionally controlled licensees.
Senator Mark Bishop asked whether “that latter group” pays fees to the AFA, and Fox replied yes – about $400,000 a year, in aggregate. The source of the approximately $2.3 million of other revenue was not discussed in detail.
Bishop raised the issue of what he described as “first-level professional advisers”, who he said included members of professional associations “like the Law Society, or the AMA, or the veterinarians’ association or the actuaries’ society”.
“I am asking whether you, as an organisation representing financial advisers, regard yourself as equal to, on par with, that list of specialist professional groups that I referred to,” Bishop said.
Fox responded: “I think we are getting closer to it. We are not there yet.”
Later, Bishop asked the chair of the FPA, Matthew Rowe, to “put on the record the number of your members, the nature of your membership, where the bulk of them are employed, your gross fee income and any licensing or partnership or other commercial arrangements your organisation might have that result in fee income to the association”.
According to the Hansard proof, Rowe said the FPA represents 10,500 individual members, of which 8500 are financial planning practitioners. Its 2000 non-practitioner members include students – “kids at university studying towards financial planning degrees” – and paraplanners, who “might be working their way to become a practitioner”.
Fees paid by members
Rowe said that in the 2012-13 financial year it generated revenue of about $9.5 million.
“Do we have the resources, without interference or influence from others, to be able to run a professional body? Yes, we do,” Roewe said.
“We generate more than enough money out of our membership revenue and our membership fees to cover the entire operating costs of our operation, including running the Conduct Review Commission and education standards, which is quite expensive.”
Rowe added: “Only individual practitioners can be members of ours, because we believe that ethics rest with natural people – a person, an individual – and not with a corporation of any size”.
